SAS — Interim / Quarterly Report 2010

Aug 18, 2010

SAS Group Interim Report January-June 2010

SAS Group Interim Report January-June 2010

Key ratios January-June 2010

· Operating revenue: MSEK 19,474 (23,519) 

· Number of passengers: 12.0 million, down 4.6%  

· Earnings before non-recurring items in continuing operations: MSEK

-1,080 (-851)  

· EBT margin before non-recurring items in continuing operations:

-5.5% (-3.6%) 

· Net income for the period: MSEK -1,214 (-1,795)  

· Cash flow from operating activities: MSEK 533 (-604)

Key ratios April-June 2010 

· Operating revenue: MSEK 9,979 (12,223) 

· Number of passengers: 6.3 million, down 8.3%  

· Earnings before non-recurring items in continuing operations: MSEK

-236 (38). Adjusted for the effects of the ash cloud, earnings amounted

to MSEK 464 

· EBT margin before non-recurring items in continuing operations:

-2.4% (0.3%) 

· Net income for the period: MSEK -502 (-1,047)  

· Cash flow from operating activities: MSEK 503 (-353)  

Comments by the CEO 

"Adjusted for ash-cloud effects, SAS generated a profit for the second

quarter of 2010." 

Although the situation in 2010 for the aviation industry has improved

compared with 2009, the sector and we as a company are faced with major

challenges moving forward. The IATA industry body anticipates continued

losses totaling USD 2.8 billion for European airlines in 2010. The

Group's reported income before non-recurring items in continuing

operations in the first six months of the year was a loss of MSEK

-1,080, with the second quarter accounting for MSEK -236 of this

amount. 

The ash cloud and the subsequent closure of airspace had a significant

impact on net income for the second quarter and greatly affected our

customers. However, we are pleased that our hard work taking care of and

informing customers was appreciated and helped increase confidence in

SAS. Although services recovered within a few weeks to a normal level,

earnings were negatively impacted by approximately MSEK -700 due to the

event. Adjusted for the negative effects, income was consequently

positive in the amount of MSEK 464 in the second quarter, which is

traditionally a strong period for airlines. The fact that cash flow from

operating activities is now positive, MSEK 503, including the impact of

the closure of airspace, it is also a display of financial strength. 

During the first six months, we lowered unit cost by 6.7% despite

reduced capacity and the major disruptions to services. We also noted

growth in travel in Economy extra and Business class and a record-high

load factor on primarily intercontinental flights. This has added to the

platform we must establish to attain profitable growth. Accordingly, we

will now reintroduce one long-haul aircraft that will increase the

number of departures to Asia and the US and, in Scandinavia, we will

increase the frequency of services between the capital cities already in

September. 

Our increased customer satisfaction demonstrates that our focus on

service, simplicity and attractive prices is generating results.

Moreover, we have one of the market's strongest loyalty programs with

three million members. Today, we are also launching our biggest ever

low-fare campaign, with 1,000,000 low-price tickets, which will help

boost capacity utilization and direct focus to our product and brand. 

At present, I believe we are faced with three challenges that are most

decisive in our efforts to achieve a profitable SAS: 

-    Retain our focus and momentum in the implementation of the Core SAS

strategy and cost savings program. We are experiencing intense

competition, which entails continued pressure on yields. It is now vital

that we continue our efforts to cut costs. Over a period of one and a

half years, we have implemented savings totaling SEK 5.6 billion. It is

important that we continue in this manner, even in a period of positive

development. 

-    Continue to be the leader in terms of product and quality. Higher

frequency of services, a broader network and better punctuality than our

competitors constitute significant competitive advantages. Combined with

simplicity on the ground and in the air, this represents considerable

added value for our customers. This is a focus area and we are working

tirelessly to identify new solutions. 

-    Grow profitably in line with a market that remains uncertain. The

market is expected to grow annually by approximately 4-6% and our

ambition is to grow at an equal or higher rate. However, the

macroeconomic trend is uncertain. We will expand our capacity by

increasing aircraft utilization and availing ourselves of short-term

leases. This requires low investment obligations, which combined with

our strong liquidity, reduces our vulnerability. 

In addition to these challenges is the constant 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.   

I recently informed the Board of Directors that I have decided to leave

SAS in the fall. My decision to leave the company was not easy and

although there are still great challenges to come for SAS, the platform

is in place. The Core SAS strategy, including extensive cost savings,

has been established, the financial platform has been secured through

the latest rights issue, SAS has gained strength in terms of our

products, and customer satisfaction has increased. The company is now

well positioned to face the future. 

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 (investor.relations@sas.se). 

All reports are available in English and Swedish and can be ordered on

the Internet: www.sasgroup.net or from:

investor.relations@sas.se (investor.relations@sas.se). 

The SAS Group's monthly traffic data information is normally issued on

the fifth business day of the following month. A continuously updated

financial calendar can be found at:

www.sasgroup.net (http://www.sasgroup.net). 

For definitions, refer to the SAS Group website,

www.sasgroup.net (http://www.sasgroup.net), or contact

investor.relations@sas.se (investor.relations@sas.se).

Press/Investor Relations

Telephone conference, Frösundavik    10:30 a.m. August 18, 2010

Telephone conference, investors/analysts    2:00 p.m. August 18, 2010 

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 August 18,  2010 at 8:00

a.m.