SAS — Earnings Release 2014

Mar 14, 2014

SAS Group Interim Report November 2013 - January 2014

SAS Group Interim Report November 2013 - January 2014

SAS continues to deliver on its restructuring program in a market under

continuing pressure

November 2013 - January 2014 *

· Revenue: MSEK 7,871 (9,597)

· SAS' scheduled traffic increased 0.7%

· SAS' passenger revenue adjusted for currency effects and Widerøe

decreased 4.9%

· Unit cost (CASK) adjusted for currency and jet-fuel decreased 3.2%

· Income before tax and nonrecurring items: MSEK -1,169 (-745)

· EBIT margin: 1.7% (-5.5%)

· Income before tax: MSEK -146 (-767)

· Net income for the period: MSEK -112 (-588)

· Earnings per share: SEK -0.35 (-1.79)

· Cash flow from operating activities: MSEK -908 (-441)

* Comparative figures for the year-earlier period include Widerøe.

SAS Group has applied the amended standard for pension reporting, IAS 19

- Employee Benefits since November 1, 2013. As part of the

implementation of the amended accounting standard, the reported figures

for the preceding fiscal year (2012/2013) have been restated to enable

comparison with fiscal year 2013/2014. The effects of the restatement of

the SAS financial statements for 2012/2013 can be found at

www.sasgroup.net, under Investor Relations/Reports and

Presentations/Interim reports.

Comments by the President and CEO of SAS:

"As expected, this has been a weak quarter in terms of earnings, with an

income before tax of MSEK -146. The first quarter is seasonally the

weakest, but this quarter was also marked by overcapacity and lower

growth, which put pressure on margins across the entire market.

Although the result is as expected, it is not satisfactory. The market

trend shows quite clearly the importance of continuing at a high tempo

with our three strategic priorities: to establish an efficient operating

platform, to win the battle for Scandinavia´s frequent travelers and to

invest in our future.

During the quarter, the unit cost declined a further 3.2% compared with

the preceding year. During the quarter, the unit cost declined by a

further 3.2% compared with the preceding year. With an increasingly

competitive cost base, we can fight for the frequent travelers more

effectively. We continue to invest in our offering to the frequent

travelers. A significant upgrade of EuroBonus was launched at the

beginning of the year, with the biggest changes since the SAS loyalty

program was introduced in 1992, including a totally new membership

level, called EuroBonus Diamond. We also presented 44 new routes to be

launched during the year.

In February 2014, an issue of preference shares strengthened our equity

by SEK 3.5 billion partly offsetting the effect of the amended standard

for pension reporting. By issuing a new convertible bond, SAS also

secured refinancing of the convertible bond that matures in 2015. These

transactions are testament to the market's confidence in SAS and proof

of the effects already generated by the restructuring program," says

Rickard Gustafson, SAS President and CEO.

Comments by the CEO

· Income before tax totaled MSEK -146

· Lower market growth in parallel with increased competition

· SAS' scheduled traffic increased 0.7%

· The unit cost, excluding jet fuel, fell 3.2%

· 44 new routes to be launched in 2014

· EuroBonus - significant upgrade

· SAS was recapitalized by issuing preference shares, a new

convertible bond, cancelation of the revolving credit facility and

entering into a new credit facility.

As expected, SAS reported a weak quarter in terms of earnings, with an

income before tax of MSEK -146. The first quarter is seasonally weakest,

but this quarter was also marked by overcapacity and lower growth, which

put pressure on margins across the entire market. As communicated in

connection with the full-year report for 2012/2013, the earnings were

positively impacted by about SEK 1 billion from changed pension terms.

The weak macroeconomic trend in Europe had a negative impact on business

travel to and from Europe. With SAS's large share of business travel, we

are affected to a greater degree. At the same time, this trend has led

to other operators shifting more capacity to the Nordic region, which

has intensified the competition for passengers. Despite this, the trend

for SAS in the Scandinavian home markets was stable during the quarter

in terms of number of passengers, and traffic on the intercontinental

routes rose 2.8% year-on-year. However, the yield declined 5.6% during

the quarter.

The market trend clearly illustrates the importance of continuing our

transition toward lower costs and greater flexibility. Equally clear is

the fact that we must continue to invest offensively in our customer

offering to meet the increasing competition.

Strategic priorities

To strengthen competitiveness and provide opportunities for long-term

sustainable profitability, SAS has three strategic priorities. We must

secure an efficient operational platform, win the battle for

Scandinavia's frequent travelers and invest in our future.

Establish an efficient production platform

Given the measures already implemented within the framework of the

restructuring program, we are now competing from a stronger position and

with a much more efficient production platform. During the quarter, the

unit cost declined a further 3.2% compared with the preceding year.

Payroll expenses, in particular, were a major contributor to the

improvement in unit cost.

We are now rolling out a comprehensive Lean Program across the entire

organization, aimed at enhancing efficiency at every level. Many of our

operational units have already made good progress, and we are now

involving all parts of SAS.

Our measures to restore punctuality following the system updates

implemented last year have brought results and we are now back where we

should be, with world-class punctuality.

Natural choice for frequent travelers

With an increasingly competitive cost base, we can compete more

effectively for the frequent travelers. We have already presented 44 new

routes for 2014. Focusing on customers who travel frequently and who

value easier and more time-efficient travel is a key component of the

SAS' strategy, and it is gratifying to note that customer satisfaction

increased during the quarter. We will continue to invest in our offering

to the frequent travelers. A significant upgrade of EuroBonus was

launched in early 2014, with the biggest changes since the SAS loyalty

program was introduced in 1992. We are introducing a totally new

membership level, EuroBonus Diamond, while several new features will be

added to the membership offering for gold and silver levels. Since the

launch, an additional 71,000 members have joined the program.

Invest in the future

We are introducing extensive changes to the aircraft fleet as part of

the Group's investment in the future. Last year, we phased 48 aircraft

in and out - the largest modernization in the history of SAS in such a

short time. The SAS aircraft fleet now consists solely of "Next

Generation" aircraft - with greater comfort and higher fuel efficiency.

We have already ordered 30 Airbus A320 NEOs for our short-haul

operations, as well as four Airbus A330Es and eight Airbus A350s for our

long-haul operations, which will give us an even more modern aircraft

fleet going forward.

We are also investing in our employees and are currently strengthening

the organization's leadership by introducing a new leadership and

employee model that links to our Lean processes.

Future capital structure

During the quarter, we continued to take important steps to strengthen

our financial position. In February 2014, an issue of preference shares

strengthened our equity by SEK 3.5 billion, which partly offsets the

effect of the amended standard for pension reporting and bring our

equity/assets ratio back to 20%. We also issued a new convertible bond

to secure refinancing of the existing convertible bond that matures in

2015. The major interest in these transactions is testament to the

market's confidence in SAS, which was further, confirmed when Moody's

upgraded the SAS Group's credit rating.

Outlook

Our forecast for the full-year remains. During the year, the expected

impact on earnings from the restructuring program is SEK 1.2 billion,

and bookings at the beginning of the second quarter were at the same

level year-on-year. Provided that the market conditions, in terms of

capacity, jet fuel and exchange rates, do not decline any further and

that no unexpected events occur, potential exists to post a positive

EBT, excluding the positive effect from the changed pension terms, also

in the 2013/2014 fiscal year.

Stockholm, March 14, 2014

Rickard Gustafson

President and CEO

SAS discloses this information pursuant to the Swedish Securities Market

Act and/or the Swedish Financial Instruments Trading Act. The

information was provided for publication on March 14, at 8:00 a.m.