Scandinavian Airline SAS: Fourth Quarter Profit Up

Scandinavian airline operator SAS said Thursday that fourth-quarter profit surged, mainly boosted by its hotel chain sale in November, but warned that although it does not see a slowdown in the airline market in 2007, it remains cautious on the strength of growth.

SAS also said it expects further cost-cuts when it unveils the details of its new restructuring program in May.

Net income, including the sold Rezidor hotel operations, for the three months through Dec. 1 rose to 4.6 billion kronor (504 million euros; $656 million), from 198 million kronor in the same period last year, the company reported. Revenue rose to 15.2 billion kronor (1.66 billion euros; $2.16 billion) compared with 14.49 billion kronor a year ago, but fell short of analysts forecast of 15.82 billion kronor (1.74 billion euros; $2.26 billion).

SAS shares fell 3.1% to 132.8 kronor (14.6 euros; $18.9) a share on the Stockholm Stock Exchange.

Stig Nymann, an analyst at Gudme Raaschou, said that even though the results roughly matched his own forecasts, the drop was mainly due to the missed consensus figure which he said contained "scattered" estimates. He added that the future unveiling of the restructuring program, dubbed Strategy 2011, "will be very interesting."

SAS Chief Executive Mats Jansson said in a statement that "the result reported for 2006 is a good sign, but the level is too low to meet shareholders' return requirements and future investment needs. There are currently no indications of a slowdown in the economy or the airline market."

He added, however, that "uncertainty remains regarding the strength of growth, the future competitive situation and the trend for jet fuel prices."

Excluding the sale of the Rezidor Hotel Group in November, SAS posted a fourth-quarter profit of 230 million kronor (25.2 million euros; $32.8 million) compared with a previous loss of 343 million kronor. The group said this was mainly thanks to higher demand and more savings.

Passenger traffic in the quarter rose by 5.4%, it said.

Operating costs, including staff costs, rose 5.5% to 13.15 billion (1.44 billion euros; $1.88 billion) in the quarter mainly because of higher jet fuel costs, up by 364 million (39.9 million euros; $51.9 million) from last year, as well as higher volumes in SAS individually branded airlines.

The travel group operates Scandinavian Airlines, which is the joint carrier of Sweden, Denmark and Norway. The group also includes regional airlines Blue1, Spanair, SAS Braathens, Wideroe, airBaltic and Estonian Air.