SAS Group's pre-tax profit fell by over 60% in the second quarter, to SKr137 million ($20 million) while the Scandinavian company's half-year performance sank into a SKr912 million loss.
These figures did not account for the effects of a non-recurring property transaction, which lifted earnings before tax for the second quarter to SKr371 million.
Revenues for the quarter were up slightly to SKr11.4 billion as passenger numbers rose by 3%.
Despite the decline and the "unsatisfactory" earnings level, SAS Group says its '4Excellence' savings programme is "beginning to generate results", with a 4% fall in unit costs over the quarter.
"We have observed the clear effect of 4Excellence on revenue," it states. "This is gratifying since continuously increased capacity and intense competition was noted during the entire second quarter."
SAS Group iss aiming for a 3-5% reduction of unit costs per year under the programme, and says that it can "already see the effects".
Collective agreements with unions, equating to SKr1 billion in savings over 2012-13, are in place and this has been illustrated by lower payroll expenses over the quarter.
SAS says it expects passenger growth of 5-7% this year with capacity rising "in pace" by 4-5%, and the company plans to implement improvements corresponding to SKr5 billion during this year and next - of which around one-third was put in place over the second quarter.
SAS Group is not putting forward a profitability forecast for the full year 2012, owing to the "uncertain" economic trend, competitive pressure and the cost of fuel. The group's fuel cost rose by SKr800 million during the quarter.