According to the Swedish newspaper Expressen, the Scandinavian airline SAS is on the way to bankruptcy. The newspaper writes that if Norway, Sweden and Denmark fail to find a solution to the airline’s problems, there is a high risk of stopping all aviation services.
After the newspaper’s claims, the comapny announced today its delayed quarterly financial report and the solutions to save the company.
The Scandinavian giant targets approximately 3 bn SEK of annual improvement from cost reductions and organizational restructuring and approximately 3 bn SEK increased liquidity from asset sales. The Board will meet again on Sunday November 18, 2012 to decide if the conditions for the implementation of the plan exist.
The company board plans to address the issues facing SAS through:
· New union agreements for personnel
· Centralization of administration functions
· Reduction of compensation to market levels
· New pension terms
· Outsourcing of Call Centers and Ground Handling
New pension terms will mitigate the need for new equity
As a result of the revised IAS19, that will be applied by SAS as of November 2013, the SAS Group’s shareholders’ equity will be reduced when all unrecognized deviations from estimates and plan amendments will be recognized in full in shareholders’ equity. The 4XNG plan will result in a transition, for the majority of the employees, from the current defined benefit plans to defined contribution plans. These changes will mitigate the negative impact on equity by an estimated 2.8 bn SEK, reduce defined benefit obligations by 19 bn SEK (58%) and reduce volatility in future earnings resulting from changes in pension assumptions. These pension changes, together with the other actions announced today, provide SAS with the confidence that it will retain a strong equity position.
Asset Disposal and Financing Plan to increase liquidity
The Plan involves a commitment to complete an asset disposal and financing plan, which totals approximately 3 bn SEK in potential net cash proceeds. The proceeds will improve SAS’ internally generated financial preparedness and allow SAS to further reduce its financial leverage. The asset disposal and financing plan includes:
· Widerøe, a subsidiary regional airline in Norway
· Airport realated real estate interests;
· Ground handling; and
· Aircraft engines
SAS has initiated discussions with its relevant unions and will initiate a broad communication effort towards its employees to obtain their consent to the changes in the union agreements.