SAS is early retiring almost one-third of its -fleet, converting some of them to full-freighters. Most of the Airbus A340-fleet is also to be retired, the airline said on December 3 during its FY2019/20 results presentation.

Before Covid, the Scandinavian airline used to operate 22 Boeing -700s and 28 -800s. Currently, eleven -700s and sixteen -800s are in service, mostly on domestic routes in Scandinavia. This means there is a surplus of fourteen that is parked right now, including eight -700s and six -800s. The airline said today it will retire fifteen NGs without specifying the exact types and numbers.
Already three 737NGs have been sold for $29 million for conversion into freighters, while the sale of five more is being assessed. SAS retired its 737-600s by late 2019.

Already gone have five A340-300s out of the seven that were operated until April. The last one operated to Tucson just this week. One A330-300 of the nine owned will be retired too. The airline has six in service, three are parked. The phase-out of all fifteen will produce liquidity through the sale of engines and frames while reducing maintenance and leasing costs. It also improves fleet emissions as these are older and more polluting aircraft.

At the same time, SAS will continue its fleet renewal with A320neo’s and A350s, albeit at a reduced rate. Already announced in Q3 (which at SAS runs from May-July) are the deferrals of one A350-900 from this year to FY22 and another to FY23, while four A320neos have been deferred from FY22 to FY24 and another four from FY23 to FY25. SAS will operate an all-A320neo short/medium-haul fleet in 2023, it says.

Full-year loss of SEK 9.3 billion
Unsurprisingly, SAS has been hit by the effects of the Covid-crisis. After in tailwind in the first six months, the Group suffered a serious headwind. During its Q3, it saw a significant in the European and especially domestic markets but the spreading of the virus from September reduced demand. Some 65 percent of SAS’ markets are either in lockdown or have imposed travel restrictions, which left Sweden and Scandinavia as the main areas that made money with passenger yields in Q4 even up 26 percent to SEK 1.20. In October, 67 percent of capacity was used on the domestic market versus 33 percent on international routes.

SAS reported a full-year net income of SEK -9.275 billion, down from 621 million the previous year. The operating result was SEK -9.549 billion, revenues -55 percent at SEK 20.513 billion. In Q4, the net loss was SEK -2.579 billion, operating loss -2.738 billion, and revenues 3.035 billion (-77 percent).
The airline has aggressively cut costs and has reduced monthly cash burn to SEK 500-700 million. At the same time, it paid almost SEK 5.0 billion in refunds to some two million passengers, with a backlog remaining of 350.000. SAS completed the redundancy of 5.000 staff as projected this summer and is in talks with suppliers over further cost reductions. SAS targets an additional SEK 4.0 billion in savings and expects to accomplish it without additional labor contract revisions.

The most important and significant lifeline was provided by the restructuring and recapitalization plan, which took most of this summer to be completed. SAS increased equity by SEK 14.25 billion and net liquidity by SEK 12 billion thanks to a massive bond conversion program. The Swedish and Danish governments guaranteed revolving credit facilities and upped their share to 21.8 percent each. Additional liquidity will be provided to sale and leasebacks and extending of loan facilities for aircraft.

Replacement NGs under evaluation, but no longer a priority
Before Covid, SAS had planned to restructure its domestic operations by establishing a business unit to better interact with the mainline airline. As we reported back then, SAS evaluated the renewal of the 737NG fleet. CEO Rickard Gustafson said that with the NGs leaving the fleet, this is no longer a priority. “We need to replace them long-term with similar-sized aircraft, but it has to be defined which one. At the moment we have more aircraft than we can deploy, so there is no urgent need now.” The new business unit needs to be fully competitive with terms that were defined before for the regional operations.

SAS is not providing guidance for FY21, but it is expecting fierce competition on the Scandinavian core market. “We now have a new player in our domestic backyard, which is Wizz, a very, very serious player. They will primarily compete with just outside our core business. As far as Norwegian is concerned, I have no idea if they will succeed, but it is not completely unlikely that they will re-emerge and concentrate on operations in Norway and Scandinavia. Expect it to be crowded over here.”

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