SAS Sees Q1 Loss, Cost Cuts On Schedule

March 30, 2010

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Scandinavian airline SAS said it expected a first-quarter loss of SEK1 billion Swedish kronor (USD$139 million) as it pushed ahead with drastic cost cuts aimed at making it profitable by 2011.

SAS said on Tuesday the projected loss was in line with internal forecasts, and its SEK7.8 billion cost-cutting programme was on schedule.

SAS, which published the update ahead of a planned share issue, said its performance in the first two months of the year had been hit by exchange rate effects due to the strong kronor.

Analysts said the trading update did not provide any major surprises, but was largely positive for the airline.

"This reflects that SAS is moving forward according to plan -- at least that is a positive -- and that they are not behind plan," said Jacob Pederson, an analyst with Sydbank in Stockholm, referring to the airline's efficiency plan.

Last year was one of the worst ever for the aviation industry, but SAS had already been struggling with high staff costs and an unwieldy business structure as low-cost rivals stole business on many of its core short-haul routes.

In February, SAS said it would ask shareholders for SEK5 billion (USD$692.8 million) to allow it to press forward with a hefty cost-savings programme as it posted a bigger-than-expected fourth quarter loss.

Earlier this month, SAS said it had struck a deal with pilots and crew to freeze salaries and reduce pensions -- a milestone in negotiations with unions which have blocked many earlier efforts to reduce business costs.

SAS also said yields had remained under pressure in the first two months of the year dropping 12.2 percent, though cabin load had increased by 5 percentage points.

"January and February are clearly the weakest months of the year, so things should be developing in a positive way going forward," Pederson added.