Scandinavia's SAS targets staff costs with hubs in London, Spain

* To seek Air Operator's Certificate (AOC) in Ireland (Other OTC: IRLD - news)

* First (Other OTC: FSTC - news) operation established outside home markets

* SAS (LSE: 0O1W.L - news) shares rise nearly 4 percent (Adds Norwegian, Swedish government comments)

By Anna Ringstrom

STOCKHOLM, Feb 1 (Reuters) - Scandinavian airline SAS will set up bases in London and Spain in a bid to cut staff costs and compete with budget carriers such as Norwegian Air and Ryanair.

Partly state-owned SAS flagged plans for its first hubs outside Scandinavia in December. They will be owned by a new Irish-registered company, it said on Wednesday.

Basing aircraft and employing pilots and cabin staff at leisure destinations in Europe, such as London and the Mediterranean, would lower labour costs, SAS Chief Executive Rickard Gustafson said.

SAS, which is part-owned by Sweden, Norway and Denmark, said it aims for the new hubs, which will have locally employed staff, to be up and running in around a year's time.

Although salary levels would not differ much, total labour costs in Britain and Spain would be between 35 and 40 percent lower per employee than in Scandinavia, Gustafson told Reuters.

"This (move) is mainly about staff costs," he said.

NATIONAL BACKING

The major shareholders in SAS -- Sweden owns 17 percent of SAS, Denmark 14 percent, and Norway 12 percent -- were supportive of the airline's plan, which lifted its shares.

"SAS acts in a very tough market and works hard to be profitable. And that is a task for, and the responsibility of, the board," Swedish enterprise minister Mikael Damberg said.

And Norwegian deputy trade and industry minister Lars Jacob Hiim said Norway's stake in SAS was a financial one.

"The Norwegian government is of course keen to protect Norwegian workplaces and ensure increased competitiveness. But it is the company's board and management that take operational decisions," Hiim said in an emailed statement.

A Danish government spokesman said it supported the move of a small part of the SAS fleet of aircraft to London and Spain to ensure the company's competitiveness.

SAS said costs for the start-up of the Irish air operator certificate (AOC) and its hubs would impact earnings initially, and positive earnings effects would come gradually.

SAS's shares were up 3.9 percent at 1406 GMT. (Additional reporting by Rebecka Roos in Stockholm, Stine Jacobsen in Copenhagen and Gwladys Fouche in Oslo; Editing by Alistair Scrutton and Alexander Smith)