SAS Group Interim Report January – September 2008
Key ratios for the third quarter
• Operating revenue: MSEK 16,365 (16,307) (+0.4%)
• Number of passengers: 9.8 million (-5.4%)
• Earnings before nonrecurring items in continuing operations: MSEK 101 (553).
• EBT margin before nonrecurring items: 0.6% (3.4%)
• MSEK 1,959 in goodwill impairment and write-down of tax assets in Spanair.
• Net income for the period: MSEK -2,005 (701), of which MSEK 1,959 corresponds to the Spanair impairment/write-down.
• Earnings per share: SEK -12.19 (4.05).
• A short-term earnings-improvement program corresponding to an earnings effect of SEK 1.5 billion in 2008 is being implemented according to plan.
Key ratios for January – September
• Operating revenue: MSEK 48,018 (45,738) (+5.0%)
• Number of passengers: 29.6 million (+0.1%)
• Earnings before nonrecurring items in continuing operations: MSEK -831 (888)
• EBT margin before nonrecurring items:
• Net income for the period: MSEK -3,550 (1,261), of which MSEK 1,959 corresponds to the Spanair impairment/write-down.
• Earnings per share: SEK -21.23 (7.50)
Comments by the CEO
We were all reminded of how vulnerable life is in conjunction with the shocking, tragic air crash in Madrid on August 20. To the best of our ability, we have endeavored to support and assist the family members of the victims in their time of deep sadness. Our coworkers, mainly in Spanair’s organization, have done an admirable job under extremely demanding circumstances. For this, I would once again like to extend my sincerest gratitude and admiration.
As expected, the SAS Group’s earnings for the third quarter were only marginally positive at an operating level, amounting to an EBT of MSEK 101 before nonrecurring items. The reasons for the decrease in earnings in the third quarter are the same as earlier in the year: the economic trend that both impacts total demand and alters the behavioral patterns of business travelers, and the continued high price of oil during the period. The recent sharp drop in oil prices is good for the industry and SAS, but is offset by the rising USD and a further deepening of the recession by the financial crisis, which will have an additional negative impact on travel.
Against the background of the considerable turmoil in the financial markets, the weakening of the economy and overcapacity in the air travel market, the SAS Group’s goodwill in relation to Spanair has been impaired and a certain portion of the tax assets in the company written down in a total amount of MSEK 1,959.
The crisis in the air travel industry strikes indiscriminately. To date in 2008, some 30 airlines have filed for bankruptcy, the most recent of these being Sterling, one of our main competitors in Scandinavia. To secure SAS’s future growth, Group management and the Board of Directors are focusing intensely on assessing various structural solutions and alternatives. Regardless of the choice of structural alternatives and solutions, it is of the utmost importance that we rapidly close the remaining cost gap we have in relation to comparable competitors. As a step in this process, we are currently in the midst of negotiations with all of the trade unions. The situation calls for insight, courage and strength by both parties.
Our short-term earnings-enhancement program called “Profit 2008,” corresponding to SEK 1.5 billion, with a capacity reduction of 18 aircraft, is proceeding as planned. During the third quarter, we could clearly see the effects of the program month by month. Spanair’s action program is being implemented successively and 25% of total capacity, corresponding to 15 aircraft, has now been reduced. It is gratifying to see that the booking situation in Spanair has returned to normal levels, albeit at a lower yield level. In parallel with the earnings-enhancement program, we are implementing activities within the S11 strategy program “Strategi 2011,” which aims to strengthen SAS’s long-term competitiveness.
I am pleased to report that month for month, Scandinavian Airlines’ regularity is now highly stable and our punctuality is at its highest level for many years. Scandinavian Airlines is once again at the top among European airlines and the leader amid the major carriers. Our customer satisfaction, which is measured on an ongoing basis, has seen considerable improvement as a result of such measures as enhanced delivery quality. Our employees have done a fantastic job to improve our quality and performance in the customer interface.
President and CEO
Direct questions to: Investor Relations SAS Group: Vice President Sture Stølen +46 8 797 14 51, e-mail: email@example.com
SAS Group: Interim Report January-September 2008