Scandinavian Airlines System (SAS) on Tuesday launched SAS FORWARD, a SEK 7.5 billion savings plan. The struggling airline needs a fresh start after two difficult years. In the press release (read below), SAS said it posted a wider quarterly loss, blaming weekday demand and market competition.
“For many years, SAS has been plagued by an uncompetitive cost structure, which has prevented the company from reaching its full potential.“, said the airline, “moreover, the last two years have been the most difficult in the history of the aeronautics industry and the future remains unpredictable. Travel habits and market conditions are changing and will further impact the business. SAS needs a fresh start more than ever.”
SAS will implement measures to ensure long-term competitiveness. Alongside the work already underway to develop an efficient and profitable activity, the company is therefore presenting its transformation plan: “SAS FORWARD”.
Results for the first quarter of fiscal 2022
NOVEMBER 2021–JANUARY 2022
- Turnover: MSEK 5,545 (2,282)
- Earnings before tax (EBT): MSEK -2,597 (-1,915)
- Earnings before tax and items affecting comparability: MSEK -2,621 (-1,927)
- Net income for the period: MSEK -2,442 (-2,033)
- Earnings per ordinary share: SEK -0.34 (-0.28)
SIGNIFICANT EVENTS DURING THE QUARTER
- SAS has partnered with Vattenfall, Shell and LanzaTech to investigate large-scale production of synthetic aviation fuel.
- SAS Connect and SAS Link have established operations in Copenhagen and recruitment has begun
SIGNIFICANT EVENTS AFTER THE QUARTER
- The SEK 3,000 million credit facility entered into with the principal owners in 2021 has been drawn
- SAS FORWARD is launched – a comprehensive plan to strengthen SAS’s future position
Pre-tax profit ended at negative SEK 2.6 billion, down SEK 1.7 billion from last quarter, down SEK 0.7 billion year-on-year . Total operating expenses during the quarter ended at SEK 6.9 billion and total operating revenue landed at SEK 5.5 billion for the quarter. Total revenue decreased by 4% compared to the fourth quarter, an improvement of approximately SEK 3.3 billion compared to last year, but still 42% lower than the first quarter of 2019, which has not been affected by COVID-19. The cash balance at the end of the quarter was SEK 3.4 billion.
The number of passengers traveling with SAS decreased by 15% compared to the previous quarter and the load factor reached approximately 56%, a decrease of 4 percentage points compared to the previous quarter. Nevertheless, our capacity was similar in the fourth quarter. Lately, on a more positive note, we’ve seen ticket sales pick up, which is promising for the times to come.
The SAS FORWARD plan is launched
The pandemic has had a fundamental impact on SAS – ranging from closures, travel restrictions to structural changes in travel habits. In the absence of fundamental change, this will quickly deplete SAS’s cash resources. Therefore, SAS will proactively embrace a comprehensive transformation of its business, including its network, fleet, labor arrangements and other cost structures through a broad and comprehensive transformation plan. The plan includes leveraging the SAS brand, unit cost competitiveness, fleet resizing (including refocusing on long-haul) and building a sustainable future. SAS FORWARD is a comprehensive business and financial transformation plan designed to place SAS on a solid financial footing.
Key elements of the plan include:
- Reduce annual costs by SEK 7.5 billion – SAS will aggressively pursue cost reduction with much more comprehensive burden sharing across all major stakeholder and creditor groups
- Redesigned fleet, network and product offerings – SAS adopts a new network principle and adjusts its fleet and product offerings to position SAS for the future and improve the customer experience.
- Digital transformation –SAS will undergo a major digital transformation, delivering a major improvement in the customer experience, driving financial benefits
- Positioning SAS as the leader in sustainable aviation – SAS will invest in modern fuel-efficient aircraft, sustainable aviation fuels, emerging technologies and sustainable products and services with customer behavior change incentives.
- Operating Platform Acceleration – SAS will improve flexibility and efficiency and make it easier to adapt to changing market demands and competition.
- Strengthening SAS’s balance sheet by deleveraging and raising new capital – SAS FORWARD’s SEK 7.5 billion annual cost reduction program paves the way for a full revitalization of SAS’s balance sheet and a substantial strengthening of SAS’s liquidity position, which will enable SAS to invest more in its network, its people and its continued investments in fuel. efficient aircraft
The success of the program and the ability to attract potential new capital relies on SAS’s full execution of the SEK 7.5 billion annual cost reduction plan, which in turn is dependent on the full participation of SAS stakeholders. .
In order to achieve all the objectives of the SAS FORWARD plan, SAS has retained the services of Seabury Securities LLC and Skandinaviska Enskilda Banken AB as financial advisors and Weil Gotshal Manges LLP and Mannheimer Swartling Advokatbyrå AB as legal advisors.
We will provide an update on the progress of the SAS FORWARD plan in April.
SAS embarks on a new adventure. SAS FORWARD will ensure long-term competitiveness and financial strength.