SAS and Lufthansa Cargo Make Tough Cuts

SAS, the largest Scandinavian airline, will cease freighter business. Lufthansa cuts cargo capacity 10%, reduces worker hours.

Scandinavian Airlines (www.flysas.com) saw its revenues rise by 5.1% year over year in 2008, but it experienced an overall decline of $789 million that it attributed to high fuel prices and the poor world economy, among other reasons. Its new strategy, called Core SAS, not only calls for the reduction in cargo operations, but divesting itself of non-core companies and 3,000 employee layoffs, as well as a reduction of 5,600 workers due to divesting itself of businesses and outsourcing some operations.

SAS will divest itself of Spanair and airBaltic, as well as Spirit, Air Greenland, BMI, Estonian Air, Skyways, Cubic and Trust. It will further streamline operations by reducing 10% of its short-haul and 18% of its long-haul fleet. The goal of the restructuring is to save SAS $338 million over two years.

In addressing the reduction of its cargo capacity as the new year began, Carsten Spohr, Lufthansa’s (www.lufthansa-cargo.com) cargo chairman, noted, “Demand for airfreight capacities has fallen sharply, worldwide. The production halt in diverse industries has hit the entire international logistics business—and especially the air cargo industry. After scaling back our freighter capacities, flexible adjustment of staffing capacities has become inevitable in the Company’s present situation. We are nevertheless confident that we will be able to safeguard all jobs at Lufthansa Cargo.”

The carrier has had a hiring freeze in effect since the middle of 2008. In all, some 2,500 employees in Germany will see their work hours cut. With these measures in force, the company feels it will be able to safeguard all of its jobs. In December 2008, Lufthansa Cargo saw its freight volumes decline by 21.4% year over year.

Lufthansa’s fiscal year results will be announced in mid-March. Despite its rough December, the airline said that it expects to deliver an operating profit of € 1.3 billion, up from its previously announced projection of € 1.1 billion.