Numbers released by SAS yesterday showed that the company had 185,000 more passengers last month then during May 2013. The increase in flyers was due primarily to plummeting ticket prices.
“The worst thing for SAS right now is that prices are falling so strongly,” Jacob Pedersen, a senior analyst at Sydbank told Jyllands-Posten newspaper.
Despite intense pressure, SAS tried earlier this year to stick to a strategy focusing on higher fares, but competition has forced SAS to cut prices by nearly 18 percent from April 2013 to April of this year.
"The decline is compounded by the fact that Easter fell in April this year and holiday travel costs less than business travel,” said Petersen. “If the decline continues at this level, it will be a disaster for SAS, no airline can afford to lower their costs at this pace.”
A bad investment
Pedersen said that current conditions should cause investors to pause before they consider purchasing SAS stock.
“I doubt that SAS in its interim financial statements can provide something that can convince me that SAS is a stock that one should have in the short term,” said Petersen. "They will have a hard time providing evidence that SAS can be turned into a profitable business.”
Even though SAS has managed to lure customers with lower fares, the numbers are still less than expected.
“SAS will soon cut prices to historic lows, and they will get more people on board the aircraft, but that will also drive profits down,” said Petersen.
Pedersen said that SAS will most likely relaunch its EuroBonus loyalty program in a effort to increase revenue.