Will SAS continue to fly? A valuation of a company in crisis

Maren Emilie Birkeland & Christian Emanuel Friedrich Christ

Student thesis: Master thesis


The main objective of this thesis is to analyse the strategy of the SAS Group and its current competitive environment in order to value the share price of the SAS Group as of the 30th of June 2009, and discuss whether the group is able to overcome its current crisis. To evaluate this, an analysis of the company’s macro- and microenvironment has been undertaken and its internal strategy has been analysed. Additionally financial statements have been forecasted and a share value has been estimated via the use of DCF, economic profit, multiple and liquidation analysis. Scandinavian Airline System Group (SAS Group) is Scandinavia’s leading Airline; it operates various hub’s in the region and has a market share of around 50%. The company is currently in a crisis due to high competition coupled with falling demand. The SAS Group is mainly affected by economical factors, high competition as well as deregulation. Preferences of passenger have changed from being service orientated to being more price conscious. Consequently it has been recognised, that the airline industry is a highly competitive industry with extremely tight profit margins. Additionally, the airline is performing poorly compared to its competitors in key areas, but has some unrealised competitive advantages. Based on our forecasted financial statements, supported by findings from our strategic analysis as well as industry reports, it has been found that the airline will experience financial difficulties until 2011. The performance of the group is expected to improve from 2012 onwards. The liquidation value has been estimated to be SEK 1.16. To compare the SAS Group’s financial performance with its comparable companies and to check the results from the DCF and economic profit approach, a multiple analyses has been undertaken; this analysis yielded a share price of SEK 3.26. The Capital Asset Pricing Model (CAPM) has been used to estimate the after Tax cost of capital. The cost of capital has been estimated to be 8.54%, which results in a share price estimation of SEK 4.02. This is a 17.9% deviation from the published share price of the 30th of June 2009. As a result we have found that the share price is slightly undervalued by the market.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2009
Number of pages151