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Ramp-up and transformation of SAS continues

Ramp-up and transformation of SAS continues

SAS continues the ramp-up and has during the quarter seen the highest number of passengers since the pandemic started. Meanwhile, the work with the necessary transformation plan, SAS FORWARD, continues.

The plan was presented when the Q1 results were released on February 22 and is designed to secure long-term competitiveness. It will allow SAS to effectuate a deleveraging of its balance sheet while substantially improving its liquidity position. In addition to reducing the cost structure and improve efficiencies, SAS is seeking to convert approximately SEK 20 billion of debt and hybrid notes into common equity and will also seek to raise not less than SEK 9.5 billion in new equity capital. The success of the plan depends upon SAS attracting potential new capital from the capital markets and other sources and upon SAS fully achieving the targeted SEK 7.5 billion annual cost reduction by fiscal year 2026.

Earnings before tax ended at negative SEK 1.6 billion for the quarter and the cash balance at the end of the quarter was SEK 8.5 billion.


    Revenue: MSEK 7,048 (1,932)
    Income before tax (EBT): MSEK -1,557 (-2,331)
    Income before tax and items affecting comparability: MSEK -1,613 (-2,331)
    Net income for the period: MSEK -1,520 (-2,410)
    Earnings per common share: SEK -0.21 (-0.35)



AS presented a comprehensive transformation plan: SAS FORWARD. A successful implementation of the plan will secure long-term competitiveness and improved financial strength

    The SEK 3,000 million credit facility secured with the main owners in 2021 was drawn
    Erno Hildén was appointed as Executive Vice President and CFO

The aftermath of the COVID-19 pandemic has led to most of the airline industry experiencing difficulty in rebuilding operations. This has led to SAS reducing its summer program by 4,000 of a total of 75,000 flights


    Revenue: MSEK 12,593 (4,214)
    Income before tax (EBT): MSEK -4,154 (-4,246)
    Income before tax and items affecting comparability: MSEK -4,234 (-4,258)
    Net income for the period: MSEK -3,962 (-4,443)
    Earnings per common share: SEK -0.55 (-0.63)

Looking back at the second quarter, we can see that demand improved as travel restrictions were eased. Passengers flying with SAS increased 28% compared to the previous quarter and the flown load factor reached approximately 67%, up 11 percentage points compared with the earlier quarter. Our capacity was increased by 3% compared to the first quarter. The transformation of SAS has to continue to adapt to the new market conditions in order to be able to remain flexible, competitive and financially strong for the long-term future. Earnings before tax ended at negative SEK 1.6 billion, an improvement of SEK 1.0 billion compared with last quarter, or a SEK 0.7 billion improvement year-on-year. Ticket sales continue to increase ahead of the summer period and SAS is targeting 80% capacity deployment compared to summer 2019.

Cost reductions across all of SAS remain in focus to secure our cost competitiveness. Total operating expenses during the quarter ended at SEK 7.8 billion and total operating revenue landed at SEK 7.0 billion for the quarter. Total revenue increased 27% compared with the first quarter, an improvement of approximately SEK 5.1 billion compared with last year, but still 31% below the second quarter in 2019, which was unaffected by COVID-19.

The cash balance at the end of the quarter was SEK 8.5 billion. At end of the first quarter of FY2022 the cash balance was SEK 3.4 billion. Operational cash flow during the quarter amounted to SEK 2.5 billion, compared with SEK -1.4 billion for the same period last year.

Despite this positive development, SAS continues to face substantial structural cost challenges while also facing growing competition with substantially lower cost structures than SAS. SAS also incurred substantial additional debt during the pandemic that added to its pre-COVID highly leveraged balance sheet. In addition, recent macroeconomic changes (including fuel and exchange rates) and geopolitical events are limiting operations and create additional costs. Given these factors, the SAS Board has concluded that a substantial restructuring is needed to enable SAS to become profitable by implementing SAS FORWARD.

