SAS Posts Fiscal-Year Loss Following Reorganization Costs
SAS Group (SAS), the biggest Nordic airline, posted a 10-month loss after spending money on a reorganization plan that seeks to restore profit by selling units and cutting hundreds of jobs.
Stockholm-based SAS had a pretax loss of 1.25 billion kronor ($188 million) in the period ended Oct. 31, versus a year-earlier profit of 381 million kronor, it said today in a statement. Revenue rose 2.9 percent to 36 billion kronor.
SAS, which has suffered annual net losses since 2007, said it aims to be profitable on a pretax basis in the revised fiscal year that began Nov. 1. The company, which owns the Scandinavian Airlines brand, won union approval last month for 6 billion kronor of cost cuts and disposals while seeking an extension of credit lines it needs to carry on flying. Reorganization costs in the truncated fiscal year totaled 1.42 billion kronor.
“The restructuring costs are higher than they had announced, but they’re probably just taking some out of next year,” said Finn Bjarke Petersen, an analyst at Nordea Markets in Copenhagen who recommends selling SAS shares. “Adjusted for the restructuring costs, it was in line with expectations.”
SAS, 50 percent owned by the governments of Sweden, Norway and Denmark, aims to scrap about 800 office jobs and sell assets including a ground-handling unit and Norwegian brand Wideroe to ultimately reduce the payroll by more than 7,000 employees. The proposals were approved by the Swedish parliament yesterday, with the Norwegian parliament set to vote on them today.
“We have got agreement to significantly shift our cost- base, increase our productivity, reduce our bureaucracy, increase flexibility,” Chief Executive Officer Rickard Gustafson said today in a telephone interview. “That will be the foundation for us to stay competitive in the European market- place. We will start to make money in 2012-2013.”
Proceeds from the divestments should total 3 billion kronor, Gustafson reiterated, adding that he aims to complete the sale of Wideroe next year. SAS is in “intensive talks” with a shortlist of bidders for the ground-handling unit, all of whom are from within the industry, he added. Administrative personnel cuts will start in the first quarter of next year.
Gustafson said in the statement that while SAS may achieve earnings before interest and tax equal to more than 3 percent of sales in the current fiscal year, the first quarter will be “extremely weak.”
Norwegian Air Shuttle AS (NAS), Europe’s fourth-largest discount carrier, has been expanding in the region, in contrast to service cuts at SAS. The Fornebu-based company is the biggest Nordic airline by market value, though it still trails SAS by sales and traffic, the figure most often used to rank carriers.
Network operators including Helsinki-based Finnair Oyj (FIA1S) are also intensifying competition for traffic.
Around half of the cost cuts at SAS, also valued at 3 billion kronor, will come by next November, and the rest in the following 12 months, Gustafson said in the interview.
Of the 1.42 billion-kronor 10-month restructuring expense, 900 million kronor came from the latest program, mostly from impending personnel cuts, the CEO said.
SAS’s pretax profit excluding one-time items shrank to 23 million kronor from 96 million kronor in 2011. The 10-month period was reported as the carrier’s 2012 fiscal year, after it switched from calendar-year accounting.
On a pro forma basis, the 12-month pretax loss was 3.26 billion kronor, compared with 487 million kronor a year earlier, SAS said. Excluding items the profit was 21 million kronor, versus a 98-million kronor loss.
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