August 31, 2018 / 7:31 AM / 20 days ago

UPDATE 1-Airline SAS lifts profit outlook after strong results, shares jump

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STOCKHOLM, Aug 31 (Reuters) - Scandinavian airline SAS hiked its full-year earnings outlook on Friday as third-quarter profits topped market expectations on the back of strong customer demand and efficiency gains, sending its shares sharply higher. Citing a stronger than expected performance over the first nine months of the year, SAS lifted its forecast for full-year pretax earnings before non-recurring items to about 2 billion Swedish crowns ($220 million), compared to a previous forecast range of 1.5 billion to 2.0 billion crowns.

SAS shares rose sharply on the results, and were up 14 percent in early trade on Friday.

Pretax profit for the May to July quarter came in at 2.00 billion crowns, slightly up from 1.97 billion a year ago, and beating the 1.77 billion crowns expected in a Reuters poll of analysts.

The surprisingly strong result came despite headwinds from currency effects and rising jet fuel prices, and SAS said the weaker crown and high jet fuel prices would add challenges also in the fourth quarter and the next fiscal year.

“Going forward, it will be critical to offset these unfavourable trends with higher revenue and the implementation of our efficiency measures,” SAS said.

SAS is in the middle of renewing an elderly and fuel-intensive fleet after cutting costs for years in the face of cut-price competition from budget carriers such as Norwegian Air Shuttle and Ryanair.

The company said on Friday it had hedged a larger portion of its future jet fuel needs as prices continued to rise. It also said it continued to work on its efficiency programme to deliver savings of 700 million crowns this year as planned.

The airline would over the fourth quarter work on improving its on ground and technical efficiency as well as in its administrative department, CEO Rickard Gustafson told Reuters.

$1 = 9.1055 Swedish crowns Reporting by Esha Vaish in Stockholm Editing by Johannes Hellstrom and Edmund Blair

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