SAS Group Interim Report January-March 2009
Key ratios January – March 2009
• Operating revenue: MSEK 11,357 (12,409) (-8.5%)
• Number of passengers: 5.7 million
• Earnings before nonrecurring items in continuing operations: MSEK -934 (-875)
• EBT margin before nonrecurring items in continuing operations: -8.2% (-7.1%)
• Net income for the period: MSEK -748 (-1,163)
• Earnings per share: SEK -0.74 (-1.10)
Important events
• The SAS Group completed the divestment of Spanair.
• Rights issue amounting to approximately SEK 6 billion was completed and oversubscribed by 24%.
• Measures under the SAS Core strategy are being implemented according to plan. On March 31, 25% of the cost measures had been implemented, corresponding to an annual effect of MSEK 1,056.
Comments by the CEO
During the first quarter, the global economy continued to weaken at a pace that has rarely been seen before. The entire aviation industry, which is one of the global industries that is most sensitive to economic fluctuations, is experiencing major problems, one of the consequences of which has been extensive losses. This is an effect of the ongoing global recession. For SAS, the quarter was characterized by a weaker load factor and improved yield. The company’s stable and positive yield trend in the current market climate indicates that we essentially have a strong brand and loyal customers who value our product. It is also highly gratifying that the various parts of the Group’s new strategic direction, Core SAS, are being implemented according to plan.
As expected, earnings for the first quarter were weak and amounted to MSEK 934 before nonrecurring items in continuing operations. In addition, nonrecurring items pertaining to restructuring costs related to Core SAS totaled MSEK -95. Accordingly, income before tax amounted to MSEK 1,024. However, the first quarter is seasonally a very weak quarter. We can now see both yield and load factors falling in the industry, which is resulting in a negative spiral for many companies.
The rights issue amounting to slightly more than SEK 6 billion was completed in April. The fact that the issue, which is a key component of Core SAS, was oversubscribed by 24.2% is a clear sign that the market and our owners have confidence in our new strategic direction. We will use the rights issue proceeds to strengthen our capital structure and to facilitate the full implementation of Core SAS. After the implementation of Core SAS, we will have a more focused commercial offering, a more cost and decision-efficient organization, and be better positioned for improved profitability and to meet future challenges.
The implementation of Core SAS began in February and is progressing according to plan. Unfortunately, about 500 employees had to leave the Group during the first quarter. This is in line with Core SAS and is entirely necessary for the Group to generate profitability in the long term. A total of eight aircraft were withdrawn from operation starting in April. Effective October 2009, 18 of the planned 21 aircraft will have been withdrawn from operation. We are adjusting our capacity to the lower demand and removing unprofitable routes and market shares. On March 31, we had implemented measures corresponding to approximately MSEK 1,056 in annual effects, which impacted quarterly earnings in the amount of MSEK 233. We will see even more extensive effects of Core SAS throughout the remainder of the year.
The transaction involving Spanair has now been fully completed after all of the necessary permits and approval from the authorities had been obtained. At the same time, the Group is continuing to work on divesting the operations that are not related to Core SAS. These activities are also proceeding according to plan.
Our punctuality during the quarter was once again among the best in Europe and our customer surveys show that customer satisfaction has improved. Customer appreciation of our product is an essential part of the Core SAS strategy and is something that we are proud of in these times of many internal and external challenges.
For the full-year, the market is extremely unpredictable and uncertainty regarding the time of a recovery commencing remains high.
Mats Jansson
President and CEO
Direct questions to: Investor Relations SAS Group: Vice President Sture Stølen +46 8 797 14 51, e-mail: investor.relations@sas.se.