SAS — Interim / Quarterly Report 2010

Nov 10, 2010

SAS Group Interim Report January-September 2010

SAS Group Interim Report January-September 2010

July-September 2010 

· Operating revenue: MSEK 10,690 (11,076) 

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

387 (37) 

· EBT margin before non-recurring items in continuing operations: 3.6%

(0.3%) 

· Non-recurring effects: MSEK -1,411, of which restructuring costs

MSEK -146, legal disputes MSEK -982, impairment charges MSEK -229 and

capital losses MSEK -54 

· Income before tax: MSEK -1,024 (114) 

· Net income for the period: MSEK -1,051 (152)  

· Earnings per share:  SEK -3.19 (0.78) 

· Cash flow from operating activities: MSEK -470  (-1,744)

January-September 2010 

· Operating revenue: MSEK 30,164 (34,595)  

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

693 (-814) MSEK. Adjusted for the effects of the ash cloud, earnings

amounted to MSEK 7  

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

-2.3% (-2.4%) 

· Non-recurring effects: MSEK -1,903 

· Income before tax: MSEK -2,596 (-1,904)  

· Net income for the period: MSEK -2,265 (-1,643)  

· Earnings per share: SEK -8.40 (-10.91) 

· Cash flow from operating activities: MSEK 63 (-2,348) 

Important events during the quarter

· Mats Jansson, President and CEO, left his position on October 1,

2010

· Rickard Gustafson will assume his position as new President and CEO

not later than March 2011. Until this date, Deputy CEO John Dueholm

will  function as acting President and CEO

· On November 9, the European Commission fined SAS Cargo MSEK 660 in

the air-cargo investigation. Earnings in the third quarter were affected

by the corresponding amount.   

· SAS Cargo entered a settlement agreement concerning disputes in the

US, which had a negative impact of MSEK 104 on Group earnings for the

third quarter

· SAS was denied leave to appeal to Norway's Supreme Court in its

dispute with Norwegian, which resulted in a negative effect of MSEK 218

on the Group's earnings in the third quarter

· SAS deployed an additional long-haul aircraft to meet the rising

demand for intercontinental travel

· During the quarter, SAS was the world's most punctual major airline

Comments by the CEO

"Sharp improvement in underlying earnings, but quarter negatively

affected by substantial non-recurring items in the period."

Income before tax for the period amounted to MSEK -1,024 and was

charged with several significant non-recurring items due to events and

decisions that were not directly attributable to the quarter. The

effects were largely anticipated and the Group's financial preparedness

has been adapted to manage these. By now putting these events behind us,

we can channel our energy on looking to the future and fully focusing on

our core operations. The Group's reported income in continuing

operations (before non-recurring items) in the third quarter amounted to

MSEK 387. Compared with the year-earlier period, the underlying

improvement for the first nine months of the year is MSEK 821, adjusted

for non-recurring items and earnings effects in conjunction with the

volcanic ash in April.

The recovery in the airline industry is continuing and this is

particularly evident in the growth reported in intercontinental travel

and the general trend in business travel. The positive market trend is

expected to continue and this is therefore a favorable time to launch

initiatives aimed at profitable growth, which include higher frequency

on existing routes and the opening of the intercontinental routes

Oslo-New York and Copenhagen-Shanghai. 

Improved ratio between revenues and expenses

The Group's profitability has improved primarily as a result of reduced

unit costs, which were lowered by 8.7% compared with the third quarter

in the preceding year. Despite the recovery in the market, the price

level declined in several of the Group's markets due to overcapacity.

However, SAS successfully managed to offset the effects of the fall in

yield by improving the passenger load factor. The underlying average

currency-adjusted unit revenue, RASK, for the quarter remains on a par

with the year-earlier period. Although this underlying positive trend in

the airline operation is obscured in earnings by non-recurring items, it

is a signal that the core operation is proceeding in the right

direction. SAS expects the unit cost to continue to decline during the

remainder of the year, while the RASK is expected to be stable.

Core SAS strategy remains in focus

The focus is now shifting toward completing the implementation of the

Core SAS strategy. We must continue to reduce the cost level to improve

earnings and to grow profitably in pace with the market. This provides

us with the opportunity to manage the fierce competitive situation, in

the shape of overcapacity and downward pressure on prices in several

markets. SAS's prerequisites to successfully address this situation are

as follows: 

-      The cost savings program is proceeding according to plan and the

remaining activities have been identified and secured at a local level

in the organization. Group management is giving the activities its full

attention and they are being followed up centrally by a dedicated

program office. The remaining earnings effect from the program is SEK

2.9 billion.

-      Our innovative product offering that is specifically directed

toward business travelers sets us apart from our competitors. Now, as

one of the world's first airlines, we are launching Internet onboard and

we already offer the Nordic region's largest route network with the

highest frequency flight schedule and a range of time-saving services.

-      Our customer satisfaction and brand continues to gain in strength

as a result of such factors as our professional staff - who receive high

marks for their interaction with customers and their service - and our

punctuality, which is the highest in the world.

By following through on our Core SAS strategy with the same vigor as we

have to date, SAS's profitability will continue to improve. 

John S. Dueholm

Acting President and CEO

Direct questions to Investor Relations SAS Group:

Vice President Sture Stølen +46 8 797 14 51, or Mattias Hyllert +46 8

797 12 19, e-mail:

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

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 November 10, 2010 at 8:00

a.m.