sas ab · sas ab debt investor presentation ... airberlin easyjet brittish airways wirderøe ... 30...
TRANSCRIPT
2013‐09‐17
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SAS ABDebt investor presentationSeptember 2013
Jan TorbergerGroup Treasurer
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Göran JanssonDeputy President and CFO
Group Treasurer
2013‐09‐17
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Agenda
• SAS Group and airline industry
• 4Excellence Next Generation
• Q3 update and financials
• Transaction summary
3
• SAS is the largest carrier in the Nordic region, in 2012 SAS had about 28 million customers
The Nordic region’s largest airline in terms of revenue, passengers & flights Share of capacity in the Nordic market, full year 2012
NorweiganSAS Group
Overview of SAS
2012 SAS had about 28 million customers
• SAS route network comprises 136 destinations, mainly in continental Europe and a few selected long‐haul destinations to North America and Asia
• SAS is primary a regional operator, with 70% of its production on domestic, intra‐ Scandinavian and European routes.
• Norwegian is the largest competitor
• During both 2012 and 2013, SAS has invested in new routes
0 5 10 15 20 25 30
AirBerlinEasyjet
Brittish AirwaysWirderøe
AirFrance/KLMFinnairRyanair
120
Number of transported passengers 2012 by European airlines
new routes
• 52 routes to be opened in 2013
0
20
40
60
80
100
120
Mill
ions
Shareholder Total Acc.
The Swedish government 21.4% 21.4%
The Danish government 14.3% 35.7%
The Norwegian government 14.3% 50.0%
Knut and Alice Wallenberg's foundation 7.6% 57.6%
Other shareholders (60,361 shareholders) 42.9% 100%
Largest shareholders
2013‐09‐17
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SAS strategy and market position
SAS market share 2012• SAS focus is the Scandinavian frequent traveller (business and leisure)
• 5+ round trips/year• 5+ round trips/year
• Represent appr 70% of market revenues
• Scandinavia a substantial market of more than SEK 100 bn – most within Europe
• About 100 million passengers
• <10% passengers travelling long haul
• Nordic travelers by far the most active short distance travelers within Europe
• Sh t h l f i S di i i i li t
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• Short haul focus in Scandinavia requires airline to operate efficiently
SAS network and frequencies enable SAS to provide frequent travellers the ‘best product’
• 4XNG driving operational efficiency
SAS home market financially strong
Per cent GDP growth in SAS home markets vs Eurozone
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S&P credit rating
1
2
3
6
‐1
02012 2013E 2014E 2015E
Norway Sweden DenmarkFinland Eurozone Ave. ScandAve. EU
Source: SEB/OECD
2013‐09‐17
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SAS on course in an industry in transition
Weak profitability amongst European airlines
• Competition continues to be intense LCCs share of capacity in the Nordic • Competition continues to be intense
• High LCC penetration
European legacy carriers response
• Implementation of efficiency measures
• Capacity reductions
• Phasing in of LCC sub carriers to defend position 10%
15%
20%
25%
30%
35%
40%
LCCs share of capacity in the Nordic market
position
Signs of market converging
• LCC moving upward in customer proposition
• LCC targeting business customers
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0%
5%
4XNG
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RASK and CASK diverged – necessary for SAS to take swift action in 2012
SEK
4XNG planned andUnit cost
Unit cost and RASK diverging
4XNG planned and initiated – autumn 2012
4XNG assumes:‐Continued RASK deterioration‐ Unit cost reduction by 15% in FY15
0,8 Time
g g
2012‐20152011‐2012
4XNG plan – three building blocks
Cost/flexibilityHistorical legacy and a geographical home base in three countries have
LiquiditySAS has been too dependent on external credit facilities to be able to
EquityNew accounting rules for pensions to be applied from November 1 2013
Measures Main objective
Cost Flexibility Liquidity/Equity
New collective agreements for flight crew √ √
home base in three countries have created an expensive and inflexible cost structure.
external credit facilities to be able to maintain adequate financial preparedness.
be applied from November 1, 2013 will have substantial negative impact on the SAS Group’s equity.
