SAS Q1 loss widens on fuel prices, economic uncertainty
Published: May 7, 2012
SAS A321. By Rob Finlayson
SAS Group reported a first-quarter loss of SEK729 million ($ 108 million), compounding the SEK373 million loss incurred for the year-ago period (ATW Daily News, May 11, 2011).
The airline attributed the results primarily due to the weak economic climate, high jet fuel prices and increased capacity in the market.
President and CEO Rickard Gustafson said: “High fuel prices presented a significant challenge for the entire aviation industry, including SAS, and with the prevailing market situation it is difficult to fully offset this cost increase.”
Revenue rose 3% to SEK9.6 billion, and scheduled passenger traffic rose 5.3%. RPKs rose 5.1% and ASKs were up 2.2%. Load factor increased 2 percentage points from 66.3% in the same period last year to 68.3%. Charter traffic was also up 7.1%
Passenger trends were particularly favorable on all routes within Scandinavia, with intercontinental traffic to/from the US stable, but weak on Asian routes. The strongest improvement in the load factor was noted on European routes.
Unit revenue (RASK) was up 1.7%, driven by the positive load factor and slightly weaker yield pressure.
At the end of 2011, the Group launched its 4Excellence strategy, which aims to reduce annual costs by 3%-5% by 2015 and return the carrier to profitability (ATW Daily News, Sept. 15, 2011). A number of measures are underway to generate savings of SEK5 billion in 2012-2013, of which SEK3.5 billion involves cost measures and SEK1.5 billion revenue measures. Renegotiating collective union agreements is expected to generate SEK1 billion in savings.
SAS in January announced it would lay off 300 administrative workers (ATW Daily News, Jan. 19).
Looking ahead, Gustafson said 2012 is difficult to assess “due to the uncertain business climate, continued intense competition and high fuel prices,” but SAS nevertheless expects passenger growth of 5%-7%. He pointed out that cash flow for the Group was strengthened, mainly driven by a positive trend in future bookings.
“The combination of the uncertainty regarding economic trends, high jet-fuel prices and intense pressure from competitors means that SAS will not present a profitability forecast for the full-year 2012,” Gustafson said.