SAS to cut jobs as fuel hits earnings

SAS plans to cut 1,000 administrative jobs and double its cost-savings target as the Nordic airline prepares for rising fuel prices and intensifying competition.

Norwegian Air, a unit of SAS rival Norwegian Air Shuttle, received clearance to operate US routes through Cork and Shannon this month, which will enable the carrier to accelerate its long-haul expansion.

SAS said it’s the only airline in Europe operating with crews based in Scandinavia, where labour costs average €43 an hour, compared with €25 in the EU.

Profit in the fiscal first quarter that started November 1 will fall from a year earlier following “more demanding” trading conditions in the autumn, SAS said.

The airline will try to reduce spending on operations by 1.5 billion kronor (€155m) from 2017 to 2019, versus an earlier target of 800m kronor, with the job cuts amounting to about 9.3% of its workforce.

It’s also considering setting up operations outside its home markets of Sweden, Norway and Denmark, where SAS estimates labour costs are as much as 72% higher than the EU average.

SAS, which focuses on business travelers seeking a dense European network and is expanding its long-distance fleet, is among mainline carriers in the region struggling with expanding discount competitors including Norwegian Air Shuttle.

It’s also contending with an industry-wide capacity glut spurred by a drop in oil prices that’s now coming to an end. Chief executive Rickard Gustafson said SAS will decide by the second half of 2017 whether to create “a few bases across Europe” to complement business in the Nordic region, which will remain the carrier’s focus.

“Potentially moving bases to outside of Scandinavia is a move investors might appreciate,” said Jacob Pedersen, an analyst at Sydbank.

“Restructuring has become their way of life; the company is fighting for survival.”

Setting up operations abroad “will not be an easy task, given the involvement of the unions, but if the company wants to survive, they have to look at all options,” he said. SAS shares rose yesterday, paring the shares’ decline this year to 37%.

SAS’s fiscal 2016 pretax earnings excluding one-time items totalled 939m kronor, and this year the measure will again be positive.

SAS added four long-haul aircraft to bring its fleet in the segment to 16 planes, and intercontinental passenger numbers jumped 25% in the fourth quarter. The company was unprofitable in the five years through 2012 as well as in 2014.


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