SAS Group Interim Report January-September 2010

SAS Group Interim Report January-September 2010

July-September 2010 

  · Operating revenue: MSEK 10,690 (11,076) 
  · Earnings before non-recurring items in continuing operations: MSEK
387 (37) 
  · EBT margin before non-recurring items in continuing operations: 3.6%
(0.3%) 
  · Non-recurring effects: MSEK ‑1,411, of which restructuring costs
MSEK ‑146, legal disputes MSEK ‑982, impairment charges MSEK ‑229 and
capital losses MSEK ‑54 
  · Income before tax: MSEK ‑1,024 (114) 
  · Net income for the period: MSEK ‑1,051 (152)  
  · Earnings per share:  SEK ‑3.19 (0.78) 
  · Cash flow from operating activities: MSEK ‑470  (‑1,744)

January-September 2010 

  · Operating revenue: MSEK 30,164 (34,595)  
  · Earnings before non-recurring items in continuing operations: MSEK ‑
693 (‑814) MSEK. Adjusted for the effects of the ash cloud, earnings
amounted to MSEK 7  
  · EBT margin before non-recurring items in continuing operations:
‑2.3% (‑2.4%) 
  · Non-recurring effects: MSEK ‑1,903 
  · Income before tax: MSEK ‑2,596 (‑1,904)  
  · Net income for the period: MSEK ‑2,265 (‑1,643)  
  · Earnings per share: SEK ‑8.40 (‑10.91) 
  · Cash flow from operating activities: MSEK 63 (‑2,348) 

Important events during the quarter

  · Mats Jansson, President and CEO, left his position on October 1,
2010
  · Rickard Gustafson will assume his position as new President and CEO
not later than March 2011. Until this date, Deputy CEO John Dueholm
will  function as acting President and CEO
  · On November 9, the European Commission fined SAS Cargo MSEK 660 in
the air-cargo investigation. Earnings in the third quarter were affected
by the corresponding amount.   
  · SAS Cargo entered a settlement agreement concerning disputes in the
US, which had a negative impact of MSEK 104 on Group earnings for the
third quarter
  · SAS was denied leave to appeal to Norway's Supreme Court in its
dispute with Norwegian, which resulted in a negative effect of MSEK 218
on the Group's earnings in the third quarter
  · SAS deployed an additional long-haul aircraft to meet the rising
demand for intercontinental travel
  · During the quarter, SAS was the world's most punctual major airline

 

Comments by the CEO

 “Sharp improvement in underlying earnings, but quarter negatively
affected by substantial non-recurring items in the period.”

 Income before tax for the period amounted to MSEK -1,024 and was
charged with several significant non-recurring items due to events and
decisions that were not directly attributable to the quarter. The
effects were largely anticipated and the Group's financial preparedness
has been adapted to manage these. By now putting these events behind us,
we can channel our energy on looking to the future and fully focusing on
our core operations. The Group's reported income in continuing
operations (before non-recurring items) in the third quarter amounted to
MSEK 387. Compared with the year-earlier period, the underlying
improvement for the first nine months of the year is MSEK 821, adjusted
for non-recurring items and earnings effects in conjunction with the
volcanic ash in April.

 The recovery in the airline industry is continuing and this is
particularly evident in the growth reported in intercontinental travel
and the general trend in business travel. The positive market trend is
expected to continue and this is therefore a favorable time to launch
initiatives aimed at profitable growth, which include higher frequency
on existing routes and the opening of the intercontinental routes
Oslo-New York and Copenhagen-Shanghai. 

Improved ratio between revenues and expenses
The Group's profitability has improved primarily as a result of reduced
unit costs, which were lowered by 8.7% compared with the third quarter
in the preceding year. Despite the recovery in the market, the price
level declined in several of the Group's markets due to overcapacity.
However, SAS successfully managed to offset the effects of the fall in
yield by improving the passenger load factor. The underlying average
currency-adjusted unit revenue, RASK, for the quarter remains on a par
with the year-earlier period. Although this underlying positive trend in
the airline operation is obscured in earnings by non-recurring items, it
is a signal that the core operation is proceeding in the right
direction. SAS expects the unit cost to continue to decline during the
remainder of the year, while the RASK is expected to be stable.

 Core SAS strategy remains in focus
The focus is now shifting toward completing the implementation of the
Core SAS strategy. We must continue to reduce the cost level to improve
earnings and to grow profitably in pace with the market. This provides
us with the opportunity to manage the fierce competitive situation, in
the shape of overcapacity and downward pressure on prices in several
markets. SAS's prerequisites to successfully address this situation are
as follows: 

-      The cost savings program is proceeding according to plan and the
remaining activities have been identified and secured at a local level
in the organization. Group management is giving the activities its full
attention and they are being followed up centrally by a dedicated
program office. The remaining earnings effect from the program is SEK
2.9 billion.

-      Our innovative product offering that is specifically directed
toward business travelers sets us apart from our competitors. Now, as
one of the world's first airlines, we are launching Internet onboard and
we already offer the Nordic region's largest route network with the
highest frequency flight schedule and a range of time-saving services.

-      Our customer satisfaction and brand continues to gain in strength
as a result of such factors as our professional staff - who receive high
marks for their interaction with customers and their service - and our
punctuality, which is the highest in the world.

By following through on our Core SAS strategy with the same vigor as we
have to date, SAS's profitability will continue to improve. 

John S. Dueholm
Acting President and CEO

Direct questions to Investor Relations SAS Group:
Vice President Sture Stølen +46 8 797 14 51, or Mattias Hyllert +46 8
797 12 19, e-mail:
investor.relations@sas.se (investor.relations@sas.se). 

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 November 10, 2010 at 8:00
a.m.