UPDATE 1-Airline SAS posts 2012/13 profit, says tough market slows turnaround

Thu Dec 19, 2013 2:53am EST

* Q4 pretax profit 442 mln SEK

* Full year profit 433 mln SEK

* Says first quarter to be weak

* Says tough market delays meeting financial targets (Adds detail, company comment)

STOCKHOLM, Dec 19 (Reuters) - Scandinavian airline SAS said on Thursday that weak market conditions would slow its turnaround plan after posting its first full-year profit since 2007.

SAS, 50 percent owned by Sweden, Denmark and Norway, has been struggling for years with overcapacity and competition from budget carriers like Ryanair and Norwegian.

After a series of restructuring programmes, the airline posted a pretax profit of 433 million crowns in its fiscal 2012/13 year versus a loss of 3.25 billion in the previous year.

Barring unforeseen events, SAS CEO Rickard Gustafson said it would remain in the black in the coming fiscal year.

But SAS warned that competition was again intensifying and that economic conditions were weak, adding that the journey to sustainable profitability had just begun.

The airline said the first quarter of its new year would be "extremely weak" as a result of seasonality and tough market conditions.

The headwinds are expected to continue, pushing back SAS's estimate of when it will reach the financial goals set in its latest turnaround plan.

The plan included reaching an operating margin of greater than 8 percent by 2014/15. For the full year 2012/13 the operating margin was 3.3 percent.

"SAS now expects, as an additional consequence of the weaker conditions, that the financial targets expected to be reached in 2014/2015 will not now be reached until 2015/2016," it said.

The airline was close to folding in 2012, but persuaded banks and owners to provide it with fresh funds in return for a plan to sell off operations and cut wages to bring down costs.

SAS's fiscal year runs from November to October. ($1 = 6.5315 Swedish crowns) (Reporting by Simon Johnson, editing by Terje Solsvik and Jane Merriman)

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