Scandinavian airline SAS, with CEO Mats Jansson, will launch an entirely new cost program and lay off 1,500 employees in a move to curb swelling losses.

SAS Group, half-owned by Sweden, Norway and Denmark, said it will cut more jobs, reduce salaries and slash other expenses after reporting its seventh uninterrupted quarterly net loss.

The second-quarter net loss amounted to 1.05 billion kronor (€102 million, $143 million), compared to a loss of 422 million kronor a year ago. The result was slightly better than analysts’ expectations – a survey by Reuters had forcast a loss of 1.1 billion kronor.

“The numbers are poor, but not as poor as I had feared”, said Jacob Pedersen, senior aviation analyst at Danish Sydbank, to The Swedish Wire. “It’s clearly better earnings than expected”.

To curb swelling losses the airline will launch an entirely new cost program amounting to 2 billion kronor, which is in addition to the total savings measures under Core SAS of 4.5 billion kronor. These cut downs will entail further reductions corresponding to 1,000-1,500 employees.

"It is essential that we now completely close SAS's cost gap with our competitors", said Mats Jansson in a comment. "This is a matter of competing on equal conditions and, ultimately, about the survival of SAS".

SAS' staff costs are in average 20 percent higher than for most of its competitors.

The airline declined to say how much the new savings programme would cost. Still, the actions got positive reactions from the market and the stock share gained rapidly in the early trade on the Stockholm stock exchange.

“It’s very positive with the cost reduction plan. But it will be difficult to implement. I don’t think the employees will be very happy about it”, said Jacob Pedersen, pointing out the importance that SAS is fighting to take control of the turbulent situation.

“SAS management is not sitting on their behinds, they are in the driving seat", he said.

A total of 1,066 full-time staff have already left the company. Seven airplanes have been taken out of service and a further 14 aircraft will be grounded during the remainder of the year in a move to reduce capacity, the airline said.

Operating volume fell 15 percent to 12 billion kronor during the quarter while the number of passengers was down 17 percent to 6.8 million.

Last week SAS said that traffic declined almost 14 percent in July - and 16.5 since the turn of the year - while the company’s earnings dived more than expected.

The international aviation organization IATA predicts a substantial loss of 9 billion kronor for the entire aviation industry in 2009, and many airlines find themselves struggling to survive.

Last week Finnish airline Finnair's chief executive Jukka Hienonen steped down after he reported a switch into loss. For the April to June period, the company reported a net loss of 26.1 million euros compared to net profit of 13.4 million euros in the same period a year earlier.