SAS Group is poised to launch another round of cost-cutting and efficiency initiatives to boost earnings by SKr3 billion ($450 million) as it moves to deny reports in the Scandinavian media that it is heading for bankruptcy.
Responding to the rumours, the airline group has taken the unusual step of releasing some details of its third-quarter results more than one week ahead of schedule. It says it recorded positive earnings before tax (EBT) of SKr568 million for the period to 31 September. However, with EBT for the first half of 2012 negative at SKr761 million, the group remains in the red year-to-date.
Passenger revenue grew by 9% during the quarter, while unit costs were trimmed by 6%. This reflects the effectiveness of its 4Excellence cost-saving strategy, it claims.
However, the group adds that further cuts are required "in order to secure its long-term competitiveness". This will include the disposal of "non-core assets" worth about SKr3 billion, it says, helping to reduce its reliance on third-party funding. The group has a 10% holding in Estonian Air and a 37.5% stake in Air Greenland, alongside its main operations, Scandinavian Airlines, Widerøe and Blue1.
Other aspects of the plan will aim to "increase cost flexibility, reduce complexity, and also reduce the effect of the potential equity writedown in 2013 due to pension accounting changes".
SAS Group has SKr2.4 billion of funds available, with credit facilities of SKr4.7 billion due to expire next June, it says. Discussions are ongoing to extend these credit lines and the new cost-cutting measures are an "essential part of the negotiations", it adds.
SAS Group shares were up 18% in morning trading at the Stockholm Stock Exchange on 30 October, following the latest announcement.