Ahead of today’s extraordinary shareholders’ meeting of SAS AB, and given that the SAS fiscal year ended on October 31, 2017, SAS has chosen to publish its preliminary earnings for the 2016/2017 fiscal year. In conjunction with this, SAS is also announcing the outlook for 2017/2018.
Preliminary earnings for 2016/2017
SAS operations performed as expected in the fourth quarter. During the quarter, the yield improved while load factor is lower year-on-year. The implementation of the efficiency measures proceeded as planned during the quarter. Nonrecurring costs related to IT, employees, properties and changed management of aircraft maintenance costs is expected to amount to about SEK 0.5 billion in the fourth quarter. Currency hedges and the translation of balance-sheet items also had a negative impact on earnings of above SEK 0.2 billion.
Altogether, developments during the fourth quarter 2016/2017 indicate the following for the 2016/2017 fiscal year:
– Revenue of about SEK 42.5 (39.5) billion
– Income before tax: about SEK 1.7 (1.4) billion
– Income before tax and nonrecurring items: about SEK 1.9 (0.9) billion
– Financial preparedness: about 37% (41%)
Outlook for 2017/2018
SAS expects the expansion of total market capacity in autumn and winter 2017/2018 to accelerate compared with the beginning of 2017. At the same time, SAS will consolidate the capacity growth implemented over the last few years. The planned capacity growth (ASK) for SAS in 2017/2018 is therefore only 1–3%compared with the previous year. As a consequence of the phasing-in of larger aircraft, a year-on-year decrease in the load factor is expected at the beginning of the fiscal year.
To meet the increase in market capacity, SAS is endeavoring to strengthen competitiveness by efficiency enhancements and greater flexibility in its production platform. In 2017/2018, efficiency measures are expected to generate an earnings impact of about SEK 0.7 billion.
Uncertainty in the macro environment remains considerable with highly volatile exchange rates and jet-fuel prices. SAS has hedged a large share of the expected jet-fuel consumption and net deficit in USD for the next six months. Despite this, rising jet-fuel prices together with a sustained strengthening of the USD could negatively impact the earnings trend.
Following a seasonally weak first six months in 2017/2018, the potential exists for a strong summer in 2018. To sum up, this leads to the following outlook for 2017/2018:
SAS expects to deliver income before tax and nonrecurring items in the interval of SEK 1.5–2.0 billion. The outlook is based on no unexpected events occurring.
The outlook for 2017/2018 is based on the following assumptions:
– ASK: +1–3 percent
– Continued stable macro trend
– The introduction of an aviation tax in Sweden
– Jet fuel: Average of USD 550/tonne
– Average SEK/USD of SEK 8.0
– Net investments are expected to amount to about SEK 6 billion (slightly more than SEK 7 billion for FY17)