Global Airport News

Global Airport News

Scandinavian airline SAS's new strategy will focus on costs and maintain a cautious expansion as it seeks to return to profit this year, analysts said on Monday.

SAS, which has cut billions of kroner from costs in reorganisation programmes over the last few years, said it would present its strategy on Wednesday, but gave no further details.

"SAS is far better off now than they have been for the past five, six, seven years. They are doing a lot of things right," said Sydbank analyst Jacob Pedersen.

"Still, the problem is that competition is tough and the organisation… of SAS seems to be difficult to drive into value-creating mode."

Pedersen said he expected the strategy to consolidate the airline's most recent turnaround plan, called Core SAS.

That programme led to savings of around SEK7.6 billion Swedish kroner (USD$1.2 billion), cut unit costs by more than 20 percent and helped the flag-carrier of Norway, Sweden and Denmark make a profit of SEK729 million kroner in the second quarter.

At the time, CEO Rickard Gustafsson, appointed in January, said SAS was on track to make a profit for the year, a feat it has only achieved twice in the last eight years.

SAS has long been struggling with high costs and fierce competition from no-frills rivals such as Norwegian Air and Ryanair.

The global downturn and high jet fuel prices in recent years have added to its troubles. But SAS is in a much better position to deal with a gloomier climate now.

It has refreshed its fleet, brought down costs, sold non-core operations and renegotiated contracts with many of its workers to bring in more efficient practices.

In recent quarters it has cautiously been looking at growth again, adding capacity and routes. Mogens Holgaard, president of the SAS Group Pilots Association union, said he expected the strategy to outline how the company will grow despite uncertain market conditions.

"I don't expect any hesitation in the expansion plan," he said.

"There will still be a focus on the good trend we've had with cost cutting… but I expect to see them being more concrete on how they will follow up the expansion plans so the company does not stagnate any more."

SAS, half-owned by the governments of Sweden, Norway and Denmark, said in a statement it would present the strategy on Wednesday at 1130 GMT.