The airline reported a net loss of 6.32 billion kronor ($760 million) in 2008, after a profit of 636 million kronor in 2007 and a loss of 2.77 billion kronor in the fourth quarter.
"Horrifying," company chief executive Mats Jansson said of the results at a press conference.
"2008 will probably go down in history as one of the most challenging and turbulent years that the entire aviation industry has ever experienced," he said earlier in a press release.
Already weakened in 2007 by technical problems which led to the grounding of its short-haul Dash-Q400 planes, SAS in 2008 faced plummeting demand due to the global economic downturn and the crash in Madrid of a Spanair unit plane in August that killed 154 people.
Out of SAS' 6.32 billion kronor loss last year, 4.89 billion was attributable to its subsidiary Spanair which the Scandinavian company finally sold to a consortium of Spanish investors last week for a single euro.
To overcome its dire financial difficulties, SAS said Tuesday it would launch a new restructuring programme involving a share issue to raise 6.0 billion kronor and a fresh 14-plane reduction in its fleet.
An additional 3,000 employees would also be laid off while a further 5,600 workers would be taken off its books through outsourcing.
The restructuring programme has already received the thumbs-up from the Swedish, Danish and Norwegian governments, which together control 50 percent of the airline, as well as from its major private shareholder, a foundation managed by the famed Wallenberg family.
J.P. Morgan, Nordea and SEB have also confirmed their intention to participate in the 6 billion kronor rights issue which will help fund the reorganization.
The carrier at the end of 2008 employed 24,635 people, having announced the lay-off of 2,500 workers in August. It had also cut back on its fleet by 33 aircraft, 15 of which belonged to Spanair.
Some 40 percent of the company's routes will be cut and a number of subsidiaries, including British Midlands, Estonian Air, Air Greenland and Skyways airlines, will be sold, SAS said.
Jansson, who has headed the company since January 2007, said the plan unveiled Tuesday would help streamline operations and save 4.0 billion kronor between 2009 and 2011.
The programme, he said, "will lead to SAS becoming a more focused and less complex company.
"SAS's market position remains strong. Our brand stands for quality, reliability and stability," he said, stressing that "in light of the fundamental crisis that is going on around the world, the losses remain at a manageable level."
Jansson also said the airline aimed to refocus its business on the Nordic market, which he said remained fairly healthy and showed potential for growth.
SAS, established in 1946 and today comprising SAS Denmark, SAS Norway and SAS Sweden, as well as low-cost airlines Blue 1 and Wideroe, has a 40 percent share of the northern European civil aviation market.
Germany's leading airline Lufthansa has long been mentioned as a rescuer for the Scandinavian company, which carried more than 29 million passengers last year, not including Spanair.
Following Tuesday's announcement, SAS saw its share price nosedive 19.26 percent in afternoon trading on the Stockholm stock exchange where the main OMX 30 index ticked up 0.44 percent.