SAS Q1: -973MSEK (~104M EUR)


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SAS Group earnings for first quarter: MSEK -973 - Profit 2008 action program expanded to SEK 1.1 billion

Key data from the SAS Group's first-quarter report today:
· Earnings before nonrecurring items for the period amounted to MSEK -973 (-94), a decline of MSEK 879
· The Group transported 7.3 million passengers, an increase of 2.4%

As a result of the rapidly increasing fuel prices, increasing overcapacity and
the consequent pressure on yield, SAS has expanded the action program announced in February, which has been grouped under the name Profit 2008.

Main points of Profit 2008:
· Total earnings effect in 2008 - SEK 1.1 billion
· Capacity reduction by 11 aircraft commencing in autumn 2008, and the addition of another long-haul aircraft has been postponed
· A surplus of approximately 1,000 full-time positions will occur.

Mats Jansson, President and CEO, comments:
"To turn around the earnings trend and manage the challenging market situation, we are undertaking a number of short-term measures that we have grouped under the name Profit 2008. These measures shall generate an earnings effect in 2008 of SEK 1.1 billion, including price adjustments, changes to the traffic programs, additional efficiency enhancements of overheads and the discontinuation and postponement of certain planned activities. In total, the number of positions will be reduced by approximately 1,000 FTE.

"At the same time, it is important to keep S11 on track to ensure that we can develop SAS to become an even stronger and more competitive airline."
Refer to the interim report at www.sasgroup.net for further detailed
information.

SAS GROUP INVESTOR RELATIONS
_________________________________________

DaV
 
Interim Report January-March 2008

Key ratios for the period

· Operating revenue: MSEK 12,833 (11,887) (+6.3%) *

· Number of passengers: 7.3 million (+2.6%)

· Earnings before nonrecurring items in continuing operations: MSEK -973 (-94)

· EBT margin before nonrecurring items: -7.6% (-0.8%)

· Net income for the period: MSEK -1,134 (-47)

· Earnings per share: SEK -6.55 (-0.11)

· A short-term action plan corresponding to SEK 1.1 billion will be implemented.
A total of 44% of the long-term cost program corresponding to SEK 2.8 billion
has been implemented.

* Currency adjusted


Comments by the CEO

The negative earnings trend we experienced in November and December last year
continued in the first quarter of 2008. The primary reason for this is the rapid
rise in jet fuel prices to record high levels that could not be offset, while
unit earnings fell as a result of further intensification of competition. There
is also certain overcapacity in the market and tendencies toward a decline in
business travel. Managing this market situation is currently a challenge faced
by the entire air-travel industry. We have seen how companies in the local
market have adjusted their forecasts downward at the same time as carriers in
the US and Asia have filed for bankruptcy. Consolidation in the industry on a
global scale is continuing with full force.

Accordingly, the SAS Group's earnings for the first quarter were very weak, with
an outcome of MSEK -973, which is a substantial decline compared with the
year-earlier period. The first quarter is seasonally a weak quarter, which was
further amplified by Easter falling in March this year. However, the underlying
decline is deemed to amount to approximately MSEK 600. We continued to incur
increasing expenses as a result of the Q400 problems, but the amount of
compensation received from Bombardier will mostly offset this during the
quarter.

There are indications that that global trends are so serious that we must
prepare for a more enduring economic downturn. The macroeconomic problems, which
essentially derive from the overutilization of the US credit market, are now
having knock-on effects in the financial system.

To turn around the earnings trend and manage the challenging market situation,
we have extended the action plan announced in February and grouped it together
under the name Profit 2008. These measures shall generate an earnings effect in
2008 of SEK 1.1 billion, including price adjustments, changes to the traffic
programs, additional efficiency enhancements of overheads and the
discontinuation and postponement of certain planned activities. Furthermore, we
have decided to reduce capacity by 11 aircraft (5%) commencing in autumn 2008
and have decided not to implement the planned increase of one intercontinental
aircraft. In total, the number of positions will reduced by approximately 1,000
FTEs.

In parallel with these measures, we will continue to implement the S11 strategy
program - "Strategy 2011." Major focus is being directed toward a cultural
turnaround and to improving our customer satisfaction, for example by providing
more stable delivery quality and continuous product improvements.

The situation in the air-travel industry is serious. For this reason it is vital
that we turn around the earnings trend and at the same time keep S11 on track to
ensure that we can develop SAS to become an even stronger and more competitive
airline.

Mats Jansson
President and CEO
_______________________________________

DaV
 
Riporto un'articolo di ATW Online in cui viene trattata la dismissione delle partecipazioni e delle attività accessorie da parte di SAS, intraprese nell'ottica di razionalizzazione e risanamento.

