SAS cuts 800 jobs in 'final call' savings plan

Updated 13 November 2012
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SAS cuts 800 jobs in 'final call' savings plan

COPENHAGEN, Denmark: Scandinavian airline SAS said yesterday it will lower pensions and salaries and slash 800 jobs in an effort to cut costs by 3 billion kronor ($ 440 million) annually in what the CEO described as a "final call" for the loss-making carrier.
SAS AB will get 3.5 billion kronor in credit lines from the governments of Sweden, Norway and Denmark, as well as major banks, if it can agree on those savings cuts with labor unions. SAS wants to renegotiate the workers' employment terms and conditions as well as their pension schemes.
SAS also plans to raise about 3 billion kronor by selling its regional airline Wideroe, ground handling services and other assets.
"We are demanding a lot but there is no other way. This truly is our final call if there is to be an SAS in the future," CEO Rickard Gustafson said.
SAS is being hurt by the combination of a drop in demand due to a global economic downturn, high costs and competition from low-cost carriers. Last week, Norwegian Air Shuttle, one of Europe's fastest-growing airlines and a big competitor of SAS, announced it will start next May its first long-haul flights to New York and Bangkok from Oslo and Stockholm.
"We haven't made money in a number of years and we cannot continue to operate if we do not demonstrate that we can earn money and make a profit," Gustafson said in Stockholm, where the company is headquartered. "Our credit providers have said that we give you this chance to turn the company around."
As SAS announced the restructuring details, it also presented its third-quarter results, which showed net profit doubled to 434 million kronor ($ 64 million) as sales rose 5 percent to 11.1 billion kronor (1.6 billion).
Gustafson said the company's five-point plan had not yet been presented to employees, who now "would have to digest it and form their own opinion." He said he believed the company had "a good dialogue" with the employees.
The restructuring plans, including the sale of Wideroe, will result in the overall number of SAS employees falling from around 15,000 to 9,000.
Bente Sorgenfrey of Denmark's FTF union that has most of the 2,000 cabin and ground crew employees in Denmark called the plan "violent." "Many SAS employees have demonstrated time and time again that they have been willing to go far to help SAS by, among other things, go 20 percent down in salary, 20 percent up in working time and by handing (SAS) half a month's salary in December this year and next year," she said.
The three Scandinavian governments own 50 percent of the company. Denmark and Norway each control 14.3 percent of the shares, while Sweden holds 21.4 percent.
SAS is not the only airline to be struggling, particularly in Europe, where the financial crisis has been hurting business. Last week, the International Airlines Group warned its Spanish carrier, Iberia, would cut 4,500 jobs, 25 aircraft and rearrange salary contracts.
"Like the rest of the aviation industry SAS is going through a very difficult period. The economic crisis, high fuel prices and tough competition has for several years pushed earnings," Denmark's Finance Minister, Bjarne Corydon, said. "The implementation of (the plan) is an indispensable prerequisite for SAS' future."
The company's shares rose 2.6 percent to 5.80 Danish kroner ($ 0.98) in morning trading in Copenhagen.


Abraaj gets $50 mln Abu Dhabi bid for investment management business

Updated 3 min 42 sec ago
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Abraaj gets $50 mln Abu Dhabi bid for investment management business

ABU DHABI: An Abu Dhabi Financial Group company has made a conditional $50 million offer to buy private equity firm Abraaj's investment management business, a document reviewed by Reuters shows.
Abu Dhabi Capital Management's (ADCM) bid is well below the $125 million offered by New York-based Cerberus Capital Management before Dubai-based Abraaj filed for provisional liquidation in the Cayman Islands last week.
It was unclear whether the terms of the offer that Cerberus made were different from the one made by ADCM.
ADCM stated its terms in a letter to Abraaj's financial adviser Houlihan Lokey dated June 17, which said it will not buy any companies owned by Abraaj and its affiliates and will not assuume any liabilities.
Abraaj has been bruised by a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), in a $1 billion healthcare fund.
It has denied it misused the funds.
Abraaj Holdings said on Tuesday a court in the Cayman Islands ordered the appointment of PwC as provisional liquidators of Abraaj Holdings and Deloitte as provisional liquidators of Abraaj Investment Management Ltd., Abraaj's fund management business.
ADCM, an ADFG entity based in Cayman Islands, wants to become the General Partner of the limited partnerships, which have committed money to Abraaj's various private equity funds.
Abraaj acts as the general partner for these limited partnerships.
Some Gulf limited partners - ranging from financial institutions to pension funds and family businesses - in funds of Abraaj had asked ADFG to explore a buyout of Abraaj's investments business as they were concerned about their holdings, two sources familiar with the talks told Reuters.
Abraaj, which declined to comment on ADCM's offer, has debt estimated at more than $1 billion, sources have told Reuters.
Since the dispute went public early this year, Abraaj has split its investment management business and holding company, while its founder Arif Naqvi stepped aside from the day-to-day running of its private equity fund unit and the firm halted its investment activities.