SAS boss predicts return to profit

SAS is expected to turn around three years of losses in 2004 as the result of a radical restructuring which will see the loss of 6,000 jobs. The Scandinavian carrier, the fourth largest airline group in Europe, secured a “historic” agreement last week, which will see pilots take a 6% pay cut, representing a cost saving of more than £50 million. This key concession, along with other wide-ranging cost-cutting measures designed to bring £1 billion-worth of savings by 2005, will enable SAS to effectively be split into four separate entities. This process will create individual airlines for Denmark, Norway and Sweden plus a long haul arm. The three-year overhaul will see costs reduced by up to 45% by 2005, when staffing levels will have shrunk from 22,000 to under 17,000. Further redundancies are expected as the airline’s Norwegian business merges with local carrier Braathens to create a single company with the name SAS Braathens. SAS vice-president strategy and co-ordination Soren Belin stressed that the revamped group would continue to focus on the business travel sector rather than get embroiled in a no-frills war with the likes of Ryanair. He said SAS aimed to be in profit this year, with an improved result in 2005, but declined to forecast figures. Stressing SAS’s determination to continue as a “premium” carrier offering services primarily to business travellers, Mr Belin admitted: “In a street fight with Ryanair, we would never win.” He added that the pact with pilots was a “historic achievement” as failure to do so would have led to the airline to retract rather than expand in the future. Speaking in London, Mr Belin dismissed suggestions that no-frills carriers would dominate European air travel, claiming that there continued to be demand for efficient network carriers like SAS to provide additional services to corporate travellers. “The battle in the air will be fought on the ground,” he said. “You will see more special treatment for passengers on the ground with no queues, better automation and instant functions such as SMS.” SAS in the UK is aiming for a rise in online sales from 12.5% to 20% this year and claims e-ticketing now represents 40% of total business. Vice-president Europe, Middle East and Africa Per Moller Jensen said SAS still regarded travel agents as a “very important” distribution channel. Lars-Ove Filipson, the airline’s UK and Ireland general manager, said: “Signs of the group’s continued growth and expansion are evident with a total of six new services from Birmingham, Edinburgh, Inverness and Dublin airports at the end of March in addition to our existing services from London Heathrow and Manchester.” Report by Phil Davies