Q3 Q3 20 2018 18/201 /2019 27 August 2019
Q3-19 Highlights Q3/19 CHANGE Q3-19 VS. Q3-18 Financial drivers EBT • Stable operational quality and seasonal adaptation driving increased revenues MSEK 1,495 MSEK -513 • Domestic and European traffic stronger than early indications Capacity • Continued good development of unit revenue and passenger yield (ASK, mill. km) • Revenue increase offset by higher fuel costs, weak SEK and pilot strike resulting in 13,279 -1.0% declining EBT vs last year • Disappointing CASK development, partially driven by strike effects Unit Revenue, PASK (SEK, currency adjusted) 0.78 +1.8% Opportunities and challenges Passenger yield + Short term indications of reduced capacity growth in Scandinavia (SEK, currency adjusted) + Continued positive underlying trend in yield and unit revenue 0.98 +3.9% + Volatile but recent decline in fuel price - European order book of new aircraft indicating substantial risk for structural CASK ex. fuel overcapacity in the medium to long term (SEK, currency adjusted) - Soft economic indicators pointing towards decrease in demand 0.55 +2.1% - Weak Swedish krona 2
Q3-19 Strong recovery after pilot strike ▪ Improvements in customer SAS’ TOTAL NUMBER OF PASSENGERS offering Million ▪ 12 new Fast Tracks ▪ Option for customers to May 2.50 (-10.1%) Strike effects purchase biofuel ▪ Improved digital customer experience ▪ Seasonal adjustments with 12 Best month ever in June 2.96 (+0.3%) new leisure routes for SAS’ history summer-19 ▪ Improved operational quality with high regularity and Best July in SAS’ history July 2.84 (+0.1%) punctuality 3
Q3-19 Investments in operational improvements paid off SAS’ IMPROVEMENTS JUN -JUL VS. FY18 Regularity 99.2 (+1.5 p.p.) ▪ Secured fleet and manning resources ▪ Increased operational buffers Punctuality (P15) 75 (+4 p.p.) ▪ Introduced hot spare to secure fleet robustness CSI 72 (+3) ▪ Deployed new digital tools to aid customers Cost of claims 1 66 (index vs. LY) 1 Q3 FY19 vs. Q3FY18 4
Continued efforts towards sustainable air travel Q3-19 Q3 HIGHLIGHTS 2030 TARGETS 3 NEW A320NEO PHASED IN (27 IN OPERATIONS) A330E PHASED IN TO REPLACE A340 25% REDUCTION OF CO 2 EMISSIONS OPTION FOR CUSTOMERS TO PURCHASE BIOFUEL SAS REMOVAL OF TAX-FREE STORE ONBOARD DOMESTIC FLIGHTS 100% BIOFUEL PARTNERSHIP WITH AIRBUS TO RESEARCH POWERED HYBRID AND ELECTRIC AIRCRAFT 38% OF SAS’ TICKETS CO 2 -COMPENSATED 5
Q3-19 Efficiency program on track, but market challenges remain MARKET DYNAMICS EFFICIENCY PROGRAMME SEKbn 0.6 3.0 Volatile jet fuel prices 0.6 0.3 0.2 0.2 0.9 Unfavorable FX-rates 0.2 0.7 0.7 0.8 Decreased demand 0.8 European order books at record levels FY17 FY18 Q1 Q2 Q3 Q4 FY20 Total FY19 6
Q3-19 Market uncertainties remain, additional efficiency initiatives required NEW ORGANIZATION TO ACCELERATE ADDITIONAL EFFICIENCY TRANSFORMATION AND DRIVE ACCOUNTABILITY LEVERS ASSESSED Effects from single Rickard type fleet Gustafson CEO FINANCE CHIEF OF STAFF Accelerated pace in Torbjørn Wist Carina Heander digitalization and lean CFO COS Improved asset and crew utilization through enhanced planning IT & AIRLINE AIRLINE COMMERCIAL DIGITAL OPERATIONS SERVICES Karl Sandlund Mattias Forsberg Simon Hansen Kjetil Håbjørg CCO CIO COO CSO Further enhanced operating model 7
FIN FINANCIA ANCIALS LS
Q3-19 Summary Results MSEK, except per cent Q3/19 Q3/18 Change % Currency Key Financials Comments Total operating revenue 13,552 13,146 +3.1 +201 • Increase in currency adjusted revenues Total operating expenses* -10,538 -9,816 -7.4 -428 driven by passenger revenue, ancillary EBITDAR* 3,014 3,330 -9.5 -227 revenues and sale of EuroBonus points EBITDAR margin, % 22.2% 25,3% -3.1 p.p. • Revenue increase offset by higher fuel EBT* 1,495 2,008 -263 -25.5 costs, weak SEK and pilot strike resulting in Items affecting comparability -5 26 <-100 decline in EBT EBT 1,490 2,034 -26.7 -263 • Positive trend in unit revenue (PASK) continues Key Metrics ASK 13,279 13,418 -1.0 RPK 10,495 10,822 -3.0 Cabin Factor 79.0% 80.7% -1.6 p.p. PASK** 0.78 0.76 +1.8 CASK excl Fuel** 0.55 0.54 +2.1 * Before items affecting comparability **Currency adjusted 9
Q3-19 Revenue Development MSEK +406 13.552 113 80 -68 -99 201 390 13.146 -211 Q3 FY18 Q3 FY19 Currency Capacity Load factor Passenger Cargo revenue Other traffic Other change yield revenue operating revenue 10
