UPDATE 2-SAS Q2 loss smaller than forecast, plans more cuts

* Swings to pretax loss 1.04 bln SEK, vs consensus 1.14 bln

* Expands ongoing savings programme, doubles cost estimate

* Launches plan to save additional 2 billion SEK

* New plan envisages 1,000-1,500 new job cuts

(Adds background, detail, analyst comment, share reaction)

By Anna Ringstrom and Katarina Gustafsson

STOCKHOLM, Aug 12 (Reuters) - Scandinavian airline SAS (SAS.ST) posted a smaller second-quarter pretax loss than expected and announced plans to save an extra 2 billion Swedish crowns ($276 million), lifting its shares on Wednesday.

SAS said the market remained unpredictable and it would cut another 1,000-1,500 jobs, or 5-8 percent of the workforce based on the average number of employees in the second quarter. A company spokesman declined to say how much the move would cost.

Airlines have been hit hard by the global recession and high fuel prices. SAS, with an ageing fleet and higher costs than many rivals, was already struggling before the financial crisis to compete with cheaper rivals and overcapacity.

"SAS must compete on the same basis as its competitors, which ultimately is a matter of survival," said SAS Chief Executive Officer Mats Jansson.

SAS said it had also expanded its ongoing 'Core SAS' savings programme by 0.5 billion crowns to 4.5 billion and now expected costs to amount to 1.7 billion crowns in 2009.

SAS warned in June the programme would cost much more than the 900 million crowns it previously estimated due to an earlier phase-out of aircraft, a higher early retirement ratio and redelivery costs for leased aircraft. [ID:nL5656177]

The airline, half of which is owned by Sweden, Norway and Denmark, made a second-quarter pretax loss of 1.04 billion Swedish crowns ($143.5 million), better than a mean forecast for a loss of 1.14 billion in a Reuters poll and compared with a year-ago profit of 131 million.

Nordea analyst Finn Bjarke Petersen said results roughly matched his expectations and the new programme was good news.

"It is a never ending story, but it is important that they are doing something significant on the cost side to reduce the costs," he said. "So, all in all, we keep our 'hold' recommendation and will do minor changes to our estimates."

PAY CUTS

SAS shares rose 4 percent to 3.84 crowns at 0855 GMT while the broader market in Stockholm .OMXSPI was slightly down.

"We are positively surprised over the depth of the management's new initiatives, but it may well be very difficult to persuade all employee groups to sign up to new wage agreements," Jyske Bank said in a note.

SAS said it aimed to slash flight pilot's and cabin staff's collective salary agreements by 10 to 20 percent.

"The scene is set for a tough encounter with especially the cabin crew as management will not pay any national consideration in its attempt to become more competitive," Jyske said.

SAS said measures under Core SAS were ahead of schedule.

Last week, the firm reported a 13.6 percent year-on-year drop in its passenger traffic in July -- the 11th consecutive fall. Budget airline Norwegian Air Shuttle (NWC.OL), however, said it carried 16 percent more passengers in July.

Rival Finnair (FIA1S.HE) last week announced a quarterly loss caused by weak demand and falling ticket prices, and the resignation of its chief executive. [ID:nL7696982]

SAS reported a 12 percent drop in quarterly sales to 12.2 billion crowns, matching expectations, and said its market remained unpredictable amid higher fuel prices and weak demand.

"Passenger growth in the market is expected to be negative during 2009. Uncertainty with regard to the price of jet fuel, the trend in the USD exchange rate and the effects of pandemics remains," it said. (Editing by Jon Loades-Carter) ($1=7.248 Swedish Crown)