SAS losses prompt reorganization

Scandinavian airline SAS reported major losses for 2008 on Tuesday as it announced plans to accelerate restructuring, lay off thousands, cut 40 percent of its routes, and divest several subsidiaries.

SAS losses prompt reorganization

The airline reported a net loss of 6.32 billion kronor ($760 million) in 2008, after a profit of 636 million kronor in 2007 and a loss of 2.77 billion kronor in the fourth quarter.

“Horrifying,” company chief executive Mats Jansson said of the results at a press conference.

“2008 will probably go down in history as one of the most challenging and turbulent years that the entire aviation industry has ever experienced,” he said earlier in a press release.

Already weakened in 2007 by technical problems which led to the grounding of its short-haul Dash-Q400 planes, SAS in 2008 faced plummeting demand due to the global economic downturn and the crash in Madrid of a Spanair unit plane in August that killed 154 people.

Out of SAS’ 6.32 billion kronor loss last year, 4.89 billion was attributable to its subsidiary Spanair which the Scandinavian company finally sold to a consortium of Spanish investors last week for a single euro.

To overcome its dire financial difficulties, SAS said Tuesday it would launch a new restructuring programme involving a share issue to raise 6.0 billion kronor and a fresh 14-plane reduction in its fleet.

An additional 3,000 employees would also be laid off while a further 5,600 workers would be taken off its books through outsourcing.

The restructuring programme has already received the thumbs-up from the Swedish, Danish and Norwegian governments, which together control 50 percent of the airline, as well as from its major private shareholder, a foundation managed by the famed Wallenberg family.

J.P. Morgan, Nordea and SEB have also confirmed their intention to participate in the 6 billion kronor rights issue which will help fund the reorganization.

The carrier at the end of 2008 employed 24,635 people, having announced the lay-off of 2,500 workers in August. It had also cut back on its fleet by 33 aircraft, 15 of which belonged to Spanair.

Some 40 percent of the company’s routes will be cut and a number of subsidiaries, including British Midlands, Estonian Air, Air Greenland and Skyways airlines, will be sold, SAS said.

Jansson, who has headed the company since January 2007, said the plan unveiled Tuesday would help streamline operations and save 4.0 billion kronor between 2009 and 2011.

The programme, he said, “will lead to SAS becoming a more focused and less complex company.

“SAS’s market position remains strong. Our brand stands for quality, reliability and stability,” he said, stressing that “in light of the fundamental crisis that is going on around the world, the losses remain at a manageable level.”

Jansson also said the airline aimed to refocus its business on the Nordic market, which he said remained fairly healthy and showed potential for growth.

SAS, established in 1946 and today comprising SAS Denmark, SAS Norway and SAS Sweden, as well as low-cost airlines Blue 1 and Wideroe, has a 40 percent share of the northern European civil aviation market.

Germany’s leading airline Lufthansa has long been mentioned as a rescuer for the Scandinavian company, which carried more than 29 million passengers last year, not including Spanair.

Following Tuesday’s announcement, SAS saw its share price nosedive 19.26 percent in afternoon trading on the Stockholm stock exchange where the main OMX 30 index ticked up 0.44 percent.


‘We agree to disagree’: Still no progress in marathon SAS strike talks

By lunchtime on Friday, talks between the Scandinavian airline SAS and unions representing striking pilots were still stuck on "difficult issues".

'We agree to disagree': Still no progress in marathon SAS strike talks

“We agree that we disagree,” Roger Klokset, from the Norwegian pilots’ union, said at lunchtime outside the headquarters of the Confederation of Swedish Enterprise in Stockholm, where talks are taking place. “We are still working to find a solution, and so long as there is still some point in continuing negotiations, we will do that.” 

Mats Ruland, a mediator for the Norwegian government, said that there were “still several difficult issues which need to be solved”. 

At 1pm on Friday, the two sides took a short break from the talks for lunch, after starting at 9am. On Thursday, they negotiated for 15 hours, breaking off at 1am on Friday morning. 

READ ALSO: What’s the latest on the SAS plane strike?

Marianne Hernæs, SAS’s negotiator on Friday told journalists she was tired after sitting at the negotiating table long into the night. 

“We need to find a model where we can meet in the middle and which can ensure that we pull in the income that we are dependent on,” she said. 

Klokset said that there was “a good atmosphere” in the talks, and that the unions were sticking together to represent their members.

“I think we’ve been extremely flexible so far. It’s ‘out of this world’,’ said Henrik Thyregod, with the Danish pilots’ union. 

“This could have been solved back in December if SAS had not made unreasonable demands on the pilots,” Klokset added. 

The strike, which is now in its 12th day, has cost SAS up to 130m kronor a day, with 2,550 flights cancelled by Thursday, affecting 270,000 passengers.