SAS AB Debt investor presentation September 2013

Transcription

1 SAS AB Debt investor presentation September 2013 Jan Torberger Group Treasurer Göran Jansson Deputy President and CFO 2 1

2 Agenda SAS Group and airline industry 4Excellence Next Generation Q3 update and financials Transaction summary 3 Overview of SAS The Nordic region s largest airline in terms of revenue, passengers & flights Share of capacity in the Nordic market, full year 2012 SAS is the largest carrier in the Nordic region, in 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 52 routes to be opened in 2013 Largest shareholders 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% SAS Group Norweigan Ryanair Finnair AirFrance/KLM Wirderøe Brittish Airways Easyjet AirBerlin Number of transported passengers 2012 by European airlines Millions

3 SAS strategy and market position SAS focus is the Scandinavian frequent traveller (business and leisure) 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 Short haul focus in Scandinavia i requires airline to operate efficiently SAS market share 2012 SAS network and frequencies enable SAS to provide frequent travellers the best product 4XNG driving operational efficiency 5 SAS home market financially strong Per cent GDP growth in SAS home markets vs Eurozone 4 S&P credit rating E 2014E 2015E 1 Norway Sweden Denmark Finland Eurozone Ave. Scand Ave. EU Source: SEB/OECD 6 3

4 SAS on course in an industry in transition Weak profitability amongst European airlines 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 Signs of market converging LCC moving upward in customer proposition LCC targeting business customers LCCs share of capacity in the Nordic market 40% 35% 30% 25% 20% 15% 10% 5% 0% 7 4XNG 4

5 RASK and CASK diverged necessary for SAS to take swift action in 2012 SEK Unit cost 4XNG planned and initiated autumn XNG assumes: Continued RASK deterioration Unit cost reduction by 15% in FY15 Unit cost and RASK diverging g 0,8 Time XNG plan three building blocks Cost/flexibility Historical legacy and a geographical home base in three countries have created an expensive and inflexible cost structure. Liquidity and we are dealing with them now SAS has been too dependent on external credit facilities to be able to maintain adequate financial preparedness. Equity New accounting rules for pensions to be applied from November 1, 2013 will have substantial negative impact on the SAS Group s equity. Measures Main objective Cost Flexibility Liquidity/Equity New collective agreements for flight crew 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 deliver improvement in earnings (EBIT) by ca SEK 3 bn and liquidity effects of ca SEK 3 bn pertaining to the sale of assets 5

6 Financial targets Long term: FY 15 Profitability NEW >8% 1 EBIT % NEW Equity ratio Equity/Assets, % >35% 2 Financial preparedness >20% NEW Cash & unutilized credit 3 (70 days) facilities / Fixed cost 11 4XNG SEK 3bn in cost reductions Initiatives New collective agreements New pension schemes Progress Compensation effective as of December 2012 New schedules effective as of Mar ch13 Move to contribution plans implemented in Sweden/Denmark; Norway to be completed by end of the year New early retirement conditions implemented in Q2 Cost measures Admin centralization IT restructuring Commercial &sales Sales 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 Network efficiency being enhanced through better utilization of existing resources Call Centres Agreement signed with Sykes Increase proportion of variable costs 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 6

7 Through new union agreements, capacity can be increased without adding resources Flight hours per month Winter program Nov Dec Jan Feb Summer program Mar Apr May Jun Jul Aug Sep Oct 13 Asset disposal of close to SEK 3 already completed Liquidity effect Sale of Widerøe Agreement to sell 80% of Widerøe to be completed in September Aircraft and loans relating to aircraft sold and transferred to Widerøe. SAS to receive about SEK 2 billion in conjunction with the sale 1,000 Approximately SEK 1 billion will have a positive effect on liquidity Net debt to be reduced by approximately SEK 2 bn Sale/lease back of engines A sale and leaseback agreement of spare aircraft engines was entered into in February with a liquidity effect of slightly more than 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. 1,

