Struggling Scandinavian airline SAS's efforts to cut costs were overshadowed by a fine that dragged it to a third-quarter pretax loss of 1 billion crowns ($149 million.

The airline booked 1.4 billion of one-off charges, the biggest of which was a 70.2 million euro ($97.7 million) fine from the European Commission related to its cargo unit.

SAS, badly hit by the global downturn, has struggled for years to compete with no-frills airlines and streamline its units.

The market is now beginning to recover and SAS's cost cuts -- of around 6.3 billion crowns since the start of 2009, with further effects still to come from the current 7.8 billion crown program -- have boosted its underlying business.

Acting CEO John Dueholm said unit revenues were stabilising and costs would continue to fall, though SAS expects continued price pressure through 2011.

"When you have ... unit costs decline more than unit revenue, then of course you will have a positive impact on the underlying business," Dueholm said.

In the second quarter the company lost 600 million crowns, mainly due to a volcanic eruption in Iceland that kept most of Europe's air traffic on the ground for a week. In September, the International Air Transport Association (IATA) said it expected the industry to post a combined net profit of $8.9 billion this year, compared with an estimate of nearly $10 billion in losses in 2009.

European heavyweights BA and merger partner Iberia have returned to profit this year.

Lufthansa and Air France-KLM raised their earnings forecasts after the third quarter, citing improving revenues and robust bookings.

Analysts had also expected SAS to book a small pretax profit in the third quarter, though the range of forecasts was wide and analysts had not included the EU fine in expectations.

In the long term, however, SAS is unlikely to survive as an independent company, though an ownership change is unlikely in the short term as the main players driving consolidation in Europe -- Lufthansa, AirFrance KLM and British Airways -- have their plates full with integrating acquired operations.

"We have stated that in the long run, we see SAS as part of a consolidated entity," Dueholm said.

"Of course the consolidation will continue, but if we are talking about consolidation in Europe, I don't think any acquisitions will take place in the coming 2-3 years." (Reuters)