SAS — Earnings Release 2020

Feb 26, 2020

QUARTERLY RESULTS IN LINE WITH GUIDANCE

QUARTERLY RESULTS IN LINE WITH GUIDANCE

SAS STRENGTHENS ITS MARKET POSITION

Our first quarter of 2020 was characterized by passenger growth and a

strengthened position in the Scandinavian market. Operational improvements also

resulted in increased robustness and customer satisfaction. However, a strong

revenue growth was offset by negative currency and IFRS 16 effects, resulting in

earnings below the same period last year.

NOVEMBER 2019 - JANUARY 2020

· Revenue: MSEK 9,707 (9,405)

· Income before tax (EBT): MSEK -1,087 (-576)

· Income before tax and items affecting comparability: MSEK -1,078 (-724)

· Net income for the period: MSEK -861 (-469)

· Earnings per common share SEK -2.33 (-1.25)

· First quarter with IFRS 16 accounting standard

SIGNIFICANT EVENTS AFTER QUARTER END

· Charlotte Svensson appointed as SAS new Chief Information Officer as of 1

February 2020

· New agreement signed with Danish union, FPU, tailored for future regional

production

OUTLOOK

· SAS expects to deliver a FY20 EBIT margin before items affecting

comparability of 3-5%, subject to limited impact of COVID-19

We continued to note strong demand for our services in the first quarter of

fiscal year 2020. Revenue increased more than 3% to SEK 9.7 billion, mainly

driven by an increase of nearly 100 000 passengers.

Total expenses before items affecting comparability, increased over 4% compared

with last year due to unfavorable currency movements.

As a consequence of unfavorable currency movements and the effects from IFRS 16

accounting standard, adopted on 1 November 2019, earnings before tax and items

affecting comparability amounted to MSEK -1,078. This represents a decrease of

MSEK 354 year-over-year and is in line with our guidance communicated at the end

of last year.

Despite a weaker quarter from an earnings perspective, our cash position remains

strong and is supported by improved forward bookings ahead of the summer season.

COMMERCIAL DEVELOPMENT

I am very pleased that our improved operational quality and customer offering,

our dedicated focus on sustainability and introduction of new aircraft continue

to attract customers. In a challenging market, our strong customer offering has

resulted in a passenger increase of 1.5% and improved our market share in

Scandinavia by 1.6 percentage points to 29%.

Ingegerd Viking, the first of eight Airbus A350s on order, had its inaugural

flight from Copenhagen to Chicago on 28 January. The passengers on board the new

aircraft experienced a comfortable flight, in a cabin with new seat models and

unique customized SAS solutions.

Aircraft operations account for over 99% of our greenhouse gas emissions.

Therefore, fleet renewal is our most important initiative to reduce our

environmental impact and the Airbus aircraft are the most fuel efficient on the

market. In the quarter, we phased in eight Airbus A320neos in addition to the

aforementioned Airbus A350. This means 15-30% lower fuel consumption and CO2

emissions compared with the aircraft they replace. During FY20, we expect

deliveries of three additional A350s and six A320neos, which will further reduce

our environmental footprint.

Until future technology enables zero-emission aircraft, we will continue our

efforts to increase usage and stimulate supply of sustainable aviation fuels.

Since we provided the option for our customers to add biofuel to their SAS

tickets, almost 10 000 travelers have added biofuel to their journeys. This

interest shows that a growing number of customers wish to contribute to more

sustainable air travel.

At the start of the quarter, we launched new packaging for the New Nordic by SAS

food concept, which eliminates up to 50 tons of plastics per year. This is one

of many important initiatives in maximizing the use of sustainable materials in

the customer offering.

We were also happy to announce that SAS and Apollo have extended their

partnership for the 2020 summer and winter season. The agreement is worth around

SEK 1.4 billion and we look forward to welcoming Apollo customers on board from

23 locations in Sweden, Denmark and Norway on their way to 26 destinations in

Europe.

