SAS shares plummet on wider loss; Lufthansa load factors down; BA dropping short-haul J class?


European carriers’ stocks were mixed on Tuesday (09-Feb-2010), with some carriers pushed down by the release of weak earnings and traffic reports.

In major markets, UK’s FTSE (+0.4%), France’s CAC (-0.2%) and Germany’s DAX (-0.5%) were all up at the end of trading. European markets were generally higher, as the banking sector recovered ground on hopes the EU will provide some financial assistance to some struggling eurozone countries.

SAS shares plummet following wider than expected loss

SAS (-28.1%) shares fell their most in 13 years, following the announcement during trading of a wider than expected loss and plans to launch a rights issue.

For 4Q2009, the carrier reported an operating loss of EUR140.2 million, compared to a loss of EUR27.9 million in the previous corresponding period, and a net loss of EUR129.2 million, compared to a loss of EUR276.4 million in the previous corresponding period. Yield for the quarter was down 5.8% year-on-year, matching a 5.8% reduction in unit costs, while subsidiaries Blue1 and Widerøe also reported declines in yield of 6.2% and 4.4%, respectively.

For FY2009, SAS reported an operating loss of EUR305.5 million, compared to a loss of EUR69.0 million in the previous corresponding period, while also reporting a net loss of EUR292.1 million, compared to a loss of EUR630.3 million in the previous corresponding period.

Yields for the year were down 5.2%, despite an 8.1% reduction in unit costs. Blue1 also reported a 2.7% decline in yield, while Widerøe's yield climbed 3.0% for the year.

President & CEO, Mats Jansson attributed the weak results to a “significant decline in Business travel”, due to the global financial downturn, but the “falling trend in demand leveled out during the fourth quarter and started to stabilise slightly, and such a scenario is usually followed by a more stable yield trend”.

However, Mr Jansson admitted “uncertainty remains regarding the competitive situation, the USD exchange-rate trend and the price of jet fuel”.

Standard & Poor’s analysts stated the financial results are “beyond belief”, consequently downgrading its rating of the stock from ‘Hold’ to ‘Sell’, and price target from SEK4.20 to SEK3.00.

SAS now plans to implement additional cost savings initiatives of EUR198 million (SEK2.0 billion) and measures to strengthen the balance sheet including debt maturity extensions and a proposed rights issue of approximately EUR495.6 million (SEK5 billion). The issue is supported by SAS' largest shareholders and a consortium of underwriting banks, subject to, amongst other things, the refinancing of the bonds and final agreement with pilots and cabin unions.

Terms of the rights issue, including subscription price, are expected to be announced on 06-Apr-2010. The rights issue is subject to approval by an Extraordinary General Meeting planned for 07-Apr-2010. The subscription period is expected to run from 15-Apr-2010 to 29-Apr-2010. Swedish, Danish and Norwegian governments have separately expressed to the Board of Directors their support for this process.

Orion Securities analyst, Aleksandr Solovjov, told Bloomberg that many were expecting another rights issue by the carrier, but were not expecting it so soon.

Lufthansa Group over supplies capacity in Jan-2010

Lufthansa Group (-0.6%) reported a 23.6% year-on-year increase in consolidated passenger numbers for Jan-2010, to 5.9 million, led by rises in Middle East & Africa (45.0%) and Europe (+25.2%) numbers. (On a like-for-like basis, Lufthansa and SWISS carried 4.8 million passengers in January, up 0.6% year-on-year).

However, group load factor was down 1.4 ppts for the month, to 72.9%, as the growth in capacity (ASKs) outweighed the growth in traffic (RPKs), up 20.15 and 17.9%, respectively. Middle East & Africa (-2.3 ppts) and European (-2.1 ppts) loads dragged overall results down, while Asia Pacific (+2.4 ppts) loads were up.

bmi carried 425,000 passengers in Jan-2010 and achieved a passenger load factor of 61.1%.

British Airways considering dropping Business class on short haul

Elsewhere, British Airways (+3.1%) gained following reports it is considering dropping its Business class on a number of short-haul sectors, stating passengers have either downsized to Economy or moved to LCCs. London Gatwick Airport and regional gateways are likely to be affected by the change, with the carrier currently planning to strip premium seats from aircraft operating from those bases.

Europe selected airlines daily share price movements (% change): 09-Feb-2010

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