…and we are dealing with them now
Outsorcing of Ground Handling, customer service and certain administrative functions
√
Centralization of administration, staff cuts and market‐based remuneration
√
New pension agreements with defined contribution pensions
√ √
Savings and streamlining measures in IT √ √
Asset sales √
4XNG will deliverimprovement inearnings (EBIT) by ca SEK 3 bn and liquidity effects of ca SEK 3 bnpertaining to the sale of assets
2013‐09‐17
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Financial targets
Long term: FY 15
ProfitabilityEBIT %
>8%
Equity ratioEquity/Assets, %
>35%NEW
NEW 11
22
11
Financial preparednessCash & unutilized credit facilities / Fixed cost
>20% (70 days)
NEW 33
Initiatives Progress
New collective agreements
• Compensation effective as of December 2012
• New schedules effective as of Mar ch13
M b l l d S d /D k
4XNG – SEK 3bn in cost reductions
Cost measures
MSEK 700
Admin centralization
New pension schemes
IT restructuring
• Move to contribution plans implemented in Sweden/Denmark; Norway to be completed by end of the year
• New early retirement conditions implemented in Q2
• Majority of 1,000 FTE reduction to be completed FY2012/13• All employees to leave SAS in FY13 have been identified and
agreements reached with 85%• OCC centralized to Stockholm
• Contract agreement signed with new IT-supplier, Tata Consultancy Services (TCS)
• Agreement to outsource revenue management systems• SAS sales organization undergoing restructuring and centralization
MSEK 500
MSEK 750
MSEK 550
Commercial &sales
• SAS sales organization undergoing restructuring and centralization• Network efficiency being enhanced through better utilization of
existing resources • Call Centres – Agreement signed with Sykes
Increase proportion of variable costs
Commercial & SalesMSEK 500
• Outsourcing of SAS Ground Handling− Reduces exposure of external revenue− Switching SEK 5 bn to variable costs
• Increased use of wet lease• Outsourcing of call centres
2013‐09‐17
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Through new union agreements, capacity can be increased without adding resources
Flight hours per month
2013
2012
2013
Summer programWinter program
AprMarNov Dec Jan Feb OctSepAugJulJunMay13
Asset disposal of close to SEK 3 already completed
Sale of Widerøe
• Agreement to sell 80% of Widerøe to be completed in September 2013.MSEK
Liquidityeffect
Sale/lease back of engines
• Aircraft and loans relating to aircraft sold and transferred to Widerøe.• SAS to receive about SEK 2 billion in conjunction with the sale
− Approximately SEK 1 billion will have a positive effect on liquidity− Net debt to be reduced by approximately SEK 2 bn
• A sale and leaseback agreement of spare aircraft engines was entered into in February with a liquidity effect of slightly more than MSEK 700.
MSEK 1,000
MSEK 700
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Aircraft financing
• Additional aircraft refinancing has been carried out for a number of aircraft, which had a combined effect on liquidity of about SEK 1 billion.
MSEK 1,000
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Effect of the revised IAS 19 and new pension terms, SEK bn
New pension plans being implemented and reducing pension commitment by SEK 19 bn
Defined-benefit pension commitment
13,5 ‐3.4
‐1.5‐1.7
6,9
Actuarial Effect of new Reversal of Amortization of Estimated
33.5
14,0
~ 60%
Actuarial gains/losses, Oct 31,2012
Effect of new pension terms
Reversal of deferred tax liabilities
Amortization of actuarial
gains/losses and sale of WF
Estimated actuarial
gains/losses pro forma
New contribution pension plans implemented in Sweden and DenmarkNorway to be implemented before year end
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Oct 31, 2012
ProformaNov 1, 2013
Planned earnings effects from 4XNG
~30 4
Incremental EBIT effectsSEK billion
~30.4
1.2
1.5
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TotalFY 14/15FY 13/14FY 12/13
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This is what the future SAS will look like
Administrative locationsAdministration
t li d i SE3 administrative l tiAdministrative locations centralized in SElocations
Divestments andconsolidation
No. of employees ~15 000 ~9 000
Distribution of entire workforce in Scandinavia
30% 34% 36% 38% 31% 31%
Next generation fleet 80 % 100 %
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This is what the future SAS will look like
Crew cost per ASK
Administration
Reduction through redundancy and
outsourcing 1,000 FTE (from ~2,500 to 1,500 FTE)
‐ 33%
Admin costs per ASK
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‐ 43%Admin costs per ASK
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Q3 update
