SAS to break up in full restructure

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[ Suprised this one was missed... -Ed. ]

28 March 2004
Clear skies ahead for SAS after landmark restructuring

by Jean Liou
STOCKHOLM, March 28 (AFP) - The dark clouds that have long hung over
Scandinavian carrier SAS appeared to evaporate last week after
management struck a landmark deal with unions, clearing the way for a
major restructuring and more importantly, profits.

The deal, clinched just before Wednesday's deadline, will enable the
struggling airline -- it has not posted a profit since 2000 -- to save
1.5 billion kronor (162 million euros, 197 million dollars) a year
once it takes full effect in 2005.

The group's chief executive Joergen Lindegaard was insistent: staff
would have to say goodbye to a slew of benefits and accept wage cuts
or they would lose their jobs and some routes would be eliminated.
With the deal secured, Lindegaard was unable to hide his optimism,
saying he wanted to make SAS "the most efficient network in Europe".
He promised that the savings, along with other restructuring measures
underway, would pave the way for a profit of five billion Swedish
kronor within three years.

The airline has been hit hard since the September 11, 2001 attacks on
the United States, the sluggish global economy and the arrival of a
number of successful no-frills airlines in Scandinavia. In 2003, it
posted a loss of 1.41 billion kronor.

Union leaders acknowledged that the deal they cut with management was
a poor one -- but it was the only one that could be made, they said.
The airline's Danish cabin crew agreed, for example, to a 12 percent
wage cut on average, as well as an extension of their working hours by
30 percent and a reduction in the number of compensation days.

"It's a very bad deal, but it was necessary to save jobs," the head of
their CAU union, Verner Lundtoft Jensen, said.

As for pilots, they agreed to a six percent wage cut and will have to
forego bonuses and cut back on their expense accounts.

"The deal breaks the unions' dominance in SAS; they have always been
very strong. Now, SAS can be run on fully commercial principles," Jeff
Saul, an aviation analyst at Sweden's Enskilda Securities, told AFP.
SAS' onerous structure -- it is half-owned by the Danish, Norwegian
and Swedish governments, with 39 different unions in the three
countries -- has long weighed down efforts to make structural changes.
Now, as part of an overall restructuring programme called "Turnaround
2005", the carrier will split into three national companies in
Denmark, Norway and Sweden.

A fourth SAS unit will be created to handle intercontinental flights.

"The aim is to establish more efficient units that are closer to the
clients and the market, and that's why we're decentralising,"
Lindegaard said.

Jeff Saul said he believed that the restructuring, as well as SAS's
strong brand, compact network and unparalled number of flights in
northern Europe, would leave it well-placed to make a comeback.

"That's why I think the low-cost airlines will have a hard time," he
said.

SAS management has insisted that the split is not the first step
towards selling off parts of SAS, a line most analysts agreed was
true.

But the prospect of a return to profits has already sparked the
imagination of some.

Danish Finance Minister Thor Pedersen said the day after the deal was
signed with unions that his government would sell its 14.3 percent
stake in SAS as soon as the airline starts making a profit.

The Swedish government, which owns 21.4 percent of SAS, wasted no time
and said it would snatch up the Danish stake.

Meanwhile, Lufthansa, an SAS partner, and British Airways are often
mentioned as possible buyers of the Scandinavian carrier.

If however the group is not swallowed up, it could acquire Finnair of
Finland or LOT of Poland, according to analysts.

"But none of this will happen before 2006," Saul said, noting that the
group will have to pull itself out of the red first.

BL.
- --
Brad Littlejohn | Email:
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