Shares in Scandinavian airline group SAS AB plunged Tuesday after the company reported weaker-than-expected profit for the third quarter and said market conditions have deteriorated.
The airline said it recorded a 214 million kronor ($32.5 million) profit in the quarter, up from a loss of 1.05 billion kronor in the same period last year, mainly due to favorable currency exchange rates.
Revenues for the period decreased by 1.5 percent to 10.6 billion kronor from 10.8 billion kronor in the same quarter in 2010, SAS said.
The result missed analysts' expectations and SAS shares dropped by 6.8 percent to 11.05 kronor ($1.68) in early trading on the Stockholm stock exchange.
Operating costs narrowed by 11 percent to 9.3 billion kronor from 10.4 billion kronor, but increased by 7.9 percent adjusted for currency effects and one-off costs amid higher jet fuel expenses, the company said.
Passenger numbers rose by 4.1 percent during the quarter to 6.9 million, while the load factor remained unchanged at 78.9 percent.
"Although major capacity increases have been implemented in several of our principal markets, SAS succeeded in raising the number of passengers on many routes. This confirms that we have strengthened our competitiveness and that our product stands up well against the competition," SAS CEO Rickard Gustafson said in a statement.
The company reiterated its forecast for full-year 2011 of reaching a "marginally positive income before tax," but said the market conditions for fulfilling the forecast have deteriorated.
It said jet-fuel prices, additional capacity in the market and global economic developments have resulted in greater challenges.
"Against the backdrop of the difficult economic situation in the Spanish market, the risks related to the financial exposure in Spanair have increased," Gustafson added, referring to SAS's holding in the Spanish airline.
SAS's cost-cutting program, dubbed Core SAS, has resulted in cost reductions of 23 percent since 2008, it said.
During the third quarter, the company launched a new program aimed at reducing the unit cost by another 3-5 percent on an annual basis.