SAS Group has unveiled a last-ditch effort to restructure the ailing Scandinavian company, warning that union agreement is essential to obtain the support needed for new financing.
Norwegian regional operation Wideroe and SAS's ground-handling operation are included in a disposal and financing plan intended to generate some SKr3 billion ($444 million) in cash. This asset disposal plan also covers aircraft engines and real estate.
SAS Group's board has urged employees to back the scheme which, on top of the disposals, also aims to cut another SKr3.5 billion in costs.
"This truly is our final call if there is to be an SAS in the future," says chief executive Rickard Gustafson. "I know that we are asking a lot of our employees, but there is no other way."
The company has negotiated a tentative agreement with banks and shareholders to extend a credit facility from SKr3.1 billion to SKr3.5 billion, and extend the term to March 2015.
But this is conditional on obtaining support from unions, and the board will meet on 18 November to decide "if the conditions for the implementation of the plan exist".
SAS Group has designated the restructuring plan as '4XNG' - a next-generation version of its previous '4 Excellence' strategy, unveiled in September 2011.
The restructuring will involve centralising administration functions, arranging new pension terms, and outsourcing functions such as ground-handling and call centres.
SAS Group expects to generate some SKr1.5 billion in earnings improvements over 2012-13 and most of the remainder in 2013-14.
"The plan is self-financing and requires no new capital," the company points out.
SAS says the new credit facility will be provided by seven of its current lenders as well as the three state shareholders - the Norwegian, Swedish and Danish governments - on equal terms.
But its availability is subject to final documentation and, if necessary, parliamentary approval and is "conditional" on signed union agreements which are "a central and integral part" of the 4XNG plan, states the company.
These collective agreements must be signed "in a very short space of time" to give the company access to the funding required.
SAS is aiming for earnings profitability in excess of 8% by around 2014-15, under the new plan. It says the restructuring will enable the company to "compete effectively" in the private-travel market while retaining its position in the business-travel market.
Source: Air Transport Intelligence news
