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SAS looks for more cost savings as performance declines

SAS Group has disclosed that it will need to examine further efficiency measures beyond 2020, because its unit costs are not falling sufficiently quickly.

The Scandinavian company says it is maintaining its target of delivering SKr900 million ($93 million) for the current financial year – which ends on 31 October – as part of a broader SKr3 billion programme to 2020.

But it is reviewing its outlook for the subsequent period.

"Our unit costs, after adjustment for strike effects, is not decreasing to the extent we wish," says chief executive Rickard Gustafson.

"This means that we need to look at additional initiatives beyond 2020."

While SAS achieved an increase in passenger revenue over the third quarter, to SKr13.5 billion, which helped offset the capacity effect of the strike, pre-tax profit proved "disappointing" at just under SKr1.5 billion compared with the previous figure of SKr2 billion.

SAS generated a pre-tax loss of SKr302 million for the first nine months of the year, a substantial decline in performance from the previous SKr1.26 billion profit.

Achieving a full-year pre-tax profit will be "challenging", it says, not least after the pilot strike which bridged the second and third quarters, and which had an overall SKr730 million impact on revenues and SKr615 million negative effect on earnings.

The company is to implement a new group management structure from the beginning of October in order, it says, to "accelerate" its efficiency efforts and "drive accountability".

SAS's operations division will be split into airline operations – focused on its carrier platforms, and headed by Simon Pauck Hansen – and airline services, which will concentrate on handling, maintenance and cargo, led by Kjetil Habjorg.

It will also consolidate all sales and marketing under a single commercial entity, under chief commercial officer Karl Sandlund.

The group management team will include chief financial officer Torbjorn Wist, chief information officer Mattias Forsberg, and chief of staff Carina Malmgren Heander.

Two other executives – Goran Jansson and Annelie Nassen – have chosen to leave the company following the reorganisation.

While the pilot strike affected SAS's quarterly performance, the company points out that it has also been hit by the weakness of the Swedish currency and the increase in fuel costs.

"However, it is encouraging to note that our successful adaptation to seasonal demand and improved operational quality led to a strong customer uptake and an increased yield, thereby mitigating parts of the additional costs incurred during the quarter," it says.

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