Scandinavian airline group SAS AB has reported a sharp narrowing of financial losses for the second quarter of 2010, but failed to return to profit due to the Icelandic ash cloud.

The airline – which operates as the flag-carrier of Denmark, Norway and Sweden – made a net loss of SEK502 million (£43.7 million) in the three months to June, compared with a loss of SEK1.05 billion (£91 million) a year earlier.

In a statement to markets the Stockholm-based airline stated it would have posted a profit of more than SEK400 million if the ash cloud had not paralyzed air travel across Europe in April.

Airport closures caused by the ash have left their mark in the quarterly reports of several European airlines, including British Airways and Ryanair.

Revenue at SAS fell to SEK9.98 billion, down from SEK12.2 billion for the second quarter of 2009.

Moving forward, SAS said it remains focused on a cost-cutting program that has helped it achieve savings of SEK5.6 billion in the past year and a half.

“During the first six months, we lowered unit cost by 6.7 per cent, despite reduced capacity and the major disruptions to services,” explained outgoing chief executive Mats Jansson,

Mr Jansson confirmed last week he would be stepping down from this role with the company during the autumn.

“Although we are on the right path, there is some way to go before we achieve profitability,” he added.

SAS has recorded losses of almost SEK10 billion in the past two years after airline travel dived during the global economic crisis.

It has also been hard-hit by the rise of low-cost airline Norwegian.