8 New pension plans being implemented and reducing pension commitment by SEK 19 bn Effect of the revised IAS 19 and new pension terms, SEK bn Defined-benefit pension commitment 13,5 3.4 ~ 60% , ,0 Actuarial Effect of new Reversalof Amortizationof of Estimated gains/losses, pension terms deferred tax actuarial actuarial Oct 31,2012 liabilities gains/losses gains/losses pro and sale of WF forma Oct 31, 2012 Proforma Nov 1, 2013 New contribution pension plans implemented in Sweden and Denmark Norway to be implemented before year end 15 Planned earnings effects from 4XNG Incremental EBIT effects SEK billion ~3 1.5 FY 12/13 FY 13/14 FY 14/15 Total 16 8

9 This is what the future SAS will look like 3 administrative l locations ti Administrative locations Administration centralized t li d in i SE Divestments and consolidation No. of employees Distribution of entire workforce in Scandinavia Next generation fleet ~ % 34% ~ % 38% 80 % 31% 31% 100 % 17 This is what the future SAS will look like Crew cost per ASK 33% Reduction through redundancy and outsourcing 1,000 FTE (from ~2,500 to 1,500 FTE) Administration Admin costs costs per per ASK ASK Admin 43% 18 9

10 Q3 update Strengthened SAS delivers positive result in Q3 Passenger revenues up 5.3% (FX adjusted) 32 new routes introduced Capacity up 7.7% Traffic up 5.6% Yield down 0.6% Restructuring status Cost and efficiency Restructuring drives improvement Operating expenses down 5% while capacity is up 7.7% Unit cost down 5,8% (ex fuel) Pension switch over EBT EBT before non-recurring items doubled to 973 Financial preparedness Decision taken to renew fleet 10

11 Improved cost structure and efficiency Increased passenger revenues vs last year, SAS Group, FX adjusted +6.3% +4.4% +5.3% +4.0% Increased Aircraft utilization A/C utilization vs. LY +6.7% +4.2% Q1 Q2 Q3 Q1 Q2 Q3 Operating expenditure* vs last year, SAS Group 4.7% NEXT GENERATION Unit cost decreasing FX & Fuel adjusted unit cost vs. LY Q1-4.0%** Q2-5.0% Q3-2.8% Q1-3.9%** Q2-5.8% Q3 *Excluding non recuring items ** Excludes 450 in reduced pension costs 21 Optimized summer program tailored to frequent Scandinavian Travellers Increased capacity (European routes) +14% Increased share of EuroBonus customers +46% Jun Jul 2012 Jun Jul new routes during summer Traffic up 11% on European routes in June-July More frequencies to USA and introduction of San Francisco Jun Jul 2012 Jun Jul 2013 Introduction of SAS Go and Plus ~100,000 more passengers in Q3 Yield down as expected but passenger revenues up 5.3% in Q

12 Liquidity position strengthened by SEK 1.3bn since Q1 Operating cash flow before change in working capital Improvement by 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 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) Financial preparedness Per cent of last 12 months fixed cost 20% 18% 21% Q1 Q2 Q3 Financial net debt, 7,760 5, Q1 Q2 Q3 23 Overview of credit facilities July 2013 and after the sale of Wideröe Available funds, SEK billion Jul 2013 Maturity Proforma 1 Oct Undrawn portion of credit facilities Revolving Credit Facility, SEK 2.7 bn Credit Facility, MUSD 125 & 62 Credit Facility, MUSD 67 Others (MUSD 120) Mar 2015 Jan 2016, Oct 2017 Sep 2021 Feb Total undrawn credit facilities Total credit facilities - Drawn portion of credit facilities - 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%. 12

13 Secured a competitive fleet roadmap Harmonized fleet Boeing 737NG in Stockholm/Oslo Airbus A320 in Copenhagen Renewal of long haul fleet 4 A E and 8 A First delivery in 2015 Renewal of short haul fleet 30 A320neo with in A320 ith first fi t delivery d li i 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 25 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 26 13

14 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 Renewal of fleet underway both long and short haul Outlook for 2012/2013 remains firm: EBIT-margin of >3% and a positive EBT 27 Thank you! 28 14