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Cheap flight tickets fail to curb SAS losses

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Cheap flight tickets fail to curb SAS losses
Photo: Claus Bech/Scanpix
14:05 CEST+02:00
Despite filling a record number of seats, the airline continues to struggle financially due to increased pressure from competition.
Scandinavian airline SAS announced a further drop in profits for the third quarter on Wednesday, as fierce competition pushed down ticket prices just under two years into a last-ditch
recovery programme.
 
The company's net profit fell by 44 percent to 400 million kroner ($69 million, 54 million euros) from May to July, with weaker sales -- down 8 percent to 8.7 billion kroner -- and cheaper tickets cutting into margins.
 
On average, the company earned 7.1 percent less from each passenger, while the cost per passenger fell by only 5.6 percent. However, the proportion of seats filled reached a record 81.9 percent.
 
"This result reflects a market under continued intense price pressure. At the same time, the high passenger growth and productivity show that our strategy is generating effects," SAS chief executive Rickard Gustafson said in a statement.
 
In November 2012, after five consecutive loss-making years, the beleaguered airline launched a "final call" recovery plan, which has included job losses, salary cuts and administrative cutbacks.
 
On Wednesday the company said it would lay off half the 350 employees at its Finnish charter subsidiary Blue1 -- on top of 300 SAS job cuts in support, administration and management announced in June.
 
SAS has come under increasing pressure in recent years from low-cost rivals such as Oslo-based Norwegian, Europe's third-largest budget airline.
 
"All in all, the fierce competition in the airline industry is persisting," Gustafson said Wednesday.
 
The airline, which is 50-percent owned by the Swedish, Danish and Norwegian states, expects to report a profit for the 2013-2014 tax year "provided that market conditions, in terms of capacity, jet fuel and exchange rates, do not decline any further and that no unexpected events occur".
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