Scandinavian airline SAS outlined fresh cost cuts and revenue measures today in an attempt to stem losses resulting from higher fuel charges and a slowdown in demand, sending its shares higher.
The airline, half-owned by Sweden, Norway and Denmark, reported a pretax loss of 106 million Swedish crowns ($17 million) in the second quarter, versus a profit of 762 million crowns in the same period a year earlier.
The second-quarter result was better than an expected 700 million crown loss, but the forecasts in the poll varied widely - ranging from a profit of 156 million crowns to a loss of 1.4 billion crowns.
The airline lost 973 million pretax in the first quarter and 24 million in the fourth quarter of 2007.
Analysts said that an additional 400 million crowns of measures to cut costs and boost revenues as part of its Profit 2008 initiative were in line with expectations.
SAS said it planned to cut an additional seven aircraft as part of the Profit 2008 plan, bringing the total to 18 planes. SAS's Spanair unit, which it tried but failed to sell earlier this year, will also cut 15 planes.
About 2,500 staff in total at SAS will lose their jobs - 500 more than previously announced.
The airline has already announced a 2.8 billion crown cost-cutting plan called Strategy 2011, which aims to boost its pretax earnings to 4 billion crowns. This follows more than 14 billion of cuts in its last programme, which ran to 2005.
SAS Chief Executive Mats Jansson pointed to record-high fuel prices, weaker economic growth and and overcapacity as behind the year-on-year fall in earnings.
"There is no doubt that the situation in the air-travel industry is serious and probably the most difficult it has ever been," he said.
Like many other airlines, SAS has struggled to compete in recent years with cut-price rivals and overcapacity. The recent rise in oil prices has added to the burden. SAS's aged fleet of aircraft burn more fuel than those of competitors.
SAS said fuel costs increased by 1.4 billion crowns compared with the second quarter of 2007.
It has hedged 60 per cent of its anticipated fuel needs for the final six months of the year and 47 per cent for the July 2008-June 2009 period.
Second quarter revenues were 17.7 billion crowns against a forecast of 17.5 billion in the poll. SAS said it carried 5.2 per cent more passengers in the second quarter than the same period the year before. Its load factor - how successful it is in filling seats on planes - fell 0.2 of a percentage point.
It said yields - a measure of unit revenue - were stable in the second quarter.
Reuters