SAS shares fall as unions hold up restructuring

STOCKHOLM (Reuters) - Shares in Scandinavian airline SAS (SAS.ST) (SAS.ST) sank nearly 5 percent on Monday as it said it had not been able to reach agreement with unions over its plans to slim down and focus on core flight operations.

In June, incoming chief executive Mats Jansson outlined a plan to sell off parts of the business and concentrate on flying passengers and cargo to, from and within northern Europe.

As part of that, the airline said it would review the future of its Ground Services and Technical Services units and handling within SAS Cargo, with a decision due in December.

However, unions and management have not been able to agree on the plan, SAS spokesman Bertil Ternert said, throwing into doubt Jansson's strategy and his goal of improving relations with SAS's union members.

"The steering group could not hand in a comprehensive proposal, they were disunited," Ternert said, adding the disagreement was mainly around Ground Services.

"The union has taken a firm position that they want to retain the current organization," he said.

Ternert would not say whether SAS's board, which meets on Monday, would make any decision about the future of the three units anyway. Swedish media reported that a decision would likely come in late January.

Jacob Pedersen, analyst at Sydbank, said that postponing a decision would be good for passengers as it would minimize disruption during the Christmas and New Year periods and would underline the airline's focus on putting flyers first.

But on the other hand, continued troubles with unions sent a poor signal about management's ability to shape the airline's future.

"This hasn't developed into a crisis for the company yet, but it has the potential to do so," Pedersen said.

"Investors are looking very closely into that and selling off the stock."

Shares in SAS were down 4.95 percent at 0545 EST against a fall of 2 percent in the wider Stockholm market .

The airline, 50-percent owned by the governments of Sweden, Denmark and Norway, has lost nearly 6 billion Swedish crowns ($924 million) since 2001, though it made a pretax profit of 249 million in 2006.

Like other flag carriers it has faced headwinds from overcapacity, competition from cut-price rivals and surging fuel costs.

This year, SAS has also lost hundreds of millions of crowns as a result of strikes by cabin staff and three crash landings involving its Dash 8 Q400 planes.

The emergency landings, in which no one was hurt, led to the airline taking its whole fleet of the turboprop aircraft, manufactured by Canada's Bombardier (BBDb.TO), out of service permanently.