SAS Group Year-end Report January-December 2008
Key ratios for January – December
• Operating revenue: MSEK 53,195 (50,598) (5.1%)
• Number of passengers: 29 million
•Earnings before nonrecurring items in continuing operations: MSEK -395 (1,234)
• EBT margin before nonrecurring items from continuing operations: -0.7% (2.4%)
• Net income for the period: MSEK -6,321 (636), of which MSEK -4,895 is attributable to Spanair
• Earnings per share: SEK -38.08 (3.87)
Major events in 2009
• SAS will renew its strategic approach and is launching the Core SAS strategy program
• To implement the Core SAS strategy, a rights issue amounting to approximately SEK 6 billion will be conducted. The rights issue is supported by the three government owners and the largest private shareholder, the Wallenberg Foundations (FAM). The banks J.P. Morgan, Nordea and SEB have also confirmed their expectation, subject to certain conditions, to enter into an underwriting agreement.
• The SAS Group divests Spanair – Spanair is reported as a discontinued operation and the total earnings impact for 2008, including the sales impact, amounts
Comments by the CEO
2008 will probably go down in history as one of the most challenging and turbulent years that the entire aviation industry has ever experienced. During the year, we saw a period of record-high oil prices, a financial crisis that heavily intensified during the final quarter and which led to an economic recession in many markets that has significantly reduced demand for goods and services. To address the global recession and our internal challenges, SAS management has launched a renewed strategic approach, “Core SAS,” which contains five primary areas: focus on our Nordic home market, focus on business travelers, new efficient organization, improved cost base and a strengthened capital structure.
The Group’s earnings before nonrecurring items in continuing operations for the fourth quarter amounted to MSEK –313 and for the full-year 2008 to MSEK -395. To this are added nonrecurring items corresponding to MSEK -649, which gives income before tax of MSEK 1,044. Income before tax for the year was charged with approximately SEK 5 billion attributable to the Spanair operations and effects of the divestment. Despite these considerably negative effects, it is gratifying that we have found a solution for Spanair with new Spanish majority owners who can now develop the company further. Earnings for the Group’s core operation, SAS Scandinavian Airlines, were negative and amounted to MSEK -179, although this loss was limited by the extensive cost program that the Group quickly initiated and the general healthiness of the core operations. It is pleasing to report a favorable performance in SGS, STS and SAS Cargo, which is the result of an efficient change process. Within the framework of Strategy 2011 and our short-term Profit 2008 (P08) program, we have implemented measures corresponding to a total of approximately SEK 4 billion since 2007. A central element of the program is the reduction in capacity by a total of 33 aircraft, of which 15 aircraft in Spanair.
“Core SAS” will lead to SAS becoming a more focused and less complex company. “Core SAS” contains a number of changes, which combined, will make SAS profitable and competitive. In addition to implementing a new, streamlined organization, in combination with extensive structural changes, considerable reductions to the Group’s fleet and route network will be made. A total of a further 14 aircraft will be withdrawn within the framework of “Core SAS.” Cost measures totaling SEK 4 billion, of which SEK 1 billion pertains to S11 measures, will generate an earnings effect over the next few years. To enable effective implementation of “Core SAS”, the Board has resolved on a rights issue of approximately SEK 6 billion.
SAS’s market position remains strong. Our brand stands for quality, reliability and stability. These are also strengths that we will build on further in “Core SAS,” where there will be a clearer focus on destinations and product offerings that are important to business travelers. Our position also improved during the year and SAS is among the three foremost airlines in Europe for regularity and punctuality. We are also at the leading edge in terms of innovation and product development.
One of the most important priorities I had when I joined SAS in 2007 was to change and improve relations with our trade unions. Accordingly, it is highly gratifying that I can state that a real breakthrough in our cultural turnaround has been achieved. The breakthrough was based on an agreement reached with all of SAS’s trade unions in January 2009 regarding necessary changes to our collective agreements. All parties have made contributions and annual savings of about SEK 1.3 billion have now been achieved.
“Core SAS,” with new competitive collective agreements, a more efficient and simplified organization that can facilitate decision-making and implementation ability, a competitive cost level, divestment of non-core operations and fleet reductions will create a stable platform for the future.
President and CEO
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