SAS Group Interim Report January-June 2010
Key ratios January-June 2010
· Operating revenue: MSEK 19,474 (23,519)
· Number of passengers: 12.0 million, down 4.6%
· Earnings before non-recurring items in continuing operations: MSEK ‑1,080 (‑851)
· EBT margin before non-recurring items in continuing operations: ‑5.5% (‑3.6%)
· Net income for the period: MSEK ‑1,214 (‑1,795)
· Cash flow from operating activities: MSEK 533 (‑604)
Key ratios April-June 2010
· Operating revenue: MSEK 9,979 (12,223)
· Number of passengers: 6.3 million, down 8.3%
· Earnings before non-recurring items in continuing operations: MSEK ‑236 (38). Adjusted for the effects of the ash cloud, earnings amounted to MSEK 464
· EBT margin before non-recurring items in continuing operations: ‑2.4% (0.3%)
· Net income for the period: MSEK ‑502 (‑1,047)
· Cash flow from operating activities: MSEK 503 (‑353)
Comments by the CEO
“Adjusted for ash-cloud effects, SAS generated a profit for the second quarter of 2010.”
Although the situation in 2010 for the aviation industry has improved compared with 2009, the sector and we as a company are faced with major challenges moving forward. The IATA industry body anticipates continued losses totaling USD 2.8 billion for European airlines in 2010. The Group’s reported income before non-recurring items in continuing operations in the first six months of the year was a loss of MSEK ‑1,080, with the second quarter accounting for MSEK ‑236 of this amount.
The ash cloud and the subsequent closure of airspace had a significant impact on net income for the second quarter and greatly affected our customers. However, we are pleased that our hard work taking care of and informing customers was appreciated and helped increase confidence in SAS. Although services recovered within a few weeks to a normal level, earnings were negatively impacted by approximately MSEK ‑700 due to the event. Adjusted for the negative effects, income was consequently positive in the amount of MSEK 464 in the second quarter, which is traditionally a strong period for airlines. The fact that cash flow from operating activities is now positive, MSEK 503, including the impact of the closure of airspace, it is also a display of financial strength.
During the first six months, we lowered unit cost by 6.7% despite reduced capacity and the major disruptions to services. We also noted growth in travel in Economy extra and Business class and a record-high load factor on primarily intercontinental flights. This has added to the platform we must establish to attain profitable growth. Accordingly, we will now reintroduce one long-haul aircraft that will increase the number of departures to Asia and the US and, in Scandinavia, we will increase the frequency of services between the capital cities already in September.
Our increased customer satisfaction demonstrates that our focus on service, simplicity and attractive prices is generating results. Moreover, we have one of the market’s strongest loyalty programs with three million members. Today, we are also launching our biggest ever low-fare campaign, with 1,000,000 low-price tickets, which will help boost capacity utilization and direct focus to our product and brand.
At present, I believe we are faced with three challenges that are most decisive in our efforts to achieve a profitable SAS:
– Retain our focus and momentum in the implementation of the Core SAS strategy and cost savings program. We are experiencing intense competition, which entails continued pressure on yields. It is now vital that we continue our efforts to cut costs. Over a period of one and a half years, we have implemented savings totaling SEK 5.6 billion. It is important that we continue in this manner, even in a period of positive development.
– Continue to be the leader in terms of product and quality. Higher frequency of services, a broader network and better punctuality than our competitors constitute significant competitive advantages. Combined with simplicity on the ground and in the air, this represents considerable added value for our customers. This is a focus area and we are working tirelessly to identify new solutions.
– Grow profitably in line with a market that remains uncertain. The market is expected to grow annually by approximately 4-6% and our ambition is to grow at an equal or higher rate. However, the macroeconomic trend is uncertain. We will expand our capacity by increasing aircraft utilization and availing ourselves of short-term leases. This requires low investment obligations, which combined with our strong liquidity, reduces our vulnerability.
In addition to these challenges is the constant volatility in exchange rates and jet-fuel prices. Although we are on the right path, there is some way to go before we achieve profitability.
I recently informed the Board of Directors that I have decided to leave SAS in the fall. My decision to leave the company was not easy and although there are still great challenges to come for SAS, the platform is in place. The Core SAS strategy, including extensive cost savings, has been established, the financial platform has been secured through the latest rights issue, SAS has gained strength in terms of our products, and customer satisfaction has increased. The company is now well positioned to face the future.
President and CEO
The SAS Group’s monthly traffic data information is normally issued on the fifth business day of the following month. A continuously updated financial calendar can be found at: www.sasgroup.net (https://www.sasgroup.net).
Telephone conference, Frösundavik 10:30 a.m. August 18, 2010
Telephone conference, investors/analysts 2:00 p.m. August 18, 2010
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 August 18, 2010 at 8:00 a.m.