Scandinavian Airline Sas
VALUATION OF SAS
PROGRAM: FINANCE AND STRATEGIC MANAGEMENT FSM COPENHAGEN BUSINESS SCHOOL AUGUST 2010 NUMBER OF STANDARD PAGES: 117 NUMBER OF CHARACTERS: 264.684
AUTHORS: RASMUS STOUMANN JENSEN LARS PFEIFFER PETERSEN SUPERVISOR: CARSTEN KYHNAUV, EXTERNAL
Valuation of SAS
Executive Summary
The aim of the thesis was to determine the fair value of the SAS stock as of June 11th 2010. SAS has received much attention in the media recently partly due to the poor financial performance in the past years.
In an attempt to turn SAS profitable a cost saving program, Core SAS, was introduced in 2009, and its implementation was supported by a capital injection MSEK6.000. Given the financial crisis a further injection of MSEK5.000 was initiated in 2010 to secure the full implementation of Core SAS.
The valuation was conducted through both a strategic and a financial analysis that together facilitated a forecasting of the future financial performance which enabled a calculation of the value of the SAS stock.
In the strategic analysis it was concluded through a PESTLE analysis that the expected rise in Nordic GDP will affect the passenger traffic positively whereas the future increasing oil prices were found to impact especially the low-cost-carriers negatively.
The competition in the airline industry was found fierce particularly because of the success of the low-cost-carriers Ryanair and Norwegian but the focus of SAS on business travellers reduces the competitive rivalry.
As a consequence of this focus SAS was concluded to be stuck-in-the-middle in an unsuccessful attempt to deliver high quality at low cost.
One of the key findings of the financial analysis was that SAS had a poor Return On Invested Capital indicating financial trouble. In line with the Core SAS strategy it was concluded that SAS had managed to reduce its overcapacity, represented by a drop in available-seatkilometres and furthermore, the airline increased its efficiency as
PROGRAM: FINANCE AND STRATEGIC MANAGEMENT FSM COPENHAGEN BUSINESS SCHOOL AUGUST 2010 NUMBER OF STANDARD PAGES: 117 NUMBER OF CHARACTERS: 264.684
AUTHORS: RASMUS STOUMANN JENSEN LARS PFEIFFER PETERSEN SUPERVISOR: CARSTEN KYHNAUV, EXTERNAL
Valuation of SAS
Executive Summary
The aim of the thesis was to determine the fair value of the SAS stock as of June 11th 2010. SAS has received much attention in the media recently partly due to the poor financial performance in the past years.
In an attempt to turn SAS profitable a cost saving program, Core SAS, was introduced in 2009, and its implementation was supported by a capital injection MSEK6.000. Given the financial crisis a further injection of MSEK5.000 was initiated in 2010 to secure the full implementation of Core SAS.
The valuation was conducted through both a strategic and a financial analysis that together facilitated a forecasting of the future financial performance which enabled a calculation of the value of the SAS stock.
In the strategic analysis it was concluded through a PESTLE analysis that the expected rise in Nordic GDP will affect the passenger traffic positively whereas the future increasing oil prices were found to impact especially the low-cost-carriers negatively.
The competition in the airline industry was found fierce particularly because of the success of the low-cost-carriers Ryanair and Norwegian but the focus of SAS on business travellers reduces the competitive rivalry.
As a consequence of this focus SAS was concluded to be stuck-in-the-middle in an unsuccessful attempt to deliver high quality at low cost.
One of the key findings of the financial analysis was that SAS had a poor Return On Invested Capital indicating financial trouble. In line with the Core SAS strategy it was concluded that SAS had managed to reduce its overcapacity, represented by a drop in available-seatkilometres and furthermore, the airline increased its efficiency as
References: Airline Focus: European Low-Cost Carrier Advantages and The Eventual Rise of Contestable Markets (2005), Center for Tourism and Culture Management, CBS working paper 2005 Auctioning Airport Slots (2001)