Feb. 9, 2010 – Stockholm, Sweden – Scandinavian airline group SAS on Tuesday asked shareholders for a five billion kronor ($670 million) cash injection, saying it needs more liquidity to emerge from the economic downturn after reporting a loss in the fourth quarter.
The struggling travel group also announced it would ramp up its savings program and slash 700 jobs to reduce costs by an additional two billion kronor.
SAS shares plummeted nearly 20 per cent to 2.84 kronor (38 cents) in Stockholm as investors took stock of the company's poor finances just a year after it launched a major cost-cutting effort and raised six billion kronor (US$720 million) in a previous rights issue.
"It is an incredibly bad signal to send to the markets,'' Sydbank analyst Jacob Pedersen said of the new rights issue. "SAS is in a very tough situation now.''
The announcement came as SAS posted a loss of 1.3 billion kronor in the fourth quarter, an improvement from a loss of 2.8 billion kronor a year earlier. Sales fell 20 per cent to 10.3 billion kronor from 12.8 billion kronor.
SAS said the new rights issue was supported by its major shareholders: the governments of Sweden, Denmark and Norway, which together hold a 50 per cent stake, and Sweden's powerful Wallenberg family. It's subject to a final agreement with SAS unions and approval by an extraordinary general meeting planned for April 7.
The cash-strapped travel group said it had also improved the terms of its bank loans, including extending four revolving credit facilities totalling about 5 billion kronor by one year to 2013.
SAS streamlined its operations last year, cutting its staff by 30 per cent to about 16,500 in the fourth quarter, shedding subsidiary airlines and focusing on its core carrier Scandinavian Airlines, which targets business travel in the Nordic region.
Meanwhile, the fleet was reduced by 18 aircraft to a total of 191, and would shrink by three more planes, SAS spokeswoman Elisabeth Manzi said.
The company said Tuesday it had achieved about 66 per cent of the targeted 5.3 billion kronor in savings, but new measures were needed to reduce costs by an additional 2 billion kronor. The new initiatives would include 700 job cuts this year and in 2011.
"The unprecedented severity of the market downturn has been far worse than anticipated,'' SAS CEO Mats Jansson said, noting that business travel was hit especially hard.
He said the new measures to improve the balance sheet "will give SAS the strength and flexibility it needs to compete effectively and be well positioned for the market recovery.''
Denmark and Norway each control 14.3 per cent of SAS shares, while Sweden holds 21.4 per cent. All three governments said they backed the deal on condition that the company improve its finances by cutting costs and other measures.
"Like the rest of the airline industry, SAS is in middle of one of the worst crises ever,'' Danish Finance Minister Claus Hjort Frederiksen said. "As a responsible owner, we found it right to back up the company's efforts.''