SAS Alone

SAS Group plans to divest non-core assets such as Spanair and its 20% stake in bmi to focus on its home markets.
By Perry Flint
Stockholm

Air Transport World, April 2008, p.26

MATS JANSSON DID NOT GET A LOT OF TIME to grow comfortable in his new position as president and CEO of SAS Group. Like his predecessor, Joergen Lindegaard, he was presented with a crisis shortly after he came aboard. For Lindegaard, who took over in the spring of 2001, it was the Maersk price-fixing scandal and then, a few months later, far worse. Jansson's baptism by fire came four months into the job when Danish and Swedish cabin attendants walked out, costing the company an estimated SEK265 million ($43 million) in the 2007 second quarter.
That was followed by last autumn's Q400 crisis, with three landing incidents in a matter of six weeks that further eroded public confidence and caused SAS to withdraw the 27 turboprops from its fleet. To understand the gravity of the situation, consider that the Q400s accounted for 32% of Danish departures and 17% of those in Sweden. The airline is wet-leasing a hodgepodge of jets for the time being, but a permanent solution involving up to 30 new CRJ900 NextGen and 21 Q400 NextGen aircraft was announced on March 10 with deliveries beginning this fall and running through 2011. As part of the agreement, SAS will receive slightly more than SEK1 billion in cash payments and credits toward the aircraft on order.
Jansson, who officially came onboard on Jan. 1, 2007, from retail and trading giant Axel Johnson AB, where he was president and CEO, jokes to ATW that "with all the overtime," his first year on the job "was more like two years." But the new chief executive, who combines a genuinely funny, wry view of things with an understanding of the airline industry that belies his brief tenure, has not let himself become a victim of events. He parlayed a stern management response to the illegal strike by the Danish union into a landmark pledge from the heads of the airline's main Danish unions to "use every available and reasonable means to avoid strikes" in the future.
His reaction to the Q400 episode was equally decisive. Although some may question whether SAS was too aggressive in publicizing what it believes are design flaws in its early model Q400s, Jansson kept the carrier ahead of the safety issue. Furthermore, his actions made it clear that SAS would not compromise on what it saw as a fundamental responsibility to its employees and the traveling public regardless of the cost--which amounted to SEK700 million in the fourth quarter and will cost an estimated SEK700-SEK800 million this year-and the disruption to its operation that resonates still.

Foreboding Skies


Unfortunately for the new CEO, it does not look like 2008 will be any less challenging. On a macro level, the industry appears to be headed toward a downturn ignited by the US credit crunch. Closer to home, SAS is engaged in a battle for Nordic supremacy with smaller but more efficient Finnair and faces increasing encroachment from low-cost rival Norwegian. Ryanair has established a beachhead in southern Sweden as well.
Between 2001 and 2005, SAS lost close to SEK6 billion. Sales of noncore assets such as the Rezidor Hotel Group, European Aeronautical Group (navigation charts and route planning), the Jetpak express delivery operation and SAS Component helped to keep the company afloat during this difficult period, as did the Turnaround 2005 program carried out under Lindegaard that cut costs by SEK16 billion. SAS returned to profit in 2006 with net income of SEK4.74 billion. Most of this, however, was attributable to capital gains and other special items; excluding these, net income amounted to SEK1.28 billion.
Until the Q400 crisis knocked the legs out of the fourth quarter, the group was on track for a much better 2007, with most of the individual airline units outperforming 2006. Instead it ended up earning just SEK636 million, or SEK1.24 billion excluding nonrecurring items, in what is generally agreed to have been the strongest year for air travel since 2000. This level of earnings, while gratifying after huge losses in the first half of the decade, is not sufficient to sustain its goal of growing passengers 20% by 2011 and keeping itself in control of its destiny.
Jansson figures that SAS needs a 7% pre-tax margin, equivalent to a SEK4 billion bottom line. To achieve this, he has launched an all-encompassing restructuring program dubbed Strategy 2011 (S11) that calls for:

