Lift-off for SAS in 2006 after cutting costs

Scandinavian Airlines System (SAS) said on Thursday that a vast savings programme had helped lift the group to a robust profit in 2006 amid strong demand.

The group, which was on the verge of bankruptcy just a few years ago, posted a net profit up 18-fold, or 1,758 percent, to 4.74 billion kronor (520.7 million euros, 675.2 million dollars) from 255 million kronor a year earlier.

SAS was still posting a loss in the first quarter but recovered throughout the course of the year to boast full-year sales of 60.7 billion kronor, up by 9.5 percent from 2005.

In the fourth quarter alone, sales totalled 15.1 billion kronor, a 4.6 percent rise from a year earlier but somewhat below analysts’ average forecast of 15.82 billion.

The price of the SAS share was down by 3.30 percent on the news on the Stockholm stock exchange in mid-morning trading.

SAS chief executive Mats Jansson, who took over on January 1, said the group’s good results were largely due to rising demand, in particular in the autumn and winter.

The number of passengers climbed by 6.3 percent to 38.6 million for 2006, and in the final quarter alone the number rose by 3.9 percent to 9.6 million.

“In addition, the introduction of new business models, effective cost control and efficient capacity adaptation resulted in considerable earnings improvements,” Jansson said in a statement.

The savings plan, which is aimed at saving 2.5 billion kronor by 2007, had been 79-percent achieved.

Jansson also announced that the group was developing a new strategic plan dubbed “Strategy 2011” to be unveiled in May.

The new plan “will be no major revolution, rather a significant evolution with the principal aim of firmly establishing our future approach and target scenario for our customers, employees and shareholders,” Jansson said.

For 2007, he said he expected “continued favourable growth” as there were no indications of a slowdown in the economy or the airline market.

“However, uncertainty remains regarding the strength of growth, the future competitive situation and the trend for jet fuel prices,” he said.