Scandinavian Airline Systems (SAS) reports a slight improvement in Q2. It reduced its losses during the first six months of November-April FY21. While these are the best results since a year ago and bookings for this summer look promising, the second half of the year remains most uncertain, the carrier said on May 27.
SAS reported an HY1 net loss of SEK 4.483 billion compared to a 4.431 billion loss in the same period last year. The operating loss was SEK 4.219 billion versus 4.082 billion last year, with revenues at SEK 4.214 billion down from 14.971 billion.
However, a positive trend has been visible in its second quarter. Despite negative demand (73 percent fewer passengers to 1.9 million) and low capacity, the net loss in Q2 improved to SEK 2.433 billion from 3.470 billion. The operating loss was 2.048 billion compared to 3.315 billion. Revenues were still very much affected and dropped to SEK 1.932 billion from 5.264 billion. Cargo revenues were up by SEK 132 million.
The answer to the weak market has been continued and strict cost reductions, which were down by 54 percent or SEK 4.6 billion compared to the same period last year and 0.5 billion lower compared to the first quarter. Personnel expenses were down by SEK 1.683 billion as the airline temporarily laid-off staff or permanently reduced its workforce, which is down by 5.000 compared to early 2020.
SAS recently renegotiated collective agreements with both cockpit and cabin crew with the Danish union that includes a fifteen percent productivity improvement. This has allowed it to open a new crew base in Copenhagen with an existing AOC that replaces the Malaga crew base, which was shut down earlier. SAS says the new base offers it much-needed flexibility as it wishes to retain its market position in Scandinavia.
New 3.0 billion credit facility
SAS continues to strengthen its balance sheet and improve the liquidity position. Its cash flow from operating activities took a significant hit in HY1 and went to a negative SEK 6.340 billion from -1.202 billion last year. It ended April with SEK 4.4 billion in cash and cash equivalents.
The airline announced on May 26 that it had secured support from the Swedish and Danish governments for a new SEK 3.0 billion credit facility, but the real improvement in liquidity must come from improved demand. The previously announced transformation plan calls for a SEK 4.0 billion in financial improvements. Last year, the carrier secured SEK 14.25 billion in a recapitalization plan.
After reporting the slight improvement in Q2, SAS has placed its hope on this summer. The airline is opening 180 direct routes to 95 destinations. This should further confirm its improvement seen in Q2. However, the success entirely depends on the roll-out of vaccinations, the containment of the Covid-virus, and how traveling for customers is eased. The airline has depended mostly on domestic demand in the past months and plans to increase capacity on the Scandinavian network, which is becoming ever-more competitive as Finnair, airBaltic, Ryanair, Norwegian, and start-up Flyr all want a piece of the same cake.
Fleet renewal remains on track
Despite the deferral of aircraft deliveries, SAS is on track to transition to a single type by 2023. It took delivery of one Airbus A320neo in HY1 and will take delivery of two A321LRs later this financial year. In FY22, thirteen A320neo’s will join SAS, twelve in FY23, six in FY24, and the final four in FY25. They replace the aging Boeing 737NGs, of which eight were phased out in HY1 and still 23 are active.
One A350-900 was delivered in HY1, with another to follow later this year. The final two have been deferred until FY23. Financing for the new aircraft has been secured until Q2 2022, while SAS also concluded a sale and leaseback on an A350 recently. The new aircraft are a major contributor to SAS’s targets of reducing carbon emissions by 25 percent in 2025.
As the outlook for HY2 remains blurred, SAS is unable to give any guidance on its financials. The HY1 results were presented by interim CEO Karl Sundland as Rickard Gustafson has left the company. His successor will be Dutchman Anko van der Werff, who will join SAS in July after leading Avianca since 2019. Before that, he was with Aeromexico, Qatar Airways, Air France-KLM, and KLM.