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SAS to ‘Turn Every Stone’ in Search for Cost Cuts as Loss Looms

SAS Group said it will intensify efforts to cut costs as the Nordic region’s largest airline battles to avert a fifth straight annual loss.

SAS fell as much as 5.8 percent in Stockholm after investor relations chief Sture Stoelen said that while a savings program is “showing results,” additional measures are required.

“We’re not happy with our earnings,” Stoelen said in a telephone interview. “The high oil price and continued intense competition is forcing us to continue to turn every stone.”

SAS, which is part-owned by the Swedish, Norwegian and Danish states, hasn’t made an annual profit since 2007 as fuel costs crimp margins and rivals including Norwegian Air Shuttle ASA win market share. The company has cut about 300 office jobs in a push to reduce expenses by as much as 5 percent and boost earnings by 5 billion kronor ($747 million) in 2012 and 2013.

SAS traded down 1.4 percent at 6.85 kronor as of 2:01 p.m. local time. The shares has fallen 14 percent this year, valuing the owner of Scandinavian Airlines at 2.27 billion kronor.

Chief Executive Officer Rickard Gustafson said in an interview on Aug. 8 that SAS may cut more jobs. He has declined to forecast whether the company will make a profit this year.

Pension Concern

Stockholm-based SAS is also talking with unions about changing pension terms to reduce the size of an equity revaluation it must make before Nov. 1 next year, Stoelen said. SAS will have to write down almost all of its 12 billion kronor of equity unless pension agreements are changed before then.

“We’re looking at different solutions like new pension and early retirement terms,” he said.

SAS would be in a “very difficult situation” in terms of how it would be viewed by financial partners should its equity be cut to zero, said Jacob Pedersen, an analyst at Sydbank A/S in Aabenraa, Denmark, with an “underweight” rating on the stock.

The carrier would probably be forced to raise money by issuing new shares he said.

SAS is still “collecting information” from potential buyers of its ground services operations, which employ about 6,000 workers, Stoelen said, reiterating comments from Sept. 27. SAS still hasn’t made a decision on whether to sale, he said.

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