Scandinavian airline group SAS would have swung back to profit
– if it weren't for the Icelandic ash cloud chaos.

• Mats Jansson steps down as CEO of airline SAS

SAS Group, the biggest airline in the Nordic region, narrowed its second quarter net losses to 502 million kronor ($69 million), from 1 billion kronor the same period last year, and said that the company is "well positioned to face the future”.

Excluding the impact of the volcanic ash cloud that hit European airlines earlier in the year, it would have recorded earnings of 464 million kronor in the quarter. Its cash flow from operating activities is now positive and came in at 503 million kronor.

However, the company and the aviation industry are still facing massive challenges ahead, such as uncertain macroeconomic trends, volatility in exchange rates and jet-fuel prices.

"Although we are on the right path, there is some way to go before we achieve profitability," the airline's chief executive officer Mats Jansson said.

Revenue declined to 10 billion kronor, from 12.2 billion kronor in the year-ago period. The number of passengers fell 8.3 percent to 6.3 million.

Last week Mats Jansson announced his decision to leave the company this fall after four years at the post.

SAS, half-owned by Sweden, Denmark and Norway, lost almost 10 billion kronor in the past two years after airline travel dived during the global economic crisis. It has also been hard-hit by the rise of low-cost airline Norwegian.

To turn the loss-making airline around Mats Jansson last year initiated a massive cost-cutting plan called Core SAS, including cost initiatives of 7.8 billion kronor, thousands of layoffs and a 20 percent capacity reduction. The financial platform was also secured through rights issues.

The IATA industry body anticipates continued losses totaling 2.8 billion dollar for European airlines in 2010.