SAS Posts Loss on EU Cargo-Cartel Fine; Shares Slump
SAS Posts Loss on EU Cargo-Cartel Fine; Shares Slump
Linus Hook/Bloomberg
SAS has been unprofitable in all but one of the past 12 quarters as it struggled with declining traffic, strikes and a volcanic eruption this year in Iceland.
SAS has been unprofitable in all but one of the past 12 quarters as it struggled with declining traffic, strikes and a volcanic eruption this year in Iceland. Photographer: Linus Hook/Bloomberg
SAS Group, the largest Nordic airline, unexpectedly reported a loss because of a penalty by European regulators for participating in a global price-fixing cartel. The stock fell the most in six months.
The third-quarter net loss was 1.05 billion kronor ($156 million), compared with a profit of 152 million kronor a year earlier, Stockholm-based SAS said today in a statement. Revenue fell 3.5 percent to 10.7 billion kronor. Analysts had expected a profit of 283 million kronor, according to the average estimate of analysts compiled by Bloomberg.
SAS, half-owned by the governments of Sweden, Norway and Denmark, was fined 660 million kronor yesterday by the European Commission for fixing prices on cargo services with other airlines. The carrier has been unprofitable in all but one of the past 12 quarters as it struggled with declining traffic, strikes and a volcanic eruption this year in Iceland.
“Even adjusted for restructuring costs they still disappointed,” said Johannes Moller, an analyst with Danske Markets in Copenhagen who advises selling SAS shares. “There will be further overcapacity in the Nordic market next year, so the operators will have to lower ticket prices. That will offset all the cost cuts that SAS is doing.”
Norwegian Air
SAS fell 2 kronor, or 7.5 percent, to 24.60 kronor in Stockholm, the steepest decline since May 19, bringing its loss this year to 52 percent.
The carrier’s profitability will continue to suffer as long as low-cost airline Norwegian Air Shuttle AS keeps adding flights in the region, Moller said. SAS may just break even in 2011, he said.
SAS began a 7.8 billion-krona cost-reduction program last year that includes eliminating 4,600 jobs. SAS said today it’s on course to complete the plan by the end of next year, after generating 4.9 billion kronor in savings so far.
“We must continue to reduce the cost level to improve earnings and to grow profitably in pace with the market,” Acting Chief Executive Officer John Dueholm said in the statement.
European airlines may see a next phase of consolidation talks in two to three years, after getting their finances in order, Dueholm said on a conference call today. SAS is not holding any merger talks, he said.
Deutsche Lufthansa AG Supervisory Board Chairman Juergen Weber said last week that Europe’s second-largest airline was taking a “wait-and-see” approach to the possible purchase of a stake in SAS. Buying a holding in SAS “hasn’t worked out so far, unfortunately, but we’ll wait and see,” he said.
Dueholm is heading SAS until Rickard Gustafson, CEO of insurers Codan and Trygg-Hansa, takes over early next year. SAS’s former CEO, Mats Jansson, retired last month.
To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net.
To contact the editor responsible on this story: Kenneth Wong at kwong11@bloomberg.net.
Rate this Page