Interim Report January-June 2008
Key ratios for the second quarter
• Operating revenue: MSEK 17,703 (16,288) (+8.7%)
• Number of passengers: 11.6 million (+5.2%)
• Earnings before nonrecurring items in continuing
operations: MSEK 262 (806)
• EBIT margin before nonrecurring items: 1.5% (4.9%)
• Net income for the period: MSEK -411 (607)
• Earnings per share: SEK 2.50 (3.55)
• A short-term earnings-improvement program corresponding to an earnings effect of SEK 1.5 billion in 2008 is being implemented.
Comments by the CEO
As expected, the SAS Group’s earnings for the second quarter were weak, amounting to MSEK 262 before nonrecurring items, which is a clear decline compared with the year-earlier period. The reasons for the decrease in earnings are well-known: rapidly rising jet-fuel prices to record-high levels combined with weaker economic trends and overcapacity in the market. Managing this highly challenging situation is currently the primary focus of the SAS Group and the entire air-travel industry. We have seen how companies globally and in our local market have presented losses for the second quarter, which is seasonally a strong quarter. Most airlines have now initiated substantial capacity reductions to create a better balance between offering and demand.
We have discontinued the sale of Spanair due to the challenging market circumstances. The value that we could have been able to realize did not reflect the underlying strategic value inherent in the company. An extensive action program corresponding to MSEK 800 and capacity reductions of 25% to generate full effects in 2009 were announced in July. The measures to be implemented in Spanair correspond to approximately 1,000 FTEs and 15 aircraft.
To turn around the earnings trend in 2008, we announced an action plan – Profit 2008 – in conjunction with the interim report for the first quarter. We have now strengthened this program with an additional MSEK 400 and, accordingly, the total earnings effect for 2008 amounts to SEK 1.5 billion. We have also decided to reduce capacity by an additional seven aircraft, entailing a total reduction of 18 aircraft. For the entire Group, the total reduction corresponds to 33 aircraft and the number of positions will be reduced by a total of approximately 2,500, meaning an additional 500 positions added to the figure that was previously announced. These measures should be seen in the light of an expected further slowdown in the economy in 2008 and 2009.
In parallel with these measures, we will continue to implement the S11 strategy program – “Strategy 2011.” Major focus is being directed toward a cultural turnaround and to improving our customer satisfaction, for example by providing more stable delivery quality and continuous product improvements. It is gratifying to report that punctuality and regularity are at the highest level for many years. Scandinavian Airlines had the best arrival punctuality in Europe for the second quarter of 2008.
There is no doubt that the situation in the air-travel industry is serious and probably the most difficult it has ever been. Although we remain financially stable, with a satisfactory acid test ratio, it is essential in the short term that we carry out the measures in the Profit 2008 (P08) program to be able to implement the long-term S11 strategy.
President and CEO
Direct questions to: Investor Relations SAS Group: Vice President Sture Stølen +46 8 797 14 51, e-mail: firstname.lastname@example.org