STOCKHOLM (Dow Jones) -- Shares in Scandinavian airline SAS AB plunged by nearly 25% Tuesday after it said it would make a 5 billion Swedish kronor ($678 million) rights issue, on top of the SEK6 billion rights issue launched in March last year, and introduced new cost cuts aimed at saving a further SEK2 billion.

The company also said that flight deck and cabin crew unions have signed a letter of intent agreeing to SEK500 million of cost savings during the first quarter of 2010.
As a result of the extended cost-cutting measures a further 700 employees will lose their job by the end of 2011, bringing the total to 4,300 from an original target of 3,000 that was set early last year.
At 1005 GMT, SAS shares were down 21% or SEK0.73, at SEK2.80 while the broader Swedish market was higher.
Alexander Solovjov at Orion Securities said investors were, not surprisingly, cautious as this is the second rights issue in a short time frame.
He also said earnings figures are weak while there are growing risks relating to legal issues, with the company expecting to be fined by the European Union in a cargo case.
The result of the investigation could be known as early as the first quarter of 2010 according to SAS.
“Market conditions deteriorated far more extensively than originally expected when the core SAS strategy was initiated a year ago,” President and chief executive officer Mats Jansson said in a statement.
The additional SEK2 billion in cost savings will “further improve SAS's long-term cost position”, while the SEK5 billion rights issue will help fund the cost-saving program and allow it to capitalize on the market situation when air-travel recovers, he added.
The original core SAS saving plan, launched in February 2009, targeted SEK4 billion in annual cost savings, rising to SEK5.3 billion, and is running to plan with 66% of the savings already achieved.
The company said the rights issue has support from the airline's three government owners -- Sweden, Norway and Denmark--and the largest private shareholder, the Knut and Alice Wallenberg Foundation, through Foundation Asset Management (FAM).
In total, the four shareholders hold 57.6% of all outstanding shares and votes in SAS.
A consortium of banks, comprising J.P. Morgan, Nordea, SEB Enskilda, DnB Markets, The Royal Bank of Scotland and Danske Markets has confirmed it expects to underwrite the remaining 42.4% of the shares to be issued in the rights offering.
Terms of the issue are expected on April 6.
Company credit lines are also been re-worked, with lending banks agreeing on improved terms, while talks have started over refinancing or extending bond maturities, the company added.
SAS said its fourth-quarter net loss came in at SEK1.3 billion, approaching twice the loss seen by analysts of SEK733M. Revenue fell to SEK10.32 billion from SEK12.82 billion, in line with analyst expectations, while the operating loss widened to SEK1.42 billion from SEK282 million a year earlier, after analysts had eyed a loss of SEK733 million.
January traffic decreased by 5.1% versus last year while it carried 1.7 million passengers in the month, down 3.7% from last year.