Scandinavian Airlines improved its 2011 first quarter financial results over the same period last year with stronger passenger traffic in the face of mounting fuel costs. A 6.2% rise in scheduled passenger traffic transported compared to last year January-March period led to 6.093 million passengers flying aboard SAS and wholly owned subsidiaries Blue1 and Wideroe aircraft. The encouraging results occurred despite passenger revenues retreating slightly to Swedish Kronor 5.690 million ($903,000) from SEK 6.058 million ($961,300). However aggressive cost containment measures were able to produce an overall income rise from SEK -844,000 (-$133,922) last year to SEK -505,000 (-$80,140) (+40%) with the net income position improving to SEK -303,000 (-$48,079). Remarkably the Group managed to decrease overall operational expenses by SEK 598,000 ($94,888) compared to last year (-7.24%) despite jet fuel costs escalating 21% to SEK 1.55 million ($245,900). Thus highlighting the maturity of the SAS Core cost savings plan which anticipated SEK 600,000 ($95,205) in savings for the first quarter of 2011.
Strategy & Management
The Group’s Board of Directors which saw the appointment of Rickard Gustafson as CEO effective February 1st ,2011 and Goran Jansson as Deputy President and CFO effective March 1st,2011 is pursuing a two-fold strategy of meeting a projected 6% growth in traffic for the entire 2011 year while completing the SAS Core plan implementation. Traffic levels are set to improve significantly for the remainder of the year, taking into account that SAS seasonally low traffic period ended in March. Already a new Oslo-New York city route has been opened, another 10% capacity increase is focusing on strong domestic air transportation demand and across Norway, Sweden and Denmark, in addition to the rest of Europe where capacity has also been incremented.
The new management goal of returning the carrier to profitability relies on developing deeper relationship within the industry, capturing greater business travelers market share, with stronger product offerings such as onboard internet and Euro Bonus. An additional cushion of upwards of SEK 1 billion ($150 million) for 2011 fuel expenses has been set aside as fuel price volatility remains the greatest threat to the industry’s financial health.
A fleet modernization plan will mark the elimination of older aircraft that have become more expensive to maintain and operate, given the high cost of fuel. The Boeing 737-400/-500 and McDonnell Douglas MD-82/-87 are gradually being phased out in favor of Boeing 737NextGeneration (leasing agrement with GECAS) which will be deployed in Stockholm and Oslo while Airbus A320 will be based in Copenhagen. The SAS Core strategic plan provides a continuous vision which has already generated strong dividends in cost savings.
Articulated around 5 pillars, the February 2009 plan is directly responsible for bringing the carrier’s cost base under control. By march 2011, SEK 7.4 billion ($1.17 billion) had been saved out of a targeted SEK 7.8 billion ($1.24 billion). Gross income managed to surge 43.2% since the significant losses experienced in the first quarter of 2009 (SEK -889,000) (-$141,062). Altogether the SAS Core savings program engineered the company upturn through reduction of administrative personnel, more efficient process in air and ground operations and better cost awareness.