SAS to downsize Scandinavian Airlines
ATW Online | Jan. 16, 2006
Although SAS Group has succeeded in reducing costs by SEK14 billion ($1.8 billion) over the past three years through its Turnaround 2005 program, the company's namesake airlines, collectively known as Scandinavian Airlines Businesses, continue to underperform. Furthermore, SAS says ongoing contract negotiations with unions are not progressing toward the cost-saving goals it needs, according to a recent edition of the company's internal newsletter. As a result, it is looking at shrinking SAB by eliminating unprofitable routes and cutting frequencies, resulting in layoffs and aircraft disposals. SAS Sverige (Sweden) laid off 120 employees in December while a further 150 were given a choice between transfer and redundancy.
SAB is carrying out a route-by-route profitability analysis as a prelude to likely service reductions. It expects approximately 15%-20% of routes will be affected by the evaluation. An announcement may be made within the next few weeks.
SAS Group reported a net profit of SEK57 million for the nine months ended Sept. 30, reversing a loss of SEK1.1 billion in the year-ago period. Operating income was SEK703 million compared with a loss of SEK629 million in 2004.
However, Scandinavian Airlines Danmark (Denmark) had an operating loss of SEK429 million while the Swedish unit had negative EBIT of SEK373 million. SAS Braathens, which operates in Norway, had EBIT of SEK692 million for the nine months. SAS International, operating long-haul services, had an operating loss of SEK8 million. Spanair had EBIT of SEK229 million, Wideroe's operating profit was SEK120 million and Blue1 had EBIT of SEK48 million.
The company recently has been selling off units it considers noncore. In the past two months it sold 67% of SAS Component Group to Singapore Technologies Aerospace (ATWOnline, Dec. 16) and European Aeronautical Group, which provides navigation and flightpath databases and flight- and crew-planning solutions, to Canada's Navtech. Jetpak Group, a same-day door-to-door delivery service, was sold to Denmark-based Polaris Private Equity.