Scandinavian airline SAS has reported an unexpected gain in earnings for the third quarter, as cost cuts and a surge in passenger numbers pays off. The firm said it now has the potential to post a full-year pre-tax profit.
Its quarterly earnings did fall to SEK756m ($106m) from SEK1.18bn in the same period last year, but the dip beat industry predictions of SEK650m in the third quarter. The surprisingly positive announcement sent the SAS stock price soaring by about eight percent in the immediate hours after.
“This result reflects a market under continued intense price pressure. However, the high passenger growth and productivity shows that our strategy is generating effects,” SAS Chief Executive Rickard Gustafson said. He added that passenger numbers had increased by more than 700,000 since the same quarter last year.
SAS, which is 50 percent owned by Sweden, Denmark and Norway, has been struggling for years with overcapacity and competition from budget carriers such as Ryanair and Norwegian.
“All in all, the fierce competition in the airline industry is persisting and SAS is continuing to work at a fast pace to create long-term profitability,” Gustafson explained.
Cutbacks will continue in the coming year. This will include halving personnel numbers in its subsidiary Blue1, as well as cost measures amounting to SEK1bn in 2014-15 and a further SEK1bn in the future.
The Stockholm-headquartered airliner said this would provide potential to post positive earnings before tax for the 2013-14 fiscal year, including a positive effect from changed pension reporting and excluding restructuring costs.
SAS posted its first annual pre-tax profit since 2007 last year, having overhauled the firm in one of the most brutal restructuring programmes the Scandinavian markets have ever seen. Mass layoffs, pay cuts and closure of many short-haul routes initially lead to a series of strikes in Copenhagen and Stockholm’s airports. Since then, however, the firm has rebuilt its reputation and has worked hard at rectifying its financials.