SAS Group Interim Report January-September 2010
- Operating revenue: MSEK 10,690 (11,076)
- Earnings before non-recurring items in continuing operations: MSEK 387 (37)
- EBT margin before non-recurring items in continuing operations: 3.6% (0.3%)
- Non-recurring effects: MSEK ‑1,411, of which restructuring costs MSEK ‑146, legal disputes MSEK ‑982, impairment charges MSEK ‑229 and capital losses MSEK ‑54
- Income before tax: MSEK ‑1,024 (114)
- Net income for the period: MSEK ‑1,051 (152)
- Earnings per share: SEK ‑3.19 (0.78)
- Cash flow from operating activities: MSEK ‑470 (‑1,744)
- Operating revenue: MSEK 30,164 (34,595)
- Earnings before non-recurring items in continuing operations: MSEK ‑ 693 (‑814) MSEK. Adjusted for the effects of the ash cloud, earnings amounted to MSEK 7
- EBT margin before non-recurring items in continuing operations: ‑2.3% (‑2.4%)
- Non-recurring effects: MSEK ‑1,903
- Income before tax: MSEK ‑2,596 (‑1,904)
- Net income for the period: MSEK ‑2,265 (‑1,643)
- Earnings per share: SEK ‑8.40 (‑10.91)
- Cash flow from operating activities: MSEK 63 (‑2,348)
Important events during the quarter
- Mats Jansson, President and CEO, left his position on October 1, 2010
- Rickard Gustafson will assume his position as new President and CEO not later than March 2011. Until this date, Deputy CEO John Dueholm will function as acting President and CEO
- On November 9, the European Commission fined SAS Cargo MSEK 660 in the air-cargo investigation. Earnings in the third quarter were affected by the corresponding amount.
- SAS Cargo entered a settlement agreement concerning disputes in the US, which had a negative impact of MSEK 104 on Group earnings for the third quarter
- SAS was denied leave to appeal to Norway’s Supreme Court in its dispute with Norwegian, which resulted in a negative effect of MSEK 218 on the Group’s earnings in the third quarter
- SAS deployed an additional long-haul aircraft to meet the rising demand for intercontinental travel
- During the quarter, SAS was the world’s most punctual major airline
Comments by the CEO
“Sharp improvement in underlying earnings, but quarter negatively affected by substantial non-recurring items in the period.”
Income before tax for the period amounted to MSEK -1,024 and was charged with several significant non-recurring items due to events and decisions that were not directly attributable to the quarter. The effects were largely anticipated and the Group’s financial preparedness has been adapted to manage these. By now putting these events behind us, we can channel our energy on looking to the future and fully focusing on our core operations. The Group’s reported income in continuing operations (before non-recurring items) in the third quarter amounted to MSEK 387. Compared with the year-earlier period, the underlying improvement for the first nine months of the year is MSEK 821, adjusted for non-recurring items and earnings effects in conjunction with the volcanic ash in April.
The recovery in the airline industry is continuing and this is particularly evident in the growth reported in intercontinental travel and the general trend in business travel. The positive market trend is expected to continue and this is therefore a favorable time to launch initiatives aimed at profitable growth, which include higher frequency on existing routes and the opening of the intercontinental routes Oslo-New York and Copenhagen-Shanghai.
Improved ratio between revenues and expenses
The Group’s profitability has improved primarily as a result of reduced unit costs, which were lowered by 8.7% compared with the third quarter in the preceding year. Despite the recovery in the market, the price level declined in several of the Group’s markets due to overcapacity. However, SAS successfully managed to offset the effects of the fall in yield by improving the passenger load factor. The underlying average currency-adjusted unit revenue, RASK, for the quarter remains on a par with the year-earlier period. Although this underlying positive trend in the airline operation is obscured in earnings by non-recurring items, it is a signal that the core operation is proceeding in the right direction. SAS expects the unit cost to continue to decline during the remainder of the year, while the RASK is expected to be stable.
Core SAS strategy remains in focus
The focus is now shifting toward completing the implementation of the Core SAS strategy. We must continue to reduce the cost level to improve earnings and to grow profitably in pace with the market. This provides us with the opportunity to manage the fierce competitive situation, in the shape of overcapacity and downward pressure on prices in several markets. SAS’s prerequisites to successfully address this situation are as follows:
- The cost savings program is proceeding according to plan and the remaining activities have been identified and secured at a local level in the organization. Group management is giving the activities its full attention and they are being followed up centrally by a dedicated program office. The remaining earnings effect from the program is SEK 2.9 billion.
- Our innovative product offering that is specifically directed toward business travelers sets us apart from our competitors. Now, as one of the world’s first airlines, we are launching Internet onboard and we already offer the Nordic region’s largest route network with the highest frequency flight schedule and a range of time-saving services.
- Our customer satisfaction and brand continues to gain in strength as a result of such factors as our professional staff – who receive high marks for their interaction with customers and their service – and our punctuality, which is the highest in the world.
By following through on our Core SAS strategy with the same vigor as we have to date, SAS’s profitability will continue to improve.
John S. Dueholm
Acting President and CEO
Direct questions to Investor Relations SAS Group:
Vice President Sture Stølen +46 8 797 14 51, or Mattias Hyllert +46 8 797 12 19, e-mail: firstname.lastname@example.org.
SAS discloses this information pursuant to the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. The information was provided for publication on November 10, 2010 at 8:00 a.m.