Year end report 2004 Group | Scandinavian Airlines Businesses| Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels Analyst presentation February 11, 2005 2 2004 affected by unprecedented yield reductions, record fuel prices and large overcapacity ?Turnaround 2005 – Substantially improved cost platform – Focus on remaining activities ?New business structure established – Incorporation of Scandinavian Airlines completed – Improved transparency and accountability ?Significant overcapacity affecting yields and passenger load factor ?Full year fuel cost SEK 1,5 billion higher than 2003 – Net effect SEK 0,6 billion mainly from 1 st Half (ex volume) ?Revenue actions stabilized yield in 2 nd half Group | Scandinavian Airlines Businesses | Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels Significantly improved business platform for 2005 3 4 th Quarter loss mainly attributable to 350 MSEK in exceptionals ?Yield development according to plan – Positive yield 4 th Quarter ?Relative weak passenger load factor – Overcapacity in the market ?One off effect of MSEK 350 – Industrial actions by pilots in Spanair and cabin attendants in Scandinavian Airlines – Traffic disturbances in November/December in Scandinavia due to ATC problems – Method change SAS Cargo MSEK 100 Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels 4 October-December January-December MSEK 2004 2003 Change 2004 2003 Change ? Revenues 14 940 13 824 +1 116 58 073 57 754 +319 ? EBITDAR 1 181 814 +367 4 383 3 761 +622 ? Lease, depreciation & financial net -1 660 -1 605 -55 -6 584 -6 569 -15 ? Capital gains and non-recurring items -75* 170* -132 751 ? EBT -419 -245 -174 -1 945 -1 470 ? EBT bef non-recurring items -344**) -415 +71 -1 813 -2 221 +408 *) Restructuring costs of MSEK 84 (341) **) Including negative off effects of MSEK 350 Improved full year and 4 th Quarter EBITDAR result Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels 5 Best underlying 4th Quarter result in 4 years 473 -1588 -647 -415 6 -344 -2000 -1500 -1000 -500 0 500 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels One off effects of app MSEK 350 EBT bef cap gains & nonrecurring items 6 -30% -25% -20% -15% -10% -5% 0% 5% 10% Jan Feb Mar Apr May Jun jul Aug Sep Oct Nov Dec Jan Feb Mar April May June July Aug Sep Oct Nov Dec -30% -25% -20% -15% -10% -5% 0% 5% 10% Yield Yield adjusted for fuel charge Positive yield in December Indications for January flat or slightly positive Total yield change vs last year (excluding Braathens) Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels +12% in December ? Currency adjusted yield for full year 2004 vs 2003 -9,1%
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Year end report 2004 - SAS Group...Year end report 2004 Group | Scandinavian Airlines Businesses| Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels
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Year end report 2004
Group | Scandinavian Airlines Businesses| Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels
Analyst presentationFebruary 11, 2005
2
2004 affected by unprecedented yield reductions, record fuel prices and large overcapacity
?Turnaround 2005– Substantially improved cost platform– Focus on remaining activities
?New business structure established– Incorporation of Scandinavian Airlines completed– Improved transparency and accountability
?Significant overcapacity affecting yields and passenger load factor
?Full year fuel cost SEK 1,5 billion higher than 2003– Net effect SEK 0,6 billion mainly from 1st Half (ex volume)
?Revenue actions stabilized yield in 2nd half
Group | Scandinavian Airlines Businesses | Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels
Significantly improved business platform for 2005
3
4th Quarter loss mainly attributable to 350 MSEK in exceptionals
?Yield development according to plan– Positive yield 4 th Quarter
?Relative weak passenger load factor– Overcapacity in the market
?One off effect of MSEK 350 – Industrial actions by pilots in Spanair and cabin attendants in
Scandinavian Airlines – Traffic disturbances in November/December in Scandinavia due to ATC
problems– Method change SAS Cargo MSEK 100
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels
*) Restructuring costs of MSEK 84 (341) **) Including negative off effects of MSEK 350
