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STOCKHOLM - Scandinavian carrier SAS AB, the largest airline in Northern Europe, on Wednesday reported a worse-than-expected 42 per cent drop in second-quarter net profit, blaming mainly soaring jet fuel costs.
The Stockholm-headquartered company, which for years has struggled amid cut-throat competition from low budget airlines, posted a profit of 320 million kronor ($48 million), down sharply from the 551 million kronor recorded in the same three months a year earlier.
Revenues rose slightly, to 11.39 billion kronor from 11.31 billion kronor, mainly thanks to an increased number of passengers. But fuel costs continued to hammer bottom-line earnings.
CEO Rickard Gustafson called it an "unsatisfactory earnings level," but said the group's cost-cutting program — launched last year and aiming to save 5 billion kronor ($750 million) over 2012-13 — is starting to pay off.
"The relatively high jet-fuel price fell slightly during the second quarter only to increase again during July, constituting a major challenge for the entire aviation industry," he said. Costs for fuel rose some 800 million kronor in the quarter compared with the same period in 2011.
Even though SAS shied away from providing a profit forecast for the full year 2012 — citing the uncertain economic trend, jet-fuel prices, competition and exchange rates — it said it expects 5-7 per cent passenger growth in the market.
Jacob Pedersen, an analyst at Sydbank, said the jet fuel prices was clearly the one factor that had missed the mark according to the broader market estimates, causing the share price to fall 0.8 per cent to 5.90 kronor ($0.88) on the Stockholm stock exchange.
According to his own earnings forecasts, however, Pedersen said the results had only slightly missed the mark. "The jet fuel costs were higher, but they are starting to have more control on other costs."