Q3-19 Development in Operating Expenses* MSEK -722 Hedge effect -577 MSEK Volume effect +79 MSEK -9,816 Price effect +240 MSEK -428 -277 -83 59 -10,538 36 -29 Q3 FY18 Currency Fuel Personnel Wet-lease Government Other Q3 FY19 charges expenses including traffic *before non-recurring items 11 disturbances
Q3-19 Jet fuel and currency hedges Jet fuel USD/Mt • Policy to hedge 40-80% of expected fuel % = hedge ratio 93% consumption for the next 12 months and up 68% 74% to 50% for the following six months Fuel price headwind 687 • Position consists of a mixture of call 12% 668 options, collars and swaps 661 705 • In Q4-19, SAS has 68% of the fuel 595 613 consumption hedged at a maximum price of Fuel price 624 678 12% 687 USD/Mt. tailwind • If fuel price goes below 678 USD/Mt. 32% 74% 68% 84% of SAS’ consumption would benefit from a Q4-19 Q1-20 Q2-20 Q3-20 lower fuel price • No hedging beyond Q3-20 Sensitivity analysis, jet fuel cost Nov 2018-Oct 2019 * Currency Exchange rate USD/SEK • Policy to hedge 40-80% of expected Market price 10.5 8.5 9.0 9.5 10.0 currency deficit/surplus for the next 12 9.0 9.2 9.3 9.4 USD 500/tonne 9.5 months 9.1 9.3 9.4 9.5 USD 600/tonne 9.7 – 51% of USD hedged next twelve months 9.3 9.4 9.5 9.7 USD 700/tonne 9.8 – 60% of NOK hedged next twelve months 9.3 9.5 9.6 9.8 9.9 USD 800/tonne * SAS’ current hedging contracts for jet fuel at end of quarter have been taken into account 12
Q3-19 Debt Maturity Profile and Aircraft Orders Maturity profile, SEKbn Aircraft orders, # 2.9 20 18 Secured loans 4 Unsecured loans 15 1.8 1.5 14 7 0.9 0.8 4 0.5 2 2 0.2 0.2 2 2 1 FY19 FY20 FY21 FY22 FY23 FY24 FY25 >FY25 FY19 FY20 FY21 FY22 FY23 FY24 Airbus A350 Airbus A320neo Airbus A321LR 13
Q3-19 Development in Cash & Cash Equivalents SEKbn -1.2 3.0 8.5 -6.2 -0.1 -1.1 7.3 0.3 2.9 Cash Q3-18 Cash Q3-19 Cash flow from Aircraft and Sale of aircraft Dividend on Preference External operations other and affiliated preference share financing investments share redemption 14
Q3-19 Financial Targets RETURN ON INVESTED FINANCIAL PREPAREDNESS ADJUSTED NET DEBT CAPITAL (ROIC) /EBITDAR >12% <3x >25% 42% 3.8x 14% 3.4x 12% 33% 33% 32% 3.0x 2.7x 9% 7% Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 15
Q3-19 Outlook FY19 ASSUMPTIONS IN Q2 UPDATES IN Q3 FY19 Scheduled capacity • Unchanged growth (ASK) reduced to -1 % • 3% decrease since beginning 8% increase in jet fuel price in Q2 of quarter, offset by hedges Challenging to reach a positive result before tax • Continued weakening of SEK 5% depreciation of and items affecting SEK vs. USD in Q2 during the quarter comparability in fiscal year 2019 • Efficiency measures of SEK • Over SEK 0.6 bn delivered 0.9 bn to date • Gross investments expected • Unchanged to be around SEK 7 billion Estimated negative earnings • Actual impact amounting to impact of -650 MSEK FY19 -615 MSEK due to strike Note: The outlook is based on no additional unexpected events occurring 16
SUMMARY AND KEY TAKEAWAYS Improved operational quality and seasonal adaptation driving increased revenues Decline in earnings due to higher fuel costs, weak SEK and pilot strike Efficiency program on track, but need to assess additional measures New organization to accelerate transformation and drive accountability FY19 outlook remains unchanged
Q3-19 Income Statement Q3 Income statement, MSEK May-Jul 19 May-Jul 18 Change vs LY Currency Total operating revenue 13,552 13,146 +406 +201 Payroll expenditure -2,488 -2,385 -103 Jet fuel -2,750 -2,324 -426 Government charges -1,138 -1,149 +11 Other operating expenditure -4,162 -3,958 -203 Total operating expenses* -10,538 -9,816 -722 -428 EBITDAR before items affecting 3,014 3,330 -316 -227 comparability EBITDAR-margin* 22.2% 25.3% -3.1 p.p. Leasing costs, aircraft -985 -814 -171 Depreciation -455 -404 -51 Share of income in affiliated companies 1 29 -28 EBIT before items affecting comparability 1,575 2,141 -566 -281 EBIT-margin* 11.6% 16.3% -4.7 p.p. Financial items -80 -133 +53 EBT before items affecting comparability 1,495 2,008 -513 -263 Items affecting comparability -5 26 -31 EBT 1,490 2,034 -544 -263 *before items affecting comparability 19
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