Improved full year and 4th Quarter EBITDAR result
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
5
Best underlying 4th Quarter resultin 4 years
473
-1588
-647-415
6
-344
-2000
-1500
-1000
-500
0
500
Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
One off effects of app MSEK 350
EBT bef cap gains & nonrecurring items
6
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
Jan Feb Mar Apr
May Jun jul Au
g Sep Oct Nov
Dec
Jan Feb MarAp
ril MayJun
eJu
lyAu
g Sep Oct Nov
Dec
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
Yield Yield adjusted for fuel charge
Positive yield in DecemberIndications for January flat or slightly positive
Total yield change vs last year (excluding Braathens)
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
+12% in December
? Currency adjusted yield for full year 2004 vs 2003 -9,1%
7
SAS Group with increased commercial focus in 2005
Commercial excellence
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
? Customer segmentation
? Products? Pricing? Revenue
management? Sales? Distribution? Ancillary
revenue
Cost improvement
? Turnaround 2005
? Further rationalization
? Flexibility in cost base
Optimization of production
? Optimization of production system and network development
? Capacity & Utilization focus
? Ensure presence in growth markets
Portfolio strategy
? Alliances? Structural
deals? Horizontal
integration
Governance & organization
? Group governance
? Competence development
? Communication
SAS Group strategic focus areas
8
? Overcapacityand weak passenger load factors ? SAS Group initiates as of November capacity adjustments? Result effect (net) MSEK 400-500
Scandinavian Airlines Operations– No effect on capacity in November/December– 2 MD’s by January 1% (ASK)– 4 MD’s by February 2% (ASK - accumulated)– 9 MD’s by March 4% (ASK - accumulated)
?Target: To improve balance between supply and demand
Combined with increased commercial focus => to improve passenger load factor in 2005
Capacity & Utilization focus effect mainly as from March 2005
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
9
New European product launched on October 31
Business
Economy Flex
Economy
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | Airline Support | Airline Related Business |Hotels
10
Positive trend in Economy FlexStabilized Business Class
July Aug Sep Oct Nov Dec
Business Economy Flex
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
New service concept in Business and Economy Flex introduced
Change vs last year (passengers )
Gunilla BergCFO
12
-2,2 -5,3
6
-0,6
0,3
-1,8
-6,5
-4,5
-2,5
-0,5
1,5
3,5
5,5
EBT bef gains2003
Yield Turnaround2005
Fuel net Other includingvolume
EBT bef gains2004
January – December Change 2004 vs. 2003
Cost savings offset yield decline and increased jet fuel costs
Group | Scandinavian Airlines Businesses| Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
13
-2500
-2000
-1500
-1000
-500
0
500
Q1 Q2 Q3 Q4
2003 2004
Quarterly result development 2003-2004EBT before nonrecurring items
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport Business | Airline Related Business |Hotels
One off MSEK 350
MSEK
14
Q4 Oct-Dec Q4 January-December
Business area 2004 Change 2004 ChangeScandinavian Airlines Businesses -138 105 -1 439 324Subsidiary & Aff. Airlines -89 5 -136 66Airline Support Businesses 57 -24 498 431Airline Related Businesses 8 -12 40 -22Hotels 98 144 1 236Group eliminations, other -280 -147 -777 -627EBT, before gains & exceptionals -344 71 -1 813 408
EBT before gains and nonrecurring items- Business area
Group | Scandinavian Airlines Businesses| Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
15
Negative one off effects in 2004
? EBT -1 945? Restructuring and capital gains 132
? EBT bef. nonrecurring items -1 813
– Pilot conflict Spanair -150– Cabin conflict and ATC -100 – SAS Cargo accounting method change -100
? One off effects 350
? EBT bef one offs and nonrecurring items app -1 463
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
16
?85% implemented as of December 2004– SEK 11,9 billion implemented– Remaining MSEK 2 100 to be implemented
in 2005
?Result effect SEK 6 billion in 2004 – Total effect SEK 9,6 billion 2003-2004
Turnaround 2005SEK 2,1 billion remaining
