COPENHAGEN, Denmark (AP) — Scandinavian airline SAS said Monday it will lower pensions and salaries and slash 800 jobs in an effort to cut costs by 3 billion kronor ($440 million) annually in what the CEO described as a "final call" for the loss-making carrier.
SAS AB will get 3.5 billion kronor in credit lines from the governments of Sweden, Norway and Denmark, as well as major banks, if it can agree on those savings cuts with labor unions. SAS wants to renegotiate the workers' employment terms and conditions as well as their pension schemes.
SAS also plans to raise about 3 billion kronor by selling its regional airline Wideroe, ground handling services and other assets
"We are demanding a lot but there is no other way. This truly is our final call if there is to be an SAS in the future," CEO Rickard Gustafson said.
SAS is being hurt by the combination of a drop in demand due to a global economic downturn, high costs and competition from low-cost carriers. Last week, Norwegian Air Shuttle, one of Europe's fastest-growing airlines and a big competitor of SAS, announced it will start next May its first long-haul flights to New York and Bangkok from Oslo and Stockholm.
"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," Gustafson said in Stockholm, where the company is headquartered. "Our credit providers have said that we give you this chance to turn the company around."
As SAS announced the restructuring details, it also presented its third-quarter results, which showed net profit doubled to 434 million kronor ($64 million) as sales rose 5 percent to 11.1 billion kronor (1.6 billion).
Gustafson said the company's five-point plan had not yet been presented to employees, who now "would have to digest it and form their own opinion." He said he believed the company had "a good dialogue" with the employees.
The restructuring plans, including the sale of Wideroe, will result in the overall number of SAS employees falling from around 15,000 to 9,000.
Bente Sorgenfrey of Denmark's FTF union that has most of the 2,000 cabin and ground crew employees in Denmark called the plan "violent."
"Many SAS employees have demonstrated time and time again that they have been willing to go far to help SAS by, among other things, go 20 percent down in salary, 20 percent up in working time and by handing (SAS) half a month's salary in December this year and next year," she said.
The three Scandinavian governments own 50 percent of the company. Denmark and Norway each control 14.3 percent of the shares, while Sweden holds 21.4 percent.
SAS is not the only airline to be struggling, particularly in Europe, where the financial crisis has been hurting business. Last week, the International Airlines Group warned its Spanish carrier, Iberia, would cut 4,500 jobs, 25 aircraft and rearrange salary contracts.
"Like the rest of the aviation industry SAS is going through a very difficult period. The economic crisis, high fuel prices and tough competition has for several years pushed earnings," Denmark's Finance Minister, Bjarne Corydon, said. "The implementation of (the plan) is an indispensable prerequisite for SAS' future."
The company's shares rose 2.6 percent to 5.80 Danish kroner ($0.98) in morning trading in Copenhagen.
Karl Ritter in Stockholm contributed to this report.