Q2 2021 - A QUARTER DOMINATED BY THE ONGOING PANDEMIC
FEBRUARY 2021–APRIL 2021
- Revenue: MSEK 1,932 (5,264)
- Income before tax (EBT): MSEK -2,361 (-3,722)
- Income before tax and items affecting comparability: MSEK -2,361 (-3,714)
- Net income for the period: MSEK -2,433 (-3,470)
- Earnings per common share: SEK -0.35 (-9.15)
SIGNIFICANT EVENTS DURING THE QUARTER
- The Board of SAS appointed Anko van der Werff as President and CEO. The Board concurrently appointed Karl Sandlund, Chief Commercial Officer at SAS, as acting President and CEO.
- SAS secured financing for the majority of its aircraft deliveries until the second quarter of 2022.
SIGNIFICANT EVENTS AFTER THE QUARTER
- SAS has ensured that there is support from the main owners, the Governments of Denmark and Sweden, to gain access to a credit facility amounting to SEK 3.0 billion.
NOVEMBER 2020–APRIL 2021
- Revenue: MSEK 4,214 (14,971)
- Income before tax (EBT): MSEK-4,297 (-4,809)
- Income before tax and items affecting comparability: MSEK -4,309 (-4,792)
- Net income for the period: MSEK -4,483 (-4,331)
- Earnings per common share: SEK -0.64 (-11.49)
COMMENTS BY THE CEO
New coronavirus cases remained high during the quarter, resulting in strict travel restrictions and low demand for flights. Focus for the quarter has been on lowering SAS’ costs, preserving liquidity and further strengthening SAS’ future competitiveness. The increase in vaccination rates provides some hope for the relaxation of restrictions, and an increase in demand ahead of the important summer season.
CONTINUED NEGATIVE IMPACT FROM THE PANDEMIC
Even if the number of people vaccinated is growing globally, high numbers of new cases and strict travel restrictions continue to impact society and slow recovery for the airline industry. Demand remained low during the second quarter and the number of passengers fell 2.4 million year-on-year, and was down 140,000 on the previous quarter.
SAS is continuing to successfully adapt production to the prevailing circumstances, which is reflected with an unchanged load factor compared with the previous quarter. As a direct consequence of fewer passengers, revenue fell SEK 3.3 billion (-63%) year-on-year and SEK 350 million (-15%) compared with our first quarter.
Weak demand makes it necessary to continue to adapt operations and reduce costs to offset the substantial loss of revenue. This has resulted in costs being SEK 4.6 billion (down: -54%) lower year-on-year and almost SEK 0.5 billion (down: -11%) lower than in the previous quarter. Despite the loss for the quarter amounting to SEK 2.4 billion, SAS posted an improved EBIT for the first time since the pandemic’s outbreak, both year-on-year and compared with the previous quarter.
Another prioritized area is to secure liquidity for when demand once again normalizes. Through active efforts to improve operational cash flow in parallel with SAS securing a number of major financing transactions, cash at the end of the quarter amounted to SEK 4.4 billion. Down only SEK 300 million compared with the end of the first quarter. Moreover, SAS has secured financing for the majority of its aircraft deliveries until the second quarter of 2022.
PENT-UP DEMAND AHEAD OF THE IMPORTANT SUMMER SEASON
Infection, delayed vaccinations and continued stringent travel restrictions have led to a slower than hoped for recovery. However, SAS is ready to welcome our customers back on board as travel restrictions ease ahead of the important summer season. For the summer, SAS is opening 180 direct routes and also increasing capacity on domestic routes within the Scandinavian countries. After the quarter ended, we also announced an extended partnership with Airtours over the next four years, starting in the summer of 2021 and corresponding to a value of approximately SEK 800 million.
To reduce uncertainty when booking flights, SAS is offering more flexible ticket rules and generous rebooking alternatives. We are also now launching SAS Travel Ready Center, a digital tool, to make it easier for passengers to access information about current travel restrictions concerning their destinations and to upload necessary travel documents.
Together with an increased belief in relaxed restrictions and a number of positively received campaigns, these activities have increased forward bookings for the summer and autumn, albeit from lower levels compared with what is typical for this time of the year.
Customers’ booking patterns have also changed during the pandemic. Many customers are now increasingly choosing to book their tickets much closer to their travel dates, which makes it difficult to predict demand during the summer. The most crucial factor for an airline industry recovery is the relaxation of travel restrictions. Since the rates of infection and vaccinations are decisive in this regard, SAS is carefully following vaccination trends across the world.
The prevailing uncertainty means that access to liquidity is essential for all airlines. SAS has therefore ensured that there is support from the major shareholders, the Governments of Denmark and Sweden, to gain access to a credit line facility amounting to SEK 3.0 billion. The aim of credit line facility is to create a liquidity buffer as a complement to other ongoing activities at SAS to reduce costs and strengthen liquidity.
ADAPTATION TO CHANGED MARKET CONDITIONS
SAS expects significantly changed market conditions following the pandemic, with a greater number of leisure travelers and even more intense competition.
Retaining our position as market leader in Scandinavia following the pandemic will require SAS to continue to adapt operations to future market conditions. During the pandemic, SAS has streamlined all aspects of its operations, reduced the number of employees, entered into new collective agreements to increase productivity and reached agreements concerning frozen salary levels. These necessary measures have had a substantial impact and reduced personnel expenses almost 35% year-on-year. Moreover, we have negotiated agreements with suppliers, which has resulted in deferred payments, lower costs and a higher variable component in relation to fixed costs.
However, there will be even greater requirements for efficiency and seasonally adapting operations moving forward. Access to flexible and suitable production is required to be able to offer a complete network and a timetable adapted to Scandinavian requirements for business, leisure and regional destinations. Accordingly, SAS is continuing to develop its operational model that has proved successful in the past few years.
SAS has signed a new collective bargaining agreement for pilots and cabin crew with the Danish union FPU which is a part of FH (The Danish Confederation of Trade Unions). The new agreement means that SAS can establish a complementary base in Copenhagen. With the agreement, SAS improves the flexibility and seasonal adaptations required to maintain its leading position in Scandinavia. As a first step, SAS intends to create new workplaces in Denmark instead of reopening the base in Malaga that closed earlier as a direct result of the pandemic. The new Danish operation will be established using our European operating license, which guarantees a quick and cost-efficient start of operations.
SAS remains committed to its ambitious sustainability target of reducing carbon emissions 25% already by 2025 compared with the base year 2005. In the short term, an accelerated phase-out of older aircrafts means that the share of new, fuel-efficient aircraft in the fleet is rapidly increasing. This is also having a direct impact on our emissions reporting, where carbon emissions per available seat kilometer decreased more than 10% year-on-year. During the quarter, we also secured a minimum of 20% of our planned need of sustainable aviation fuel until 2025.
To conclude, on behalf of the Board of Directors and all the employees at SAS, myself included, I would like to thank Rickard Gustafson, who held the position as President and CEO of SAS with a great level of commitment for a decade. Rickard applied a good leadership culture in his leadership of the company through the necessary change process applicable for SAS and the airline industry as a whole. We wish him every success with his new assignment. At the same time, I would like to wish Anko van der Werff a warm welcome as SAS’ new CEO in July.
I would also like to thank all of my colleagues at SAS for their commitment and endeavors as well as our customers for all their support. As Scandinavia’s leading airline, we look forward to being able to welcome our passengers back on board.
Acting President and CEO, Stockholm, May 27, 2021
This information is information that SAS AB is obliged to disclose p ursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted by Michel Fischier for publication on 27 May 2021 at 8:00 a.m. CEST.