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SAS Group needs faster restructuring?


Increasing expenses outpace any increase in revenues

In a recent discussion with analysts about SAS Group’s second-quarter results, president and CEO Rickard Gustafson described the company’s “unsatisfactory earnings level”. Pre-tax earnings halved to SEK371 million (€45.1 million), pulling the company’s consolidated net profit down 42% to SEK320 million (€38.9 million). Operating income fell by 31% compared to the same quarter in the previous year to SEK632 million (€76.9 million). Increasing expenses are clearly outpacing any increase in revenues, which increased by just 3% despite a 5.9% rise in passenger traffic.
The high cost of jet fuel is cancelling out many of the cost savings made under SAS Group’s 4Excellence restructuring. Fuel absorbed 25% of total operating costs Q2, compared to 18% a year earlier. In contrast, salary expenses fell by 1.4% over the year to take up 29% of operating costs.
As CAPA points out, SAS was “the only major network airline in Europe to report a declining yield in the quarter ended 30 June 2012”, although “management points out that this was the result of its deliberate strategy to increase its presence in the leisure segment combined with the yield pressure resulting from a new long-haul route”, namely the five-time weekly service between CPH and Shanghai.
[Photo: Swedavia/Tommy Säfström]


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