Key Elements of SAS FORWARD

    Reducing the annual costs by SEK 7.5 billion
    Redesigned fleet, network and product offerings
    Digital transformation
    Positioning SAS as the leader in sustainable aviation
    Operating platform acceleration
    Strengthening SAS’ balance sheet by deleveraging and raising new capital
    Debt-to-equity conversion and equity raise

SAS is seeking to convert approximately SEK 20 billion of existing debt and hybrid notes into common equity, of which a majority is on-balance sheet debt and hybrid instruments (state hybrid notes, commercial hybrid notes, lease liabilities, Swiss bonds and term loans from states and commercial banks) and some relates to maintenance contract obligations and other executory contract obligations. The contemplated conversions are designed to strengthen the balance sheet and significantly reduce the debt-burden being carried in order to relieve SAS from elevated financial costs that currently weigh on profitability, and to position SAS for future growth.

In addition to debt conversions, SAS is looking for alternatives to raise new equity. SAS will seek to raise not less than SEK 9.5 billion in equity capital. The planned SEK 9.5 billion or more equity raise is expected to provide sufficient liquidity to fund operations through the full implementation of SAS FORWARD and the recovery in passenger demand post COVID-19. It is currently expected that a significant share of such new equity will likely be sought from new investors.

The new equity capital and debt-to-equity conversions contemplated as part of SAS FORWARD will entail substantial dilution to existing shareholders.

Labor discussions
SAS continues to pursue negotiations with all of its organized labor groups as a means of achieving a consensual outcome with respect to labor’s share of the burden sharing program. Notably, the requested labor concessions are an important element of SAS achieving a competitive and sustainable business model, but in aggregate represent less than 20% of the targeted annual cost improvements. An agreement with organized labor groups is a condition of SAS FORWARD and it will not be possible to raise new capital or secure the future of the airline without labor burden sharing.

Update on discussions with stakeholders
Discussions are currently ongoing regarding stakeholders’ participation and acceptance of burden sharing. Given the limited progress made so far, there can be no guarantees that SAS FORWARD will be successfully completed. In the event that the expected burden sharing, debt conversions, and new capital raise are not completed as planned, SAS will not be able to support its existing capital structure and current liquidity levels and it cannot be ruled out that SAS could become unable to meet its obligations over the longer term as they fall due.

Implementation processes
SAS FORWARD involves complex multiparty negotiations. As is usual in a restructuring process, it is possible that SAS may seek to utilize one or more court restructuring proceedings designed to assist in the resolution of SAS’s financial difficulties and help implement parts of SAS FORWARD.

Finally, it should be noted that the completion of the cost reduction programs, the debt-to-equity conversions, the fleet restructuring and the significant equity capital raise are subject to uncertainty and there can be no guarantee of success in such efforts by SAS. Further, the transactions envisaged are subject to various conditions including EU Commission and other state aid approvals and other regulatory clearances and various stakeholder approvals, which have not yet been obtained.

SAS continues the ramp-up and has during the quarter had the highest number of passengers since the pandemic started. We have recently experienced positive market development and strong ticket sales ahead of the important summer season. SAS and Apollo (a provider of charter travel services to and from the Nordic market) also signed an agreement during the quarter, concerning summer charter flights, within the framework of their three-year collaboration. Flights will depart from around 20 locations in Sweden, Norway and Denmark and fly to around 30 Mediterranean destinations.

The SAS traffic program and capacity are increased according to customer demand, but there are constraints to the growth of traffic, as effects of the pandemic linger on. The whole airline ecosystem has difficulties ramping up, which also has an implication on SAS. We foresee challenges during summer relating to everything from airports and ground staffing to crew training bottlenecks such as availability of training instructors, and we also see continued delayed aircraft deliveries. In order to minimize the risk of disruption and create more stability for the upcoming summer travels, SAS has made adjustments to the traffic program during June to August, after the quarter ended.

SAS aims to be a global leader in sustainable aviation and during the quarter we launched the Travel Pass Biofuel, a punch card for corporate customers who regularly travel to the same destination and want to include biofuel to reduce the climate impact of their trips.

SAS Scandinavian Airlines is nominated as Europe’s Leading Airline 2022 by World Travel Awards.