  • Divestment of noncore assets, among them Spanair, its 37.5% holding in Air Greenland and its 20% stake in bmi, in order to concentrate fully on airline operations in its home markets (defined as the Nordic countries and the Baltics).
  • Substantial new cost savings including SEK2.8 billion though 2009 and an undefined amount in successive years.
  • And foremost, a fundamental change to the strike culture that has characterized its labor/management relations over the past decade to enable it to become an outwardly focused, customer-centric business.
Jansson believes that without S11, SAS's profits will remain below sustainable levels, making fleet replacement impossible and eroding the foundation necessary to withstand the winds of consolidation sweeping the airline industry. Absent S11, "We are not going to be independent in the future," he warned during the company's fourth-quarter conference call.
That's not an idle worry. Excluding results of Spanair, SAS Group--the three national airlines plus SAS International, Wideroe, Blue1, Estonian and airBaltic--carried around 31.9 million passengers last year on 1,260 daily flights, placing it sixth in Europe and trailing easyJet and Ryanair, both of which are more profitable. And unlike bigger counterparts Air France KLM, British Airways and Lufthansa, SAS lacks a large intercontinental network to offset pressure from lower-cost carriers closer to home. In 2007, only around 3.5% of Scandinavian Airlines' passengers traveled on SAS International's network of 18 daily flights to a dozen destinations in North America, Asia and the Middle East.

Striking Numbers


But for S11 to succeed, labor/management relations must improve dramatically. "During [the last] 10 years . . . we have had about 100 strikes and 70 of those have been illegal," Jansson says. "In my experience the culture question is number three, four or five when talking about the key factors, but in SAS it's number one. Because if we can't change the culture then it's impossible to reach these goals."
"It seems we have created an environment and a culture where the only weapon or the only dialog tool was to strike. We weren't able to speak to each other, we weren't able to negotiate, to reach a solution," says Executive VP-Corporate Human Resources Henriette Fenger Ellekrog, who joined the airline last October from Danish telecom TDC.
A major breakthrough occurred after SAS announced that owing to the illegal strikes at SAS Denmark it would allocate more capacity on inter-Scandinavian routes to SAS Sweden and SAS Norway. "I got a letter from the Danish trade unions which said they should work for and support stability in the Danish market," Jansson recalls. He and Executive VP-Scandinavian Airlines Businesses John Dueholm agreed that this was a significant event worthy to be encouraged. He insisted on a public press conference with the trade union leaders to announce their commitment and in return, management agreed to rescind some of the capacity withdrawals. This drew fire from Swedish unions who accused him of caving in, but Jansson is unrepentant. "This type of document you haven't seen [at SAS] in 61 years," he points out.
The company maintained the momentum by hosting a gathering of union leaders and management in November. "We met for four days and nights and discussed the challenges we have for the future, the competition, the downturn we expect and so on. . . And at that meeting we did end up with, you can call it a framework agreement between the unions and the group management team," he says.
Management is continuing to emphasize this format, says Ellekrog, conducting similar meetings with union leaders "at all our subsidiaries in Scandinavia." Part of the challenge, of course, is that SAS has around 30 major unions, although as she points out, "it's more like three times ten, since all the unions are national." She believes employees and unions "understand that the business environment has changed considerably for airlines . . . Where they might differ in opinion is on the consequences that will have on SAS."

S11 Delay


That may help to explain why the group has stalled on a major piece of S11: Divestment of nonairline assets including its unprofitable SAS Ground Services unit, which employs 6,800. In February, amid strong indications that the unions would strike to prevent a sale or spinoff, a clearly frustrated Jansson said SGS will remain a subsidiary provided it can reach quality and profitability targets within 18 months including a SEK400 million improvement in costs. SAS also would like to get out of the heavy maintenance business but likewise faces union opposition. As an interim step it is sending maintenance of 737 Classics outside of SAS Technical Services. It intends to move forward with the sale of Spirit Air Cargo Handling.
The inability to resolve these issues satisfactorily has put the company somewhat behind its cost-saving schedule, with around SEK700-SEK800 million already implemented versus a target of SEK1 billion. In any case, the heavy lifting--SEK1 billion from flight operations, mostly in labor efficiencies--as still to be tackled. In announcing the decisions, Jansson conceded that SAS "still has a long way to go in building a new corporate culture . . . that is adapted to the competitive situation."
In spite of this setback, SAS remains in a powerful position as the leading airline in its home markets, a region containing more than 30 million people. It has a strong brand and an estimated 45% share of Nordic and Baltic traffic. Last year it unveiled a number of commercial initiatives, among them a new two-class product in Scandinavia and a three-class offering in Europe, upgraded food, a more flexible fare structure and a FastTrack program using biometrics to speed passengers through security.

