SAS Group back in restructuring mode

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Embattled SAS Group is ­embarking on yet another ­restructuring plan, cutting back its fleet and shedding 1,000 jobs as it bids to regain the long-term financial stability largely absent from the company since 2000.

SAS Group unveiled plans at the end of April to pursue a new series of short-term efficiency measures as part of a SKr1.1 billion ($183 million) project it calls the "Profit 2008" scheme. The new project emerged as its ­broader "Strategy 2011" programme is falling behind schedule, with one third of its proposed SKr2.8 billion savings still tied up in collective agreement talks.

SAS, in reporting an SKr872 million first quarter operating loss, unveiled plans to withdraw 11 aircraft from service later this year, representing about 5% of capacity. Chief executive Mats Jansson says SAS has experienced "further intensification" of competition which has reduced unit earnings, and adds that there is "certain overcapacity" in the market and a trend towards a decline in business travel.

 © SAS

New routes and yield pressure undermined first quarter earnings at the Norwegian and Swedish operations of SAS, while its Danish operation is still coping with the withdrawal of turboprop operations last year - although smaller leased replacements, a better market fit, are expected to ease the pressure this summer.

SAS is also facing greater competition from Finnair, which plans to strengthen its presence in SAS' markets through its links with budget carrier Norwegian. Finnair reported a first quarter operating profit of €11.1 million ($17.3 million).

Finnair chief Jukka Hienonen says the carrier plans to use Norwegian, which last year acquired budget carrier FlyNordic from Finnair, to open Scandinavia to Asian tourists connecting through Helsinki. "We want to go deeper into our co-operation with Norwegian and establish a partner in the Scandinavian market," he says.

He believes that Finland is naturally immune from the budget carrier threat because the relatively long distance to continental airports prevents carriers achieving acceptable utilisation. "There's a long list of low-cost airlines which have entered the Finnish market. The list of those exiting is also long. There are 5 million people in Finland and half of them have never entered an aircraft."