SAS Agrees With Airbus to Upgrade Wide-Body Fleet With A350s

SAS Group (SAS) agreed to buy 12 new Airbus SAS long-range jets valued at $3.3 billion as the Nordic region’s largest airline seeks to upgrade aging aircraft with more efficient models.

SAS is looking to add eight A350-900s starting in 2018 and four A330-300s from 2015, to upgrade its fleet of A330s and A340s, the Stockholm-based airline said in a statement today. The purchase, once final, will be financed by export credit facilities and sale and leasebacks agreements. Aircraft customers typically buy at a discount to list prices.

The airline has pursued asset disposals and job cuts as it seeks to return to profit and fend off rivals including low-cost carrier Norwegian Air Shuttle ASA (NAS), which is buying Boeing Co. (BA) 787 Dreamliners, and network long-haul operators. The new aircraft will make SAS more competitive and help cut fuel costs, Chief Finance Officer Goran Jansson said today.

“It was due time to take a decision to clear some question marks when it comes to cost level and competitiveness in terms of look and feel on the plane, also to get delivery positions on new aircraft,” Jansson said in a telephone interview. “The restructuring plan is a prerequisite to enable us to do this.”

The company’s 4Excellence Next Generation plan, introduced in November, aims to deliver 3 billion kronor ($450 million) in savings over the next two years. SAS is targeting earnings before interest and tax of more than 3 percent of sales, assuming stable fuel prices and no external shocks.

Lease Expiry

The airline plans to replace its older A340s and A330s as their leases expire and is looking to firm up the order “in the next couple months,” Jansson said. SAS owns half of its fleet and leases the remainder, a mixture that it plans to keep, the executive said.

SAS currently operates 19 A320s single-aisle aircraft, four A330s and seven A340s, according to Airbus. As many as seven of the airline’s A330s and A340s will be fitted with new seats and entertainment systems by the end of 2015, the carrier said.

The A350 aircraft is Airbus’s newest model and made its maiden flight this month. Airbus has stopped making the four-engine A340, and airlines are looking for ways to cut their fuel bills, the single largest expense for most carriers. Prior to the Paris Air Show that wrapped up last week, Airbus had 613 firm orders for the A350.

The A350 can seat 270 to 350 passengers and uses 25 percent less fuel than other similarly sized aircraft, according to Airbus. The A330 seats between 250 and 300 people.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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