SAS has reported a pre-tax loss of SEK 1.6bn for the quarter to end April 2022 - an improvement of SEK 1.0 billion compared with last quarter, or a SEK 0.7 billion improvement year-on-year. Revenue was SEK 7.048bn compared to 1.982bn the year ago period. SAS stated that it has carried its highest number of passengers since the pandemic began.
Total operating expenses during the quarter ended at SEK 7.8bn and total operating revenue landed at SEK 7.0bn for the quarter. SAS’ cash balance at the end of the quarter was SEK 8.5bn.
SAS states that it is focused on reducing its cost structure and improving efficiencies but is also seeking to raise more cash. SAS is planning to convert approximately SEK 20bn of debt and hybrid notes into common equity and will also seek to raise not less than SEK 9.5bn in new equity capital. The success of the plan depends upon SAS attracting potential new capital from the capital markets and other sources and upon SAS fully achieving the targeted SEK 7.5bn annual cost reduction by fiscal year 2026.
SAS has been required to reduce its summer program by 4,000 of a total of 75,000 flights due to the difficulty in rebuilding operations despite the clear increase in demand.
The company notes its transformation during the pandemic period that has enabled SAS “to continue to adapt to the new market conditions in order to be able to remain flexible, competitive and financially strong for the long-term future”.
With high debts, higher fuel costs and the growth of competition with lower operating costs, the SAS Board has concluded that a substantial restructuring is needed to enable SAS to become profitable by implementing SAS FORWARD.
Key Elements of SAS FORWARD include: reducing the annual costs by SEK 7.5bn; redesigning the fleet; digital transformation; positioning SAS as the leader in sustainable aviation; strengthening SAS’ balance sheet by deleveraging and raising new capital; and completing a debt-to-equity conversion and equity raise.
SAS is seeking to convert approximately SEK 20bn of existing debt and hybrid notes into common equity, of which a majority is on-balance sheet debt and hybrid instruments (state hybrid notes, commercial hybrid notes, lease liabilities, Swiss bonds and term loans from states and commercial banks) and some relates to maintenance contract obligations and other executory contract obligations.
In addition to debt conversions, SAS is looking for alternatives to raise new equity. SAS will seek to raise not less than SEK 9.5bn in equity capital to provide sufficient liquidity to fund operations through the full implementation of SAS FORWARD and the recovery in passenger demand post COVID-19. SAS expects a significant share of new equity will be sought from new investors.
SAS notes that discussions are currently ongoing regarding stakeholders’ participation and acceptance of burden sharing. “Given the limited progress made so far, there can be no guarantees that SAS FORWARD will be successfully completed,” says the company. “In the event that the expected burden sharing, debt conversions, and new capital raise are not completed as planned, SAS will not be able to support its existing capital structure and current liquidity levels and it cannot be ruled out that SAS could become unable to meet its obligations over the longer term as they fall due.”
Anko van der Werff, President and CEO of SAS, stressed that the company sees a “pent-up demand for traveling and underlying demand is healthy, both for business and for leisure travel. However, we still remain cautious due to the prevailing uncertainties. Traffic to and from Asia remains affected by remaining COVID-19 restrictions as well as the geopolitical situation.”