SAS Group Year-end Report January-December 2007

SAS Group Year-end Report January-December 2007

Key ratios for the period

•  Operating revenue: MSEK 54,112 (51,670) (+4.7%)

•  Number of passengers: 31.2 million (+2.9%)

•  Spanair is reported as an operation under discontinuation and goodwill
impairment of MSEK 300 was made.

•  Earnings before nonrecurring items in continuing operations: MSEK 1,242 (727)


•  EBT margin before nonrecurring items: 2.3% (1.4%)

•  Net income for the period: MSEK 636 (4,740) 

•  Earnings per share: SEK 3.87 (28.10) 



Comments by the CEO

The performance during the first three quarters was positive, with favorable
demand and, consequently, a favorable traffic trend and yield. The fourth
quarter was strongly affected by our withdrawal of the Q400 aircraft and
replacement of these with leased capacity. Overall, capacity was greater than
requirement, resulting in reduced load factors and contributing to weaker
yields. However, from a customer perspective, it is important to maintain
traffic to as high a degree as possible. As well as the direct Q400 effects, the
end of the year was also generally weaker for Scandinavian Airlines' short-haul
companies. This is probably a result of uncertainty from customers following the
Q400 problems and the strike threat relating to the structural changes
discussed, particularly in SGS, but also due to increased capacity in certain
markets.

As a result of a weak fourth quarter, income before nonrecurring items for the
year was slightly more  than SEK 1.2 billion. The direct earnings effects of the
Q400 totaled approximately MSEK 700, of which about MSEK 500 was charged to the
fourth quarter. The ECA agreement, which is a cooperation between SAS, Lufthansa
and British Midland, was charged to our earnings in an