Loss-making airline SAS will shed nearly 6,000 staff through cuts and asset sales to secure loans from banks and Nordic governments to help it survive a global downturn and fierce competition.
SAS, one of the European flag-carriers being squeezed by discount carriers such as Ryanair and Norwegian, has not made a full-year profit since 2007. Without the loans, SAS might have to stop flying.
Continue Reading Below
It said 800 jobs would be cut and the sales of regional airline Wideroe and the group's ground handling unit would reduce staff to around 9,000 in total from 15,000 now.
Announcing its new savings plan on Monday, it said it expected a slight pretax loss again this year.
"This truly is our 'final call' if there is to be a SAS in the future," said SAS chief executive Rickard Gustafson.
The group said it aimed to improve earnings by 3 billion crowns by cutting costs while asset sales would strengthen the company's balance sheet by 3 billion crowns. The new credit facility is worth around 3.5 billion crowns ($520 million).
The credit, being provided by seven banks and the governments of Denmark, Sweden and Norway, is conditional on signing agreements with unions on the job and wage cuts and getting parliamentary approval where necessary.
Gustafson said the company needed to get the deal with unions in place in a week. The company said in a statement it would sell Norwegian unit Wideroe, aircraft engines, some real estate and the group's ground handling unit.
"I know that we are asking a lot of our employees, but there is no other way. I hope that our loyal and dedicated employees are willing to fight for the survival of SAS and for our jobs," Gustafson added in the statement.
Staff will take pay cuts of up to 17 percent, depending on what part of the organisation they work in. Cabin staff will see their pay reduced on average by 12 percent.
Gustafson said he would take a 20 percent cut.
Another headache for the company has been an expected massive pension deficit of 12 billion crowns ($1.78 billion) due to accounting changes, which it said threatened to wipe out the group shareholder equity.
SAS said would change the terms of its pension plan and take other measures to reduce the deficit to 7.6 billion crowns.
"We are not exactly toasting in champagne today," said Jan Levi Skogvang, leader of Norwegiant union Parat Air travel.
"However, I think that we are determined to contribute to solve the situation ... We will now look carefully at the savings plan and go from there," he said.
Sweden said it was not providing free money to SAS.
"The credit facility is the promise of a loan and not a capital injection," the government said in a statement.
Sweden said it wanted eventually to find a buyer for SAS and that the cost cut plan could make that easier.
Swedbank First Securities analyst Hans Erik Jacobsen said the plan would give SAS some breathing room.
"But there is a lot of hard work to be done...I think, eventually, they will be taken over by someone bigger," he said.
HIGH COST AIRLINE
SAS's troubles come a troubled time for the air industry, with Spanish airline Iberia last week saying it would axe almost a quarter of its workforce.
But SAS has higher costs than its rivals, even if it has tried to change from being a traditional full service airline. It also flies on very competitive European routes.
Its 2011 annual report showed its unit costs were on average 0.86 Swedish crowns ($0.13) per available seat flown over the year, whereas Norwegian Air Shuttle's was 0.45 Norwegian crowns (0.08).
SAS flew 27.1 million passengers in 2011 with 15,000 employees, whereas Norwegian carried 15.7 million passengers with 2,555 staff at end 2011.
SAS has lost 12.4 billion Swedish crowns since the start of 2002 and already sold off assets worth 80 billion Swedish crowns over 12 years.
For SAS jet fuel - at 7.8 billion crowns - was 20 percent of overall costs in 2011, second only to payroll at 34 percent. For arch rival Norwegian, pay roll costs were 19 percent of expenses.