SAS to cut 700 jobs, raise $670M in share issue after posting quarterly loss

SAS to raise cash, cut 700 jobs after Q4 loss

STOCKHOLM — SAS stocks nosedived Tuesday after the Scandinavian airline group posted a fourth-quarter loss and asked shareholders for 5 billion kronor ($670 million) to help repair its ailing finances.

Pressured by the economic downturn and competition from low-cost carriers, the company also said it would slash 700 jobs to ramp up its savings program by an additional 2 billion kronor.

SAS shares plummeted more than 20 percent to 2.76 kronor (37 cents) in Stockholm as investors took stock of the company’s poor finances — just a year after it launched a major cost-cutting effort and raised 6 billion kronor ($720 million) from shareholders.

Sydbank analyst Jacob Pedersen called SAS’ announcement of a new rights issue a “bad signal” to investors. “SAS is in a very tough situation now,” he said.

The announcement came as SAS posted a loss of 1.3 billion kronor in the fourth quarter, an improvement from a loss of 2.8 billion kronor a year earlier. Sales fell 20 percent to 10.3 billion kronor from 12.8 billion kronor.

The company made a net loss of nearly 3 billion kronor in 2009 — its second consecutive year in the red.

SAS said the new rights issue was supported by a group of underwriting banks and its major shareholders: the governments of Sweden, Denmark and Norway, which together hold a 50 percent stake, and Sweden’s powerful Wallenberg family. It’s subject to a final agreement with SAS unions and approval by an extraordinary general meeting planned for April 7.

The cash-strapped travel group said it had also improved the terms of its bank loans, including extending four revolving credit facilities totaling about 5 billion kronor by one year to 2013.

SAS streamlined its operations last year, cutting its staff by 30 percent to about 16,500 in the fourth quarter, shedding subsidiary airlines and focusing on its core carrier Scandinavian Airlines, which targets business travel in the Nordic region.

Meanwhile, the fleet was reduced by 18 aircraft to a total of 191, and would shrink by three more planes, SAS spokeswoman Elisabeth Manzi said.

SAS said Tuesday it had achieved about 66 percent of the targeted 5.3 billion kronor in savings, but new measures were needed to reduce costs by an additional 2 billion kronor. The new initiatives would include 700 job cuts this year and in 2011.

“The unprecedented severity of the market downturn has been far worse than anticipated,” SAS CEO Mats Jansson said, noting that business travel was hit especially hard.

He said the new measures to improve the balance sheet “will give SAS the strength and flexibility it needs to compete effectively and be well positioned for the market recovery.”

Aeropol analyst Anders Lidman said SAS, which long dominated air travel in Scandinavia, “woke up too late” to competition from other European airlines.

“They have one foot in the grave. They have no way out in my mind except to cut and to cut,” he said.

Denmark and Norway each control 14.3 percent of SAS shares, while Sweden holds 21.4 percent. All three governments said they backed the deal on condition that the company improve its finances by cutting costs and other measures.

Associated Press Writers Louise Nordstrom in Stockholm, Jan M. Olsen in Copenhagen and Ian MacDougall in Oslo contributed to this report.