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SAS forced to announce new savings plan
SAS released its third quarter results ten days early yesterday after intense media speculation lead the Nasdaq stock exchange to suspend the trading of the airlines shares.
Trading resumed after SAS’s announcement, which confirmed rumours that the troubled airline would be embarking on a new round of spending cuts.
In a press release, the company said it hoped to cut an additional 2.6 billion kroner and also raise another 2.6 billion kroner by selling off non-core assets.
While the savings plan has yet to be finalised, reports last week suggested that SAS had demanded many employees would be asked to reapply for their jobs and take pay cuts of up to 25 percent, while others have been offered voluntary redundancies.
“I think SAS’s has incredibly sharp leadership at the moment,” SAS-expert Richard Björnelid, told Berlingske newspaper last week. “There is talk of a 25 percent pay cut. That is the information I have received from a centrally placed source. I suspect SAS’s leadership will simply say, 'This is what matters, take it or leave it.'”
One of the main financial challenges SAS faces is changes to the way that pensions are accounted that means it faces a multi-billion kroner bill in 2013.
The new round of savings comes a year after the airline implemented another savings plan called 4Excellence. But while the new round suggests 4Excellence did not cut deep enough, SAS argues it has benefited from it.
“In a very difficult and competitive industry environment, the positive development in Q3 is proof that implementation of the 4 Excellence strategy has proceeded according to plan,” SAS stated in the press release, adding it would provide further updates as the developments occur.
SAS managed to increase passenger revenues by nine percent and reduce the cost per passenger per journey by six percent after implementing 4Excellence.
The company also announced third quarter pre-tax profits of 491 million kroner.
According to the Ritzau news bureau, it was rumours that negotiations had failed between SAS and the company’s creditors that led Nasdaq to suspend trading of SAS shares yesterday. This, in turn, forced SAS to release its third quarter figures early.
In the press release SAS writes, however, that it is still negotiating the 4.7 billion kroner loan with its creditors.