SAS Prepares for Survival Plan

on Nov 12, 2012

SAS (STO:SAS), the lossmaking Scandinavian airline, is planning to cut wages, sell assets and reduce staff in an effort to secure loans and avoid collapse.

**SAS -Trimming the Costs**
SAS will receive 3.5 billion kronor (£326 million) in credit lines from the governments of Sweden, Denmark and Norway, as well as major banks, but only if it reaches an agreement with labour unions over cost cutting measures. The carrier plans to reduce its workforce by 40 percent from 15,000 to 9,000, including the elimination of 800 administrative staff positions. Salaries would be reduced by 15 percent and pensions moved from defined benefit to defined contributions in order to lower the company’s obligations by more than a half, or 18 billion kronor (£1.68 billion).

“This truly is our ‘final call’ if there is to be a SAS in the future… I know we are asking a lot of our employees, but there is no other way,” said chief executive Rickard Gustafson in an attempt to convince unions to back the plan. “We haven’t made money in a number of years and we cannot continue to operate if we do not demonstrate that we can earn money and make a profit,”

The Scandinavian airline is suffering from the combination of a drop in demand due to the global economic downturn, high fuel costs and competition from low-cost carriers. According to Denmark’s Minister of Finance, Bjarne Corydon, implementation of the restructuring plan is an indispensible prerequisite for SAS’s future.
Shares in the carrier rose by 1.55 percent to 6.55 Danish kroner by mid-day in Stockholm’s trading session.

**Emirates Airlines Doubles Profits**
Dubai’s Emirates Airlines managed to double its profits in the last six months with strong passenger growth offsetting rising fuel costs.
The airline has carried 18.7 million passengers since 1 April, up by 15.4 percent on the same period last year. Cargo volumes increased by 16 percent, while fuel prices accounted for 39 percent of the airline’s costs, down from 41 percent in 2011.

!m[Emirates Airlines Double Profits While Ryanair Awaits EU Approval of Aer Lingus Takeover](/uploads/story/771/thumbs/pic1_inline.png)“Emirates remained focused on its growth and global expansion despite ongoing fluctuating exchange rates and ever lingering high fuel prices,” said Sheikh Ahmed bin Saeed Al Maktoum, the group’s chairman.
Emirates Group revenue in the first six months of the fiscal year increased to Dh32.8 billion (£5.61 billion) boosted by the airline’s strong performance but also the 68 percent increase in profits of their airport services company Dnata.
**Ryanair Meets EU Resistance of Its Aer Lingus Takeover**
The European Commission has made it clear it is going to reject the remedies package proposed by Ryanair (LON:RYA) and meant to address Brussels’ competition concerns about an Aer Lingus takeover. According to the Financial Times, the Irish carrier has been told the remedies package falls short of what is required to alleviate competition concerns on all routes, on which it could enjoy a dominant position.
The FT also reported that Michael O’Leary, Ryanair’s chief executive, said he had received “no feedback” from the commission but added he believed Brussels would find it “very difficult” to reject the proposed remedies package. Mr O’Leary claims to have found six airlines willing to provide competition on routes where Aer Lingus and Ryanair overlap. He refused to identify them.
Ryanair is allowed to improve its offer to the European Commission at any time before February, when a decision on the matter is due.


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