Strengthened SAS delivers positive result in Q3
Passenger revenues up 5.3% (FX adjusted)• 32 new routes introduced
Restructuring status32 new routes introduced
• Capacity up 7.7%• Traffic up 5.6%• Yield down 0.6%
Restructuring drives improvement• Operating expenses down 5% while capacity
is up 7.7%• Unit cost down 5 8% (ex fuel)
Cost and efficiency
Pension switch overUnit cost down 5,8% (ex fuel)
EBT MSEK 1 120• EBT before non-recurring items doubled to
MSEK 973
Decision taken to renew fleet
Financial preparedness
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Improved cost structure and efficiency
Increased passenger revenuesvs last year, SAS Group, FX adjusted
Increased Aircraft utilizationA/C utilization vs. LY
+6 7%
Unit cost decreasing FX & Fuel adjusted unit cost vs LY
Operating expenditure*vs last year SAS Group
+4.0%
Q3
+6.7%
Q2
+4.2%
Q1
+6.3%
Q3
+5.3%
Q2
+4.4%
Q1
FX & Fuel adjusted unit cost vs. LYvs last year, SAS Group
Q3-5.8%
Q2
-3.9%**
Q1
-2.8%
Q3Q2Q1
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NEXT GENERATION
4.7%
-4.0%** -5.0%
*Excluding non‐recuring items ** Excludes MSEK 450 in reduced pension costs
Optimized summer program tailored to frequent Scandinavian Travellers
Increased share of EuroBonuscustomers
Increased capacity (European routes)
Jun‐Jul 2012 Jun‐Jul 2013
+46%
Jun‐Jul 2012 Jun‐Jul 2013
+14%
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• Introduction of SAS Go and Plus
• ~100,000 more passengers in Q3
• Yield down as expected but passenger revenues up 5.3% in Q3
• 32 new routes during summer
• Traffic up 11% on European routes in June-July
• More frequencies to USA and introduction of San Francisco
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Liquidity position strengthened by SEK 1.3bn since Q1
• Operating cash flow before change in working capital
Financial preparednessPer cent of last 12 months fixed cost
capital
• Improvement by MSEK 304 in Q3
• Negative change in working capital due to higher utilization of pre-booked tickets in Q3
• Asset disposals and positive cash flow strengthening SAS financial preparedness
• SAS accessing the debt market
20% 18% 21%
Financial net debt, MSEK
Q1 Q2 Q3
• SAS accessing the debt market
• Issue of MEUR 35 within the EMTN program
• S&P upgrade of SAS credit rating to B-
• Moody’s places SAS on positive outlook (13 Sep 2013)
7,760
5,957 5 791
Q1 Q2 Q3
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Overview of credit facilities – July 2013 and after the sale of Wideröe
Available funds, SEK billion Jul 2013 Maturity Proforma 1 Oct
2.70.20.30.0
3.2
5.11.9
Mar 2015Jan 2016, Oct 2017
Sep 2021Feb 2020
Undrawn portion ofcredit facilities
Total undrawn credit facilities
Total credit facilities- Drawn portion of credit facilities
Revolving Credit Facility, SEK 2.7 bn
Credit Facility, MUSD 125 & 62
Credit Facility, MUSD 67
Others (MUSD 120)
2.00.20.30.0
2.5
4.41.92 53.2- Undrawn portion of credit facilities
• After the sale of Wideröe, the financial preparedness proforma (using cash situation as at July 2013) is expected to be approximately 22%.
2.5
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Secured a competitive fleet “roadmap”
Harmonized fleet• Boeing 737NG in Stockholm/Oslo
• Airbus A320 in Copenhagen
Renewal of long haul fleet• 4 A330-300E and 8 A350-900
• First delivery in 2015
Renewal of short haul fleet• 30 A320 ith fi t d li i 2016
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• 30 A320neo with first delivery in 2016
• MD80 fully replaced (by B737NG/A320) already in October 2013
Cabin upgrade on existing fleet• Long haul: New IFE-system and new seats
(incl. fully flat business seats)
• Short haul: New seats for improved comfort and enhanced fuel efficiency
Financing of fleet renewal
• New aircraft attractive for secured financing
• Financing options
• Export credit financing
• Sale and leaseback
• Enhanced Equipment Trust Certificate EETC
• Commercial bank financing
• SAS to seek a diversification of finance options to reduce risk exposure
• Mix between leasing and finance/ownership
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2013‐09‐17
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• Restructuring measures being implemented swiftly according to plan
Summary and outlook
Restructuring measures being implemented swiftly according to plan
• Cost and efficiency
• Pension switch over
• Financial preparedness
• Productivity and efficiency driven growth tailored to Scandinavian frequent travelers
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• Renewal of fleet underway – both long and short haul
• Outlook for 2012/2013 remains firm:
• EBIT-margin of >3% and a positive EBT
Thank you!
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