Decentralization


One of the more interesting competitive situations is of the company's own doing: The decision implemented in 2004 to separate the former airline consortium into its component parts. Each of the national carriers has its own fleet and P&L statement, as does SAS International. To an outsider, such a structure raises questions about scale and scope efficiencies.
Jansson says that until the restructuring, SAS was a highly centralized company, "which is very un-modern if you look at other industries." He agrees that with decentralization comes the risk of suboptimization but believes "it was a necessary step" to create transparency and accountability.
Dueholm, one of the few longtime SAS veterans at the very top of the group's management, is a strong advocate of the move. "In my opinion, we never would have survived if we had continued with the old integrated body . . . If you go back to 2001-02, it was impossible to see where we were making money and losing money," he says. But transparency is only one of the benefits, he insists. "It makes sense to have all these companies closely connected to the local market. You can adjust your service delivery within a very, very short timeframe. We have sped up our implementation rate, our cost savings program, our resource development."
Dueholm also stresses that to the customer, the offering is fully harmonized, with common distribution platforms and sales channels, ground and inflight services and frequent-flier programs. To insure each carrier is on the same page, SAS has established a Strategic Commercial Board on which sit the airline MDs plus Jansson and Dueholm. "On this board we define and make decisions on all commercial activities," Dueholm states.
Financially, each of the national airlines did reasonably well last year. SAS Norway, formerly SAS Braathens, had sales of SEK13.1 billion, around 21.3% of group sales. It had 2007 EBIT of SEK1.06 billion, a 7.7% margin, which is nearest to the S11 profitability target of 9% among the SAS carriers. It carried 10.2 million passengers on 340 daily flights to 43 domestic and European destinations with a fleet of 54 737s and six F50s. It enjoys a 60% market share, but this has fallen 5 points in two years, in large part reflecting the rise of Norwegian but also owing to Sterling. Turboprop operator Wideroe, also part of the SAS family, added nearly 2 million passengers to the Norway total. Around 70% of SAS Norway's revenues come from its domestic operations, which are all point-to-point, with 30% from international, Dueholm says.
Perhaps surprisingly, SAS Sweden is actually the smallest of the three national airlines although Sweden is the largest Scandinavian country (and the Swedish government owns the largest share of the airline among the three nations that collectively own 50%). Sales last year totaled SEK8.78 billion and it carried 6.5 million passengers on a fleet of 35 737s and MD-80s to 57 destinations. Market share is 48%, down from 55% in 2005. EBIT margin was 7.1%.
The split between domestic and international revenue is around 50/50. "If you look at the competition out of [Stockholm] Arlanda you will see that you have much more capacity from our competitors compared to Oslo and Copenhagen," Dueholm explains. Only around 30% of Swedish traffic connects at Arlanda, reflecting the development of more point-to-point services into Europe that bypass the hub.

Disappearing Connections


A similar trend is occurring at SAS Denmark, which had 2007 sales of SEK11.66 billion and transported 8.7 million passengers to 51 destinations on 38 A320s/A321s and MD-80s. "If you go six or seven years back, our traffic out of Denmark was split equally between transfer traffic and point-to-point traffic. Today, transfer traffic only accounts for around 32%, so that means SAS in Sweden and Norway, and our competitors, are bypassing CPH, flying directly point-to-point," Dueholm says.
Although he recognizes this is not so good for CPH, he is pragmatic: "If we maintain our hub strategy and only our hub strategy then our competitors will dilute our business platform." EBIT margin for SAS Denmark was just 3.9%, in large part owing to the Q400 grounding as well the strikes in April 2007. It has a 50% market share.
Despite its reputation as the businessperson's airline, SAS actually is interested in boosting its share of leisure passengers from 35%-40% today to around 50% by 2011. Last year it opened 14 low-fare routes out of Norway operated with eight dedicated 737-800s in a one-class configuration under what Dueholm states is a competitive labor agreement. If the program succeeds, it will be expanded to Sweden and Denmark.
SAS International will add a 12th aircraft to its fleet of seven A340-300s and four A330-300s but it had weaker earnings last year, largely owing to loss of traffic feed from the other group airlines because of the various disruptions as well as MRO challenges. Pre-tax income was SEK54 million, down 68% on a 2% decline in sales to SEK7.63 billion. It has completed the rollout of its new business class with 170-deg.-recline seat-beds and AVOD with 10.4-in. screens. It also offers a premium economy section. It will add CPH-Delhi this fall and CPH-San Francisco next spring. The new services are part of the strategy to "focus on destinations where our customers want to go," says SAS International CEO Lars Soerensen.
Unlike Finnair, SAS is not trying to build a Nordic connecting hub to flow traffic between East and West, instead relying on Star Alliance to carry its customers to long-haul destinations it doesn't serve. Dueholm acknowledges Finnair is more profitable than SAS on longhaul operations, but he says, "it's only a cost game." SAS's costs are "exactly 17% too high," primarily due to more expensive and less efficient flight crew. It has to add a third pilot on transatlantic flights, for example. Taking the fight to Finland is the job of Helsinki-based Blue1, the former Air Botnia, with 13 Avros and MD-90s. It enjoyed its best year last year, with EBIT of SEK113 million on sales of SEK2 billion.
SAS's presence in the Baltics is supported through Latvia's airBaltic, in which it owns 47% and which operates from hubs in Riga and Vilnius and carried 2 million passengers last year. It would like to acquire a majority of airBaltic and also its neighbor, 49%-owned Tallinn-based Estonian Air, which carried nearly 750,000 people in 2007.
As SAS gets further into 2008, one thing it won't miss is the expiration at the end of 2007 of the eight-year European Cooperation Arrangement among itself, Lufthansa and bmi under which LH and SAS agreed to subsidize bmi for its financial losses. Last year the agreement cost SEK652 million, up from SEK415 million in 2006. "If you ask me for the business rationale behind this kind of arrangement I must be honest, I cannot see it," says Dueholm. But the separate joint venture between Scandinavia and Germany is profitable, he adds.
SAS expects to make a decision on fleet renewal this year. In addition to 42 MD-80 family aircraft, it has four orphan MD-90s at Blue 1 and a further 39 737 Classics spread around the group. S11 calls for a new increase of 15-20 aircraft beyond replacement needs, in order to handle 5% annual growth in passengers.
But the biggest challenge is still culture. "No doubt about it," says Jansson. "Can we handle the downturn? Yes we can, if we solve the culture problem. Can we handle the fuel price? Yes, if we can solve the culture problem. Can we fulfill the cost-cutting program? Yes, if we can solve the culture problem."

