SAS Plunges as Fuel Costs Widen Its Loss: Stockholm Mover

SAS Group, the Nordic region’s largest airline, fell the most in almost six months after it posted a higher-than-estimated loss on high fuel costs and pricing pressure.

SAS dropped as much as 10 percent, the biggest intra-day decline since Nov. 8, and was down 7.2 percent at 7.7 kronor as of 9:42 a.m. in Stockholm, where the carrier is based. The share has fallen 3.8 percent this year, valuing the company at 2.53 billion kronor ($380 million).

“The situation regarding the European economy and business passengers’ behavior is still very uncertain,” Chief Executive Officer Rickard Gustafson said in a phone interview. “I’m also quite sure that fuel prices will remain on a high level. It’s difficult to say how well we can compensate for this.”

SAS’s first-quarter net loss was 729 million kronor versus 373 million kronor a year earlier, the company said today in a statement. That’s worse than the 679 million kronor average estimate of five analysts surveyed by Bloomberg News.

The parent of Scandinavian Airlines, part-owned by Sweden, Norway and Denmark, hasn’t reported an annual profit since 2007 as the oil price crimps earnings and competition from discount carriers including Norwegian Air Shuttle ASA intensifies. First-quarter sales rose 3 percent to 9.59 billion kronor and a savings program is progressing according to plan, it said.

SAS said in January it will eliminate 300 administrative jobs in a program begun in September to reduce costs by as much as 5 percent. The carrier is seeking to enhance the bottom line by 5 billion kronor in 2012 and 2013 through spending cuts and measures to boost revenue.

“This year looks much more challenging than I had expected because of high fuel costs,” Jacob Pedersen, an analyst at Sydbank A/S in Aabenraa, Denmark, with an “underweight” rating on SAS’s shares, said by phone. “The earnings foundation at SAS is not as good as I thought though we’ll see some improvements in the second half of the year when we have the measures from 4Excellence beginning to impact,” he said, referring to the carrier’s cost-cut program.

SAS is not holding any consolidation talks with other airlines, Gustafson said.

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