Scandinavian airline SAS said on Thursday it had abandoned its plans to sell its loss-making Spanair unit due to tough market conditions, sending its shares down 10 percent.
The airline, half-owned by Sweden, Norway and Denmark, said in a statement that a difficult market in Spain, high fuel prices and financial market turmoil meant it had not achieved its goals and conditions for the sale.
"The value we could realize does not reflect the underlying value in Spanair," Chief Executive Mats Jansson said in a statement.
Sture Stolen, head of investor relations at SAS, said the company could not rule out a sale of Spanair at a future date.
SAS said it would focus on turning around Spanair, the second-biggest carrier in the Spanish market after Iberia.
Like many flag-carrying airlines, SAS has been struggling for years with overcapacity in the industry and competition from cut-price airlines.
The recent surge in oil prices has added to the pressure.
The global airline industry could lose USD$6.1 billion if oil remains around USD$135 per barrel for the rest of the year, the International Air Transport Association said this month. Oil was trading at above USD$136 a barrel on Thursday.
SAS said in its "Strategy 2011" turnaround plan it would sell Spanair, its stake in British airline bmi and other assets, and concentrate on its home markets in Northern Europe.
SAS wanted to complete the Spanair sale in the second quarter, but in late May it warned it might have to drop the deal after Iberia decided to back out of negotiations.
Charter airline Gadair, as well as a group of Catalan businessmen in partnership with an industrial investor, had also been tipped as possible bidders.
Strategy 2011, launched in 2007, aimed to boost pretax profit to SEK4 billion kroner, but the airline has already been forced to introduce further measures to meet higher fuel bills.
