SAS Group Interim report November - January 2012-2013
· Revenue: MSEK 9,597 (9,299)
· Traffic: up 4.3%
· Passenger revenue adjusted for currency: up 6.3%
· Income before tax and nonrecurring items: MSEK ‑801 (‑656)
· EBIT margin: ‑6.1% (‑10.4%)
· Income before tax: MSEK ‑823 (‑2,686)
· Net income for the period: MSEK ‑630 (‑2,541)
· Earnings per share: SEK ‑1.91 (‑7.72)
· Cash flow from operating activities MSEK ‑441 (‑662)
Statement by the President and CEO of SAS:
“SAS is continuing to deliver, step by step, in accordance with the restructuring plan that was presented in November of last year. Behind this progress lies one of the most extensive restructuring plans in the Scandinavian business sector – under an agreement with our employees, SAS expects to reduce its outstanding pension obligations by about SEK 19 billion, which substantially reduces its financial risk.
We have also achieved a number of key milestones – we have presented a letter of intent with Swissport concerning the Ground Handling operations and we entered into a sale and leaseback agreement regarding reserve engines with a liquidity effect of about MSEK 700. The new market-based collective agreements have reduced our direct expenses and enable us to compete effectively in the growing leisure travel market, with more departures and destinations. The unit cost, excluding jet fuel, declined 2.7% during the quarter, and in January, when we began noting the effects of the new collective agreements, the unit cost, excluding jet fuel, declined 6.9%.
At the same time, we must confirm that SAS reported a loss for the quarter, and although seasonal effects are amplified by the new fiscal year, we are far from satisfied. Accordingly, we remain focused on completing the action plan and our aim to achieve a positive income before tax for the full-year remains firmly in place.”
Comments by the CEO
· SAS delivers in accordance with the adopted plan
· Letter of intent with Swissport regarding Ground Handling
· A sale and leaseback agreement was entered into in February regarding reserve engines with a liquidity effect of about MSEK 700
· The new collective agreements have begun to generate effects in the form of lower expenses and the more efficient utilization of resources
SAS is delivering in line with the plan that we have adopted. The implementation of the actions in the 4XNG restructuring program is proceeding as planned, and it is gratifying to be able to confirm that we have now achieved several key milestones – on March 7 we signed a letter of intent with Swissport regarding the outsourcing of our Ground Handling operations. Centralization of the administration is now fully under way, including the centralization to Stockholm of the traffic-monitoring units. Consequently, the staff requirement has been reduced by 30%, with retained traffic punctuality and regularity. We have also signed an agreement on the outsourcing of our call centers to a third party and entered into a sale and leaseback agreement regarding reserve engines with a liquidity effect of about MSEK 700 during the second quarter.
The yield improved by 1.6% compared with the year-earlier period and the unit cost, excluding jet fuel, declined 2.7%, which was the result of the restructuring program that is currently under way. In January, when we experienced a significant impact from the new agreements, the unit cost declined 6.9%, excluding jet fuel.
At the same time, SAS reported a negative income before tax and nonrecurring items of MSEK 801, which was in line with or somewhat better than our expectations late last year. However, seasonally, the first quarter is our worst quarter and this effect has essentially been amplified due to the new fiscal year. However, we must naturally never be satisfied when reporting a loss, and a great deal of work remains to be done to make SAS profitable again.
The responsible actions taken by our employees and trade union representatives, which enabled us to enter into new and market-based agreements, were a crucial step toward making SAS profitable. In December, the agreements enabled us to secure a new credit facility in the amount of SEK 3.5 billion. This shored up our financial preparedness, which was 20% at January 31.
The agreement also laid the foundation for one of the most extensive financial restructuring programs in the Scandinavian business sector, which allows us to replace most of the current benefit-based pension terms with premium-based solutions. This means that our pension obligations are expected to be reduced by about SEK 19 billion, down nearly 60%. This is decisive for SAS from two perspectives. Firstly, the financial risk has decreased and the predictability increased and secondly, SAS now has its shareholders’ equity under control. The negative impact on shareholders’ equity that is recognized in November has now been sharply reduced. Accordingly, we expect our equity/assets ratio to remain above our target of 20% when shareholders’ equity is adjusted in accordance with the new accounting policies as of November 1, 2013.
The changes also pave the way for a significantly more flexible platform from which SAS can conduct its business. Competitive terms in our collective agreements also enable us to compete more effectively in the growing leisure travel market. We can expand our customer offering during the summer season and holidays, and generate greater efficiency in our utilization of aircraft and personnel – a step in the pursuit of which is the decision to launch 45 new routes in 2013.
We are putting another intensive quarter behind us. We have created the means to strengthen our competitiveness, we are well on our way to completing the restructuring plan and we have secured our financial stability. Overall, we have now provided ourselves with greater control of our fate at the same time as the 4XNG actions are being implemented as planned. Provided that there are no significant unforeseen external events and that jet-fuel prices remain stable around current levels, we believe that there is a possibility of achieving a positive EBIT margin in excess of 3%, and a positive EBT for the full-year 2012/2013.
Stockholm, March 8, 2013
President and CEO
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 March 8, 2012 at 8:00 a.m.