SAS Scandinavian Airlines has outlined details of a comprehensive new business plan which it says will pave the way for a new, strong and competitive company. The carrier is seeking total annual savings of around SEK 3 billion and a further SEK 3 billion from asset disposals, including its Norwegian regional airline subsidiary Wideroe’s Flyveselksap. How this additional restructuring will impact the carrier’s network development philosophy has not been divulged.

SAS says the proposed 4 Excellence Next Generation (4XNG) plan has received unanimous support from its Board who will meet again on Sunday November 18, 2012 to decide if the conditions for the implementation of the plan exist. SAS's banks and main shareholders have also given this plan their full support and will make credit available to SAS on equal terms. However, this support is conditional upon SAS delivering fully to this plan and upon new collective agreements being signed in the next week.

According to SAS, the 4XNG plan will give it a fresh start and will create “a completely new platform for the future”. It claims that its execution will enable it “to compete effectively in the expanding private travel market, while retaining its strong position in the important business travel market”. This, says SAS, will enable it to offer passengers a superior network and competitive travel services. Also, 4XNG will “eliminate complexity by centralising and reducing administration,” and it will make SAS more flexible by “outsourcing more work to external suppliers”.

"This truly is our 'final call' if there is to be a SAS in the future. We have been given this final chance to make a fresh start and to carry on these fundamental changes. I know that we are asking a lot of our employees, but there is no other way. I hope that our loyal and dedicated employees are willing to fight for the survival of SAS and for our jobs,” said Rickard Gustafson, President and CEO, SAS. “If we do this, we will be able to invest in new aircraft in the long-term and to further develop our operations. This will ensure that SAS will continue to play an important role for millions of people in Scandinavia in the future."

The 4XNG represents an extension of the carrier’s existing ‘4 Excellence Plan’, which was announced in September 2011 and is on target to deliver approximately 5 billion SEK in EBT effect. Despite this success, SAS foresees the need for further improvements to secure its long-term competitiveness. “In a challenging environment for airlines, SAS must take decisive action to address its cost structure, improve its capital structure on a long-term basis, and take steps to reduce the negative impact on equity in 2013 due to changed pension accounting regulations,” it said in a statement.

Through 4XNG, SAS plans to improve EBT by approximately 3 bn SEK on an annualised basis and improve the overall cost flexibility through: New union agreements for personnel; the centralisation of administration functions; the reduction of compensation to market levels; new pension terms and the outsourcing of Call Centres and Ground Handling. According to the carrier 1.5 billion SEK in improved EBT is expected to be realised in the financial year 2012/13, with most of the remaining annualised benefits realised in the financial year 2013/14. The plan is self-financing and requires no new capital, says SAS.

The asset disposals will include the sale of Wideroe, airport related real estate interests, ground handling and aircraft engines. In addition, SAS says it will also actively consider opportunities to realise further value from its financed aircraft portfolio and other assets. According to sources the current senior management team at Wideroe are in talks with investment groups to fund a bid for the carrier, while UK regional carrier Flybe has also expressed a general interest in the Norwegian venture.

In the table below we highlight the top 10 destinations across the November network of Wideroe, a major player in the Norwegian market providing key domestic connectivity and international services to destinations across Scandinavia and the UK using a fleet of Bombardier Dash 8 turboprops. The carrier was first founded in 1934 and has a long tradition of flying into rural parts of Norway. It now has a turnover of almost NOK 3 billion, carries two million annual passengers across a network that encompasses 46 destinations, of which many are flown under public service obligation (PSO) links for the Norwegian Ministry of Transport and Communications.