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
17
Focus on remaining areas in Turnaround 2005
0,9
2,10,10,5
0,3
0,3
0,0
0,5
1,0
1,5
2,0
2,5
Pilot/cabinefficiency
SAS GroundServices
SAS TechnicalServices
Distributionand IT
Other Total
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
18
0,7
0,8
0,9
1,0
1,1
Q402 Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404
SAS Group I Scandinavian Airlines I SubsidiaryAirlines I AirlineSupport I Airline Related I Rezidor I Group Wide
Unit cost down21% since Q4
2002
12 months rolling
Scandinavian Airlines unit cost development
Unit cost down 26% since Q4
2002 adjusted for fuel and currency
Jørgen LindegaardCEO
20
SAS Braathens very competitive after Turnaround 2005 and new price concepts
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
? Traffic increased 9,1%? Cabin factor up 2,9 p.u.? Stable market share? New price concepts – one way pricing? Result MSEK 4? New web site 2nd most popular in
Spanair’s result affected by pilot action, March 11 and record fuel prices
Oct-Dec Jan-Dec
2004 2003 2004 2003
?Pilot conflict affects result negatively by app. MSEK 150, net fuel effect app MSEK 235?11 March negative effect app MSEK 45?EBT before gains improved MSEK 74 vs2003?Innovative products
? Full service and simple travel? One way prices on whole
system? Punctuality guarantee
?Increased market share
2004 data:?Traffic up 12,2%?Yields down 7,6% ?Unit cost down 10,4%
22
Best result ever for Widerøe
Turnaround 2005 having full impact?EBT before gains improved vs 2003?Traffic up 10,3% in 2004 and cabin factor up 0,5 p.u.?Yields down 6,9%?Turnaround 2005 proceeding according to plan
? Unit cost down 3,6%, excluding fuel price unit cost down app 6%
2004 2003 2004 2003
Total revenues 673 615 2 502 2 477
EBITDAR 107 87 349 343EBIT 48 23 115 96
EBT 40 47 84 77
Group | Scandinavian Airlines Businesses | Subsidiary& AffiliatedAirlines | Airline Support | Airline RelatedBusiness |Hotels
October- December January-December
23
Blue1 – EBT in Q4 improved by MSEK 43 vs 2003
Blue1’s result improving strongly in Q4?Traffic in 2004 up 77,9%?Yields down 22% in 2004 and down 12,7% in Q4?Code share agreement with Lufthansa as from October ?Jet fuel cost up MSEK 73 vs 2004 adjusted for volume and currency?Turnaround 2005 proceeding according to plan
? Unit cost down 10%?Introducing Helsinki -Vaasa/Rovaniemi in January 2005
Group | Scandinavian Airlines Operations | Subsidiary& AffiliatedAirlines | Airline Support | Airline RelatedBusiness |Hotels
October-December January-December
Member of Star Alliance
24
Impressive growth in airBaltic and Estonian Air continues
Number of passengers airBaltic (12 month rolling)
0
10 000
20 000
30 000
40 000
50 000
60 000
Feb Ap
rJu
nAu
gOkt
Dec Feb Ap
rJu
nAu
gOc
tDec
Number of passengers Estonian Air (12 month rolling)
0
10 000
20 000
30 000
40 000
50 000
Dec Feb
Apr
Jun
Aug OktDe
c Feb Apr
Jun Aug
OktDec
?The SAS Group owns 49% in Estonian Air and 47,2% in AirBaltic?Number of passengers have increased by more than 40% during 2004?State of the art cost efficiency level – approximately 50% lower than west European network airlines
Group | Scandinavian Airlines Businesses | Subsidiary& AffiliatedAirlines | Airline Support | Airline RelatedBusiness |Hotels
25Group | Scandinavian Airlines Businesses | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
? Scandinavian IT Group sold in December 2003 and included in 2003 figures
66
Revenues 1 634 5,9% 515 3,8% 459 2,4%
EBITDA -34 n.m 133 16,7% 38 15,2%
EBT -57 n.m 46 187% 18 -18,2%
Jan-Dec in MSEK
Flight Academy and Jetpak on trackWeak result in SAS Trading
SAS Trading
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
67
Avinor has discontinued negotiations with SAS Trading tax free operations in Norway
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels
? SAS Trading’s current agreement expired in December 2004– New agreement valid for seven years starting in 2005– The agreement is expected to have a turnover of SEK 1 billion
? Agreements stood for app. 2/3 of SAS Trading’s total revenue
? SAS Trading has in total 32 duty free shops in Scandinavia, Poland and the Baltic states.
68 69
Group | Scandinavian Airlines Operations | Subsidiary & Affiliated Airlines | AirlineSupport | Airline Related Business |Hotels