Scandinavian Airlines (SAS) posted an increased net profit for its 2017-18 fiscal year, citing a combination of strong passenger demand, nimble capacity allocation and increased internal efficiencies.

The tri-national carrier recorded net income of SEK1.59 billion ($176 million), a significant rise on the previous financial year’s figure of SEK1.15 billion. The company achieved the result on revenues up 1.4% at SEK44.7 billion, compared to SEK42.7 billion a year ago. SAS’s fiscal year runs from November to the end of October.

SAS president and CEO Rickard Gustafson hailed the outcome as “the strongest result in many years,” but cautioned that higher fuel prices that began to be felt in 4Q were likely to continue into next year.

Passenger numbers just breached the 30 million mark. This was only 0.3% up on the previous year, but a record for the airline. “This shows that our strategy continues to deliver results,” Gustafson said.

“The strong demand for our services that we experienced in the spring and summer continued into the fourth quarter. This is reflected in a higher unit revenue and load factor.

“At the same time, the efficiency enhancement program continued to deliver. However, higher fuel costs impacted operating expenses negatively year-on-year. Combined, this resulted in earnings before tax and non-recurring items of MSEK842 in the fourth quarter, compared to MSEK1,054 in the same period last year.

“In the fourth quarter, our efficiency program generated a positive earnings impact of MSEK 193, meaning we delivered MSEK 723 during fiscal year 2018. As we are now halfway into the program, we are also looking at initiatives beyond 2020. The order of 50 new Airbus A320neo aircraft will take SAS to a single-type fleet by 2023, meaning considerable potential for increased efficiency.”

Those efficiency measures included lower airport fees, especially at Copenhagen,
increased productivity and flexibility among aircraft crew and optimization of engine maintenance, improved base maintenance and component agreements for the carrier’s Airbus A320 and A330s.

Despite the successes of the past year, “our operating environment never stands still. During the winter, market capacity growth will accelerate. Further, current fuel prices combined with a weak Swedish krona present a challenge for us going forward.

“As our [fuel] hedges wear off, we will be increasingly affected by higher jet-fuel prices and a weak SEK. Combined with a large capacity increase in our market, we expect next year to be more challenging.

“To address this, we will continue to work on our strategic priorities: Winning Scandinavia’s frequent travelers, creating efficient and sustainable operating platforms, and securing the right capabilities.”

Among new efficiencies, SAS is implementing a new catering system that will optimize the amount of food and beverages loaded for each flight. Apart from avoiding waste, this will lower weight and reduce fuel consumption, the airline said.

SAS expects an increased loss in 1Q FY2019 compared to 1Q in the year-ago period. For the full fiscal year 2019, the company expects to deliver a positive result before tax and nonrecurring items. That outlook is based on no unexpected events or material changes in the business environment.

The outlook assumes a 2%-3% growth in ASK for SAS in FY2019, volatile but increasing fuel prices, and unfavorable development in currency exchange rates.

Alan Dron