Norwegian Sykehusinnkjøp also entered into a four-year contract with SAS, as the

preferred airline for patient and employee travel on the largest routes in

Norway. The healthcare companies spend around MNOK 400 annually on airline

travel, and the decision to choose SAS was based on a combination of price and

departure schedules.

OPERATIONAL DEVELOPMENT

The ongoing work to improve our operations is reflected in a substantial

improvement in operational performance. Compared to last year, punctuality

increased 4.2 percentage points to 84.2% while regularity remained high at

98.7%.

Although weather was favorable for airline operations during the period, we also

noted positive effects from the new planning processes implemented in FY19.

These processes have resulted in a robust production scheme delivering tangible

results with over 30% reduction in the average number of delay minutes

per flight.

We know that punctuality is the single largest driver for customer satisfaction.

Compared to last year, customer satisfaction increased three points to 74. In

the month of January in isolation, the customer satisfaction index reached 75,

which is the best result in many years. I would like to recognize our employees

whose dedicated work is behind the improved performance and customer

appreciation.

Productivity measured as pilot and cabin crew block hours per quarter, declined

10% and 2% respectively. The decline is explained by the required Airbus

training as Arlanda becomes our second Airbus-base in FY20. Short-term,

productivity will be negatively impacted before the benefits from a single-type

fleet start to materialize.

One of the points I highlighted in the fourth quarter, was the need to evaluate

how to renew the fleet of midsized aircraft servicing regional routes.

Approximately 20% of the network is served with our current midsized Airbus A319

and Boeing 737-700 aircraft. Serving regional routes with aircraft of the right

size is important from both sustainability and financial perspectives. However,

these aircraft will need to be replaced in the next few years.

Before proceeding, there are several prerequisites that need to be fulfilled

before a new order can become a reality. Firstly, we must ensure that each

entity within our operating model is based on single-type fleet in order to

minimize cost and complexity. Secondly, we need to have crew agreements tailored

for regional operations in Scandinavia. Thirdly, we need to be able to select

and source proven aircraft types suitable for reliable operations in Northern

Europe.

Related to the second requirement we have made some progress. We have now signed

an agreement with the Danish union, FPU, tailored for future regional

production. The agreement fulfills the requirements of locating midsized

regional production in Scandinavia, with local recruitment on Scandinavian terms

and conditions. With this in place, we will continue our intensive efforts to

address the other prerequisites, as well as continue to work with all our unions

to ensure that we lay the best foundation for the future.

AFFIRMED FULL-YEAR GUIDANCE

We are encouraged by the increase in passenger numbers and maintained yields

supporting strong revenue development. At the same time, the economic outlook

remains uncertain and the outbreak of the COVID-19 virus adds additional

concerns regarding a slowdown in key economies that may impact customer

demand negatively.

Our exposure to mainland China is relatively low, with the routes to Shanghai

and Beijing carrying some 250?000 passengers annually. The revenue loss from

suspended flights during February and March is expected to amount to some MSEK

200. As long as the COVID-19 outbreak is contained in scope and the suspension

of flights is isolated to the winter season, this should only have a marginal

impact on our earnings. We are continuing to monitor developments and are

maintaining close dialogue with the relevant authorities. The safety of

passengers and employees is our highest priority and we need to see a positive

development before recommencing flights to these regions.

The Swedish and Norwegian kronor remain weak against the US dollar and the Euro,

thereby increasing our costs as well as price levels for customers that travel

abroad. On the other hand, the recent decline in fuel prices represents a

positive development.

After taking into account the supportive revenue development as well as the

somewhat increased economic uncertainties, we can affirm our fiscal year outlook

of an EBIT margin before items affecting comparability of 3-5%, given a marginal

impact of COVID-19 that allows us to resume normal operations before the summer

season.

I want to thank you for your interest in SAS and look forward to welcoming you

on board one of our 800 daily flights.

Rickard Gustafson,

President and CEO

Stockholm, 26 February 2020

This SAS AB is obliged to disclose pursuant to the EU ­Market Abuse Regulation.

The information was submitted by Michel Fischier for publication on 26 February

2020 information is information that at 8:00 a.m. CET.