SAS reduces forecast for fiscal year 2013/2014 as capacity and price pressure exceed expectations

SAS transported 9.2% more passengers in April at the same time as the load factor improved by 8.6 percentage points to a record high of 78.6%. Despite this positive trend, the large capacity growth in the market has created a historically high yield pressure.

The capacity within the Scandinavian market has grown by more than 5% during the past six months, partly due to more airlines shifting capacity to the Scandinavian market. For SAS, this means that yield and PASK* had weaker development than expected during the second quarter. In March, SAS’ currency-adjusted yield and PASK fell by 5.3% and 9.8% respectively. In April, the load factor improved significantly but the yield remained low and PASK was thus weak. In addition, other revenues have had a negative development.

A large number of activities were initiated during the quarter to strengthen the revenue. Already during April, this generated a concrete result in the form of more passengers and an improved load factor. The restructuring program continues to be developed according to plan and is expected to generate a positive impact on earnings of SEK 1.2 billion during in 2013/2014.

“The increasing competition for customers means that SAS is now taking an even more aggressive approach. We have improved our offer to Scandinavia’s frequent travelers, intensified our market activities and, accordingly, can now note a growing number of customers combined with a higher load factor. At the same time, the uncertainty relating to the capacity trend in the market means that the revenues from the growing volumes are difficult to estimate,” says Rickard Gustafson, SAS President and CEO.

SAS communicated the following in connection with the release of the interim report in March for the period November 2013 – January 2014:

Full year 2013/2014

“Market conditions remain challenging with overcapacity in several of SAS’ markets, for which reason the yield and PASK (passenger revenue/scheduled ASK) are expected to continue to decline in 2013/2014. The restructuring program is gradually increasing SAS’ competitiveness. In the 2013/2014 fiscal year, the earnings impact from the restructuring program is expected to amount to SEK 1.2 billion. Provided that market conditions, in terms of capacity, jet fuel and exchange rates, do not decline any further and that no unexpected events occur, potential exists to post a positive EBT, excluding the positive effect from the amendments to pension reporting, also in the 2013/2014 fiscal year.”

As a result of the capacity- and yield trend during January-April, SAS will recognize earnings below market expectations for the second quarter. With this development as background, SAS is reducing its forecast for the fiscal year 2013/2014 as set out below:

“Market conditions remain challenging with overcapacity in several of SAS’ markets, for which reason the yield and PASK (passenger revenue/scheduled ASK) are expected to continue to decline in 2013/2014. In the 2013/2014 fiscal year, the earnings impact from the restructuring program is expected to amount to SEK 1.2 billion. Provided that market conditions, in terms of capacity, jet fuel and exchange rates, do not decline any further and that no unexpected events occur, potential exists to post a positive EBT, including the positive effect from the amendments to pension reporting, also in the 2013/2014 fiscal year.”

More detailed information about SAS’ revenue- and cost initiative will be presented in the interim report to be published on June 18, 2014.

*The definition of PASK is passenger revenues divided by scheduled ASK.

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