Scandinavia’s SAS Group is to reduce fleet capacity by 11 aircraft, and drop plans to add another Airbus A340, after mounting a SKr1.1 billion ($183 million) short-term efficiency programme designed to counter losses.

The company, which has just released a heavy first-quarter operating loss of SKr872 million, is to reduce capacity by around 5% from autumn this year. It has also decided “not to implement” the planned addition of an extra A340 to serve new long-haul routes.

SAS Group says the changes will reduce its workforce by around 1,000 full-time employees.

It blames the dismal first-quarter results on increased competition and high fuel prices. The loss for the three-month period wiped out last year’s small first-quarter profit.

Operating revenue for the company was up by 6.3% to SKr12.8 billion as passenger numbers rose by 2.6% to 7.3 million.

But pre-tax losses of SKr973 million were 10 times greater than those for the first quarter of 2007. Net losses more than SKr1.1 billion against SKr47 million last year.

SAS Group chief Mats Jansson says the company 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 decline in business travel.

He says the first quarter is traditionally weak and says the early Easter holiday period has exacerbated the situation. But he adds that there is an underlying decline of around SKr600 million.

“There are indications that global trends are so serious that we must prepare for a more enduring economic downturn,” he says. SAS Group is grouping a series of short-term efficiency measures under a project called ‘Profit 2008’ which aims to generate an earnings effect of SKr1.1 billion this year.

This project, it says, will include price adjustments, changes to the SAS Group carriers’ traffic programmes, and discontinuation or postponement of “certain activities”.

SAS Group has yet to detail the fleet reduction. But it had been planning to acquire an A340 to increase its long-haul fleet in order to serve new routes to San Francisco and Delhi.

Source:'s sister premium news site Air Transport Intelligence news