SAS — Annual Report 2009

Feb 9, 2010

SAS Group Year-end Report January-December 2009

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN AUSTRALIA, CANADA,JAPAN

OR THE UNITED STATES

SAS Group Year-end Report January-December 2009

Key ratios 2009

. Operating revenue: MSEK 44,918 (52,870) (-15.0%)

. Number of passengers: 24.9 million (-14.1%)

. Passenger traffic capacity (ASK) was reduced by 15.3%

. Earnings before nonrecurring items in continuing operations: MSEK

-1,754 (-339)

. EBT margin before nonrecurring items in continuing operations: -3.9%

(-0.6%)

. Income before tax: MSEK -3,423 (-969)

. Net income for the year: MSEK -2,947 (-6,360)

Major events in 2010

. SAS launches new cost measures amounting to SEK 2.0 billion and that

expand its current cost program to a total of SEK 7.3 billion, which is

expected to have a remaining earnings impact of about SEK 5 billion,

with the majority of the effects expected in 2010. In addition, a letter

of intent, with a clearly defined commitment, has been signed with the

flight deck and cabin unions for a further cost saving of MSEK 500

during the first quarter of 2010.

. SAS announces a rights issue amounting to approximately SEK 5 billion

to strengthen SAS's liquidity position and to provide support for the

implementation of the remaining parts of Core SAS. The rights issue has

support from the three government owners and the largest private

shareholder, the Knut and Alice Wallenberg Foundation through FAM. The

participation of the three states and FAM in the rights issue is subject

to, amongst other things, all four shareholders deciding to subscribe

on a pro rata basis, refinancing of the bonds maturing in 2010, final

agreement with the flight deck and cabin unions and parliamentary

approval (where necessary). A consortium of banks has confirmed its

expectation, subject to certain conditions, to enter into an

underwriting agreement on a several basis for the remaining 42.4% of the

shares to be issued in the rights offering.

Comments by the CEO

Fiscal 2009 was probably the most challenging year that the entire

aviation industry has experienced, due to the deep recession that has

affected the global economy since the beginning of the financial crisis.

In February 2009, we launched a renewed strategic approach, Core SAS, in

a bid to address this and our internal challenges. The sharp downturn in

the economy led to an extremely large decline in business travel, which

had a significant impact on the entire aviation industry. Market

conditions deteriorated far more extensively than originally expected

when the Core SAS strategy was initiated a year ago. The weak economic

trend in 2009 had a serious effect on SAS's passenger volumes and yield

and, accordingly, revenue, which consequently had a very adverse impact

on SAS's liquidity.

The Group's earnings before nonrecurring items in continuing operations

amounted to MSEK 940 for the fourth quarter and to MSEK 1,754 for the

full-year 2009. In addition, nonrecurring items totaled MSEK 1,669,

which resulted in income before tax of MSEK 3,423. The Group's largest

operation, SAS Scandinavian Airlines, reported a loss of MSEK 1,522,

although the loss was limited due to the extensive cost program

implemented during the year. The implementation of this program has

proceeded according to plan and an earnings effect corresponding to SEK

2.2 billion was generated in 2009. We are now noting that the unit cost

is falling on a quarterly basis. Core SAS also includes capacity

reductions corresponding to a total of 21 aircraft, of which 18 aircraft

had been withdrawn from service by the end of the fourth quarter. The

divestment of non-core operations is progressing according to plan, for

example, through the sales of SAS's shareholding in bmi, and operations

in SGS and Cargo. Furthermore, we can see signs of more stable demand.

The load factor improved substantially during the final quarter of the

year and increased for the sixth consecutive month, which is primarily a

result of the implemented capacity reductions and also the initial signs

of stabilizing demand.

To further improve SAS's long-term cost position, the Core SAS cost

program will be strengthened by an additional SEK 2.0 billion. The cost

program will now total SEK 7.3 billion, of which about SEK 5 billion

remains to have an earnings impact, with the majority of the effects

expected in 2010. The Core SAS program has been expanded by a total of

SEK 3.3 billion since its launch in February 2009. One of the new

measures under the program is to further centralize and enhance the

efficiency of the organization. Moreover, a letter of intent, with a

clearly defined commitment, was signed with the flight deck and cabin

trade unions under which they expect to contribute further cost savings

of MSEK 500 in 2010. It is imperative that a final agreement is reached

quickly. A strong balance sheet is necessary to enable the

implementation of the remaining parts of Core SAS, including the new

measures, and to be able to capitalize fully on the improved market

situation when the air-travel market recovers. Accordingly, the SAS

Board has decided to propose to an Extraordinary General Meeting a

rights issue amounting to SEK 5 billion. The rights issue is subject to

the three states and the Knut and Alice Wallenberg Foundation through

FAM deciding to subscribe on a pro rata basis. This requires that SAS

refinances the majority of the bonds maturing in 2010, and succeeds in

reaching a final agreement with the flight deck and cabin unions

corresponding to SEK 0.5 billion in cost savings.

A new commercial concept - Service And Simplicity - was launched as part

of the implementation of Core SAS, and the concept has been well

received by our customers. SAS has retained its strong market position

and we further improved our punctuality and regularity during the year.

We are now the most punctual airline in Europe, which naturally is

extremely gratifying and is confirmation that our work on quality has

already yielded results. We also remain a leader in innovation, for

example, we introduced the option of fully automated biometric check-in

services on domestic routes in Scandinavia and mobile boarding passes.

As a result customer satisfaction has improved significantly in both

2008 and 2009.

With Core SAS, we have a stable foundation to build on and, with new

cost-saving measures that will have anticipated earnings effects

totaling more than SEK 5 billion, a more efficient and centralized

organization, refinancing approved by the banks, a letter of intent from

the trade unions with a clearly defined commitment, and a strong balance

sheet, we are well-equipped for the expected economic recovery.

Mats Jansson

President and CEO

Direct questions to: Investor Relations SAS Group: Vice President Sture

Stølen +46 8 797 14 51, e-mail: investor.relations@sas.se