Interim Report January-March 2008
Key ratios for the period
• Operating revenue: MSEK 12,833 (11,887) (+6.3%) *
• Number of passengers: 7.3 million (+2.6%)
• Earnings before nonrecurring items in continuing operations: MSEK -973 (-94)
• EBT margin before nonrecurring items: -7.6% (-0.8%)
• Net income for the period: MSEK -1,134 (-47)
• Earnings per share: SEK -6.55 (-0.11)
• A short-term action plan corresponding to SEK 1.1 billion will be implemented. A total of 44% of the long-term cost program corresponding to SEK 2.8 billion has been implemented.* Currency adjusted
Comments by the CEO
The negative earnings trend we experienced in November and December last year continued in the first quarter of 2008. The primary reason for this is the rapid rise in jet fuel prices to record high levels that could not be offset, while unit earnings fell as a result of further intensification of competition. There is also certain overcapacity in the market and tendencies toward a decline in business travel. Managing this market situation is currently a challenge faced by the entire air-travel industry. We have seen how companies in the local market have adjusted their forecasts downward at the same time as carriers in the US and Asia have filed for bankruptcy. Consolidation in the industry on a global scale is continuing with full force.
Accordingly, the SAS Group’s earnings for the first quarter were very weak, with an outcome of MSEK –973, which is a substantial decline compared with the year-earlier period. The first quarter is seasonally a weak quarter, which was further amplified by Easter falling in March this year. However, the underlying decline is deemed to amount to approximately MSEK 600. We continued to incur increasing expenses as a result of the Q400 problems, but the amount of compensation received from Bombardier will mostly offset this during the quarter.
There are indications that that global trends are so serious that we must prepare for a more enduring economic downturn. The macroeconomic problems, which essentially derive from the overutilization of the US credit market, are now having knock-on effects in the financial system.
To turn around the earnings trend and manage the challenging market situation, we have extended the action plan announced in February and grouped it together under the name Profit 2008. These measures shall generate an earnings effect in 2008 of SEK 1.1 billion, including price adjustments, changes to the traffic programs, additional efficiency enhancements of overheads and the discontinuation and postponement of certain planned activities. Furthermore, we have decided to reduce capacity by 11 aircraft (5%) commencing in autumn 2008 and have decided not to implement the planned increase of one intercontinental aircraft. In total, the number of positions will reduced by approximately 1,000 FTEs.
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.
The situation in the air-travel industry is serious. For this reason it is vital that we turn around the earnings trend and at the same time keep S11 on track to ensure that we can develop SAS to become an even stronger and more competitive airline.
President and CEO
· Star Alliance Los Angeles Lounge retains World’s Best Airline Alliance Lounge Award for