SAS — Interim / Quarterly Report 2020

Aug 25, 2020

CONTINUED NEGATIVE IMPACT OF COVID-19

CONTINUED NEGATIVE IMPACT OF COVID-19

MAY 2020-JULY 2020

· Revenue: MSEK 2,507 (13,401)

· Income before tax (EBT): MSEK -2,071 (1,490)

· Income before tax and items affecting comparability: MSEK -784 (1,495)

· Net income for the period: MSEK -2,365 (1,162)

· Earnings per common share: SEK -6.18 (3.04)

SIGNIFICANT EVENTS DURING THE QUARTER

· SAS signs a SEK 3.3bn revolving credit facility agreement

· SAS presents a revised business plan including measures to tackle the

effects of the COVID-19 pandemic and revised sustainability goals

· SAS presents a recapitalization plan to remedy the liquidity shortage and

the negative equity caused by the COVID-19 outbreak

SIGNIFICANT EVENTS AFTER QUARTER END

· SAS presents a revised recapitalization plan supported by shareholders

representing 35.6% of shares and the noteholders committee. The plan is also

approved by the European Commission

NOVEMBER 2019-JULY 2020

· Revenue: MSEK 17,478 (32,677)

· Income before tax (EBT): MSEK -6,880 (-302)

· Income before tax and items affecting comparability: MSEK -5,576 (-440)

· Net income for the period: MSEK -6,696 (-240)

· Earnings per common share: SEK -17.66 (-0.65)

CONTINUED NEGATIVE IMPACT OF COVID-19

We are encouraged to see that demand is slowly returning as we continue to ramp

-up our operations. So far, the demand for air travel has developed in line with

our expectations, with domestic traffic leading the way. Simultaneously we are

making good progress in adapting our cost structure to a market defined by lower

demand. Although there are significant challenges ahead, I am confident that SAS

will return as a sustainable and profitable airline following a successful

implementation of the recapitalization plan. Aviation fulfils a vital part of

Scandinavia's infrastructure, and is important to enable connectivity to the

rest of the world as demand returns.

FINANCIAL SUMMARY

The coronavirus and travelling restrictions has led to a collapse in the demand

for air travel. Consequently, the number of passengers traveling with SAS

dropped 86% and total revenue decreased 81% in the quarter. Domestic travel has

rebounded more quickly than other parts of our business and accounts for most of

our quarterly revenue.

Despite our immediate measures to reduce costs to adapt to a new reality, the

cost reduction of 67% did not offset the sharp decline in revenue. As a result,

earnings before tax came in at SEK -2.1 billion, some SEK 3.6 billion below last

year. The result was positively impacted by SEK 840 million from a strengthening

of the Swedish krona, primarily against the US dollar. However, in line with

other airlines, the negative development in aircraft valuations necessitated a

SEK 1,040 million write down of some aircraft assets.

Our focus on preserving cash is evident through a monthly operating cash burn of

SEK 320 million. This is of course significantly worse than last year but below

the range we presented in the second quarter, and we will continue to monitor

cash burn as we slowly continue to ramp-up operations. At the end of the third

quarter our cash position was SEK 6.2 billion, which includes the SEK 3.3

billion drawn under the credit facility guaranteed by the Danish and Swedish

states.

CUSTOMER DEMAND SLOWLY INCREASING

Demand continues to return slowly and in line with the estimated ramp-up plan we

presented in the second quarter. In the quarter, demand was centered around

domestic travel and attractive European summer destinations. In July, SAS

operated 8,700 departures representing some 25% of prior year available seat

kilometers. This is an increase of some 20 percentage points compared to the

first month of this quarter. During the fourth quarter, we will continue to ramp

-up production and we expect to reach 30% -40% of prior year available seat

kilometers by the end of Q4.

Despite the slow but ongoing recovery as noted in our traffic figures, demand

going forward remains uncertain and is heavily dependent on the easing of travel

restrictions as well as passenger confidence and willingness to travel.

