Weak quarter forces SAS to find further cost savings

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SAS Group is to implement further cost-saving measures after a difficult second quarter in which its pre-tax losses soared to more than SKr1 billion ($150 million).

The company is still emerging from a restructuring effort which, for the 2013-14 financial year, are set to generate a SKr1.2 billion earnings impact.

But the company says it must “continuously improve its efficiency” to offset “revenue pressure” and meet its long-term profitability target. Revenues over the three months to 30 April sank by 15%, following the sale of the Wideroe operation, and SAS’s operating losses rose sharply to SKr661 million. Net losses doubled to SKr800 million.

SAS is to shed another 300 personnel in support, commercial functions and administration.

Its Scandinavian ground-handling operation will be “streamlined”, it adds, while its Norwegian crew base structure will be “optimised”. These changes will have a positive earnings impact over 2014-15, the company states.

SAS Group says it will also detail further “significant” measures “in the billion range” in the autumn, measures which will generate restructuring costs. The extent of these has “yet to be fully estimated”, says SAS.

Chief executive Rickard Gustafson says SAS needs to “act more aggressively”. The carrier is intending to open more long-haul routes in autumn 2015, operating from Oslo and Stockholm to destinations in North America and Asia, an expansion which will increase the fleet by three aircraft.

Gustafson says the second-quarter figures, which were worse than forecast, are the result of “continued intense competition and pressure on prices”.

“We are deeply disappointed with the results, which were substantially below our own expectations,” he says.

But he points out that unit costs fell by 5.3% over the quarter, while passenger numbers increased and the company has been recording strong load factors.