http://www.atwonline.com/magazine/article.html?articleID=2286
 
Altra notizia a riguardo, da Fligh International.
La prevista acquisizione di un'ulteriore A340-300 con il quale si sarebbero dovute aprire SFO e DEL è stata cancellata, oltre a ciò ci sarà una riduzione della flotta.

SAS to cut fleet as it reels from first-quarter loss
By David Kaminski-Morrow

Scandinavia’s SAS Group is to reduce fleet capacity by 11 aircraft, and drop plans to add another Airbus A340, after mounting a SKr1.1 billion ($183 million) short-term efficiency programme designed to counter losses.
The company, which has just released a heavy first-quarter operating loss of SKr872 million, is to reduce capacity by around 5% from autumn this year. It has also decided “not to implement” the planned addition of an extra A340 to serve new long-haul routes.
SAS Group says the changes will reduce its workforce by around 1,000 full-time employees.
It blames the dismal first-quarter results on increased competition and high fuel prices. The loss for the three-month period wiped out last year’s small first-quarter profit.
Operating revenue for the company was up by 6.3% to SKr12.8 billion as passenger numbers rose by 2.6% to 7.3 million.
But pre-tax losses of SKr973 million were 10 times greater than those for the first quarter of 2007. Net losses more than SKr1.1 billion against SKr47 million last year.
SAS Group chief Mats Jansson says the company has experienced “further intensification” of competition which has reduced unit earnings, and adds that there is “certain overcapacity” in the market and a trend towards decline in business travel.
He says the first quarter is traditionally weak and says the early Easter holiday period has exacerbated the situation. But he adds that there is an underlying decline of around SKr600 million.
“There are indications that global trends are so serious that we must prepare for a more enduring economic downturn,” he says. SAS Group is grouping a series of short-term efficiency measures under a project called ‘Profit 2008’ which aims to generate an earnings effect of SKr1.1 billion this year.
This project, it says, will include price adjustments, changes to the SAS Group carriers’ traffic programmes, and discontinuation or postponement of “certain activities”.
SAS Group has yet to detail the fleet reduction. But it had been planning to acquire an A340 to increase its long-haul fleet in order to serve new routes to San Francisco and Delhi.

http://www.flightglobal.com/article...leet-as-it-reels-from-first-quarter-loss.html
 
SAS continua a perdere

Scandinavian Airlines continua a perdere
Per il primi tre mesi del 2008 le perdite raggiungono la cifra di 163 millioni di dollari
molto di piu delle aspetative della compagnia
Le perdite porterano ad un ulteriore taglio di personale, attorno a 1000 persone
(Reuters)
 
Da a.net i margini Q1 del Gruppo SAS di quest'anno paragonati a quelli del 2007 (non so la fonte dei dati)

SAS Norge -192 -6,0%
SAS Sverige -69 -3,3%
SAS Danmark -125 -4,3%
SAS IC -151 -8,4%
Blue1 +2 0,3%
AirBaltic -107 -21,0%
Widerøe +10 1,2%

Spiccano in positivo solo Wideroe e Blue1...pesante la perdita anche di Air Baltic
 
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