Furthermore, it is difficult to predict how demand will evolve during the coming

fall and winter due to changed customer behavior with bookings being made closer

to the date of travel. Our current expectation is that the ramp-up phase for the

airline industry may last until 2022 before demand can reach more normalized

levels, with a return to pre COVID-19 levels a few years thereafter.

PROGRESS ON REVISED BUSINESS PLAN

SAS continues to make progress with its revised business plan, which is based on

four building blocks: To be the preferred airline for Scandinavia's frequent

travelers; to transition to a hyper modern single-type fleet; to establish a

fully competitive operating model, and; to achieve global leadership in

sustainable aviation. During the quarter several milestones were reached.

Almost 4,000 redundancies (of approximately 5,000 in total) have now been

concluded and local employment agreements are being renegotiated. In July, we

signed an agreement to outsource ground handling operations in both Gothenburg

and Malmö, concentrating our operations to the three main hubs in Copenhagen,

Oslo and Stockholm. Even though the initiatives regarding our work force are

difficult and unfortunate, these measures are unavoidable and necessary to

safeguard SAS for the future.

Through constructive dialogue with Airbus, we have managed to defer 8 A320neo

and 2 A350-900 aircraft deliveries. These deferrals are important as they reduce

our capital expenditures for 2021-2024 and better align deliveries of new

aircraft with the expected return in demand. We are still committed to achieving

a single-type fleet operation by 2023, based on new Airbus aircraft that will

provide lower fuel consumption and reduced maintenance costs compared with our

current fleet composition. Furthermore, we have made progress on our ambitious

sustainability goals by accelerating the phase out of older and less fuel

-efficient aircraft. We have also renegotiated agreements with several

suppliers, including wet-lease providers. The new agreements will lead to lower

costs and increased flexibility, through a higher share of variable costs going

forward.

We have introduced new procedures to ensure that our customers experience the

safest travel experience possible and continue to provide an attractive

timetable for travelers to, from and within Scandinavia. At the same time, we

regret that many customers are still waiting for refunds from canceled flights.

I would like to emphasize that our customers that are entitled to refunds will

be refunded, and we have increased our capacity to handle the large number of

cancellations in these unprecedented circumstances.

PROGRESS ON RECAPITALIZATION PLAN

Despite our own efforts, the COVID-19 pandemic has resulted in a need to remedy

the liquidity situation and the negative equity caused by the outbreak. During

the quarter SAS reached an agreement in principle with the noteholders committee

representing a large proportion of the holders of SAS bonds and hybrid notes.

Furthermore, the governments of Denmark and Sweden have now approved the revised

recapitalization plan, which has also been approved by the European Commission

under applicable State aid rules framework.

The next steps of the plan are to obtain a vote in favor of the offer from the

bond and hybrid holders at the noteholders meeting on September 2, and a vote in

favor of the recapitalization plan at the extraordinary shareholders' meeting

scheduled for September 22. The entire revised Recapitalization plan is expected

to be completed early November.

SAS plays a vital role in connecting the Scandinavian countries to the rest of

the world, as well as being an important infrastructure provider within the

region. By focusing on rebuilding our domestic and intra-Scandinavian presence,

we have been able to increase capacity ahead of competition. I am grateful that

our major shareholders have decided to support SAS and trust that others will do

the same in these unprecedented times.  SAS is determined to continue as

Scandinavia's leading airline as the world recovers from the COVID-19 pandemic.

On behalf of all of us at SAS, I'm looking forward to once again welcoming you

onboard on one of our flights soon!

Rickard Gustafson,

President and CEO

Stockholm, 25 August 2020

This information is information that SAS AB is obliged to disclose pursuant to

the EU Market Abuse Regulation. The information was submitted by Michel Fischier

for publication on 25 August 2020 at 8:00 a.m. CEST.