Scandinavian airline SAS launched a scramble for fresh capital and a brutal new savings drive as it intensified efforts to ride out the global downturn, sending its shares down 20 per cent.
The part state-owned Scandinavian carrier, which has made several attempts to whittle down its cost base and has long been viewed as a takeover candidate, said it would look to raise 6 billion crowns ($720 million) in a rights issue.
The cash call - whose value compares with a market capitalisation for SAS of just under 7.1 billion crowns, according to Thomson Reuters data - was backed by the governments of Sweden, Denmark and Finland, which own half of the struggling firm, and by its main private shareholder, SAS said.
It was part of a new programme called Core SAS under which the company would withdraw another 14 aircraft, reduce the number of routes it flies and cut staff by 3,000. SAS already has two other cost-cutting schemes under way.
The firm also reported a pretax loss of 403 million crowns for the fourth quarter, compared with a year-ago profit of 57 million.
State carriers such as SAS have been struggling for years with overcapacity amid growing competition from no-frills airlines. Easing oil prices have brought some relief but fallout from the financial crisis has left the outlook far from rosy.
Karsten Sloth, analyst at Jyske Bank, said the quarterly result was weaker than expected, though the market's focus was now rather on the share issue and the new savings plan.
"The rights issue was quite a surprise," he said. "Together with the savings plan, which is quite comprehensive, it should - if they reach their goals - secure SAS's independence and ability to compete."
He added it remained to be seen if the new measures would be enough to get SAS back on its feet. Shares in the firm were down 21 per cent at 33.90 crowns at 9.36am while the broader Stockholm market was slightly up.
"I think the rights issue has taken everybody by surprise. That would be the main reason (for the share fall). But still, we have a fourth quarter that is not as good as expected," said Sydbank analyst Jacob Pedersen.
SAS Chief Executive Mats Jansson said 2008 would "go down in history as one of the most challenging and turbulent years that the entire aviation industry has ever experienced".
Reuters