Scandinavia’s home carrier SAS is seeking additional savings beyond 2020 to meet is cost and efficiency targets, the airline has announced at its Q3 presentation on August 27. The board says additional savings are needed if it wants to meet its targeted SEK 900 million this year.
SAS embarked on a strict cost reduction program in 2017 to save SEK 3 billion by 2020 to improve competitiveness and mitigate inflation. So far it has saved SEK 2.1 billion, with the remaining SEK 900 million targeted this year. In the first three quarters of FY19, SAS realized 626 million of which 230 million in Q3. A strike in May cost the airline SEK 185 million in revenues and means it is unlikely to meet its target.
While not specifying how much SAS wishes to save beyond 2020, it sees opportunities coming from its single-type A320neo-fleet that bring (fuel) efficiencies and reduce operational complexity. Digitalization is another area that not only should improve service to customers, but also benefit crew and fleet planning and thus reduce costs and grow revenues.
Instrumental in realizing these savings and efficiencies quickly is a new organizational structure that will become effective from October 1. Under CEO Rickard Gustafson SAS Operations will be divided into Airline Operations, Airline Services (including ground handling, maintenance, and cargo), Commercial, and IT & Digital.
Q3 revenues increased three percent to SEK 13.552 billion, but EBIT was 513 million down to SEK 1.495 billion thanks to higher fuel costs, the weak Swedish krona, and the effects of the pilots strike in May that led to 1.200 flight cancelations. Net income after tax was SEK 1.162 billion, down from 1.570 billion the previous year.
Without the strike, Q3 could have seen record results, as June was SAS’ best-ever month as it carried 2.96 million pax and July its best July-month with 2.84 million passengers carried. Traffic was stronger than anticipated in both Europe – where the airline opened 25 new routes – as well as Domestic, with higher numbers to Denmark and Norway but a declining trend within Sweden. By hiring extra (ground) staff and adding two spare aircraft SAS has gone an extra mile at preventing operational issues from last Summer that disrupted the schedule.
Looking ahead at 2020 SAS plans to grow capacity with just one percent compared to 3-4 percent in previous years. If this modest growth continues the airline warns of over-capacity as it has a fair number of new aircraft joining the fleet until 2024. For 2020 the order book shows 20, including 14 Airbus A320neo’s, 2 A321LRs and 4 A350-900s. In 2021 another 7 aircraft are coming in, in 2022 15 and 2023 18 (all A320neo’s), and two in 2024.
