Loss-making Scandinavian airline SAS said it would slash costs and sell assets to secure its future following media reports it was in financial difficulties.SAS, which made a SEK1.6 billion kronor (USD$241 million) pre-tax loss in 2011, has been struggling for years against cut-price rivals such as Ryanair, industry overcapacity and more recently high jet fuel costs and an economic slowdown.SAS, part-owned by Norway, Sweden and Denmark, said it was working on a plan that would cut costs, reduce complexity and ease the effect of a possible equity write-down due to pension accounting changes.The move comes as rivals, such as Lufthansa and Air France-KLM, have also embarked on cost cutting initiatives, trimmed profit forecasts and reduced plans to expand capacity and fleets.SAS's latest plan will keep it flying for a while, but analysts believe the airline only has a long-term future as part of a bigger alliance."The problem for now is that there isn't anyone willing to acquire it," said Jacob Pedersen, analyst at Sydbank. "I expect SAS to survive as a company, but it will be a bumpy road."The airline said it made a third-quarter pre-tax profit of SEK568 million kronor, bringing forward its results after reports it was in financial trouble led to a suspension of share trading.SLIM DOWNSAS said the plan is expected to yield approximately SEK3 billion kronor in earnings before tax, adding it will also sell assets of around SEK3 billion kronor, but provided no further details.The airline said it was currently in negotiations regarding the extension and amount of its revolving credit facility.SAS said it had liquid funds of SEK2.4 billion kronor and available credit facilities of SEK4.7 billion kronor, which will expire in June 2013.SAS, which faces a hit to shareholder equity of up to SEK10.7 billion kronor when new pension accounting rules are introduced in November 2013, is not the only airline to be suffering.In August Cathay Pacific Airways posted its worst first-half loss since 2003, and International Airlines Group, the owner of British Airways and Iberia, reported a group operating loss of EUR€253 million (USD$328million) in the six months to the end of June.The International Air Transport Association (IATA) expects the USD$630 billion airline industry to make a net profit of USD$4.1 billion this year, up from an earlier forecast of USD$3 billion but still less than half the USD$8.4 billion achieved in 2011.IATA said industry profits would rise next year to USD$7.5 billion, helped by passenger traffic expansion of 4.5 percent. Source: Reuters
Gravity always wins!