As Latin America’s economic growth surge occurred, traffic between Europe and South America, as measured by RPKs, grew at an average rate of 7.9% annually between 2003 and 2013, compared with a world average rate of 6.2%.
Another quarter, another fall in yield for Scandinavian Airlines, SAS. The Nordic region's largest airline reported a year on year decline in profits in 3QFY2014 and a fall into loss for 9M. It has made good progress with its cost reduction programme, but costs are not falling fast enough to offset tumbling yields and SAS remains one of Europe's highest cost airlines.
Healthy load factor gains demonstrate that SAS has some appeal to the Scandinavian frequent flyers that it desires, but price discounting remains a key feature of this appeal. Overcapacity in its markets has contributed to yield weakness, but its many LCC competitors are better positioned to provide the lower fares demanded by the market. In spite of some easing of the supply/demand imbalance, SAS expects continued yield pressure.
SAS' number one priority is an additional cost reduction programme, full details of which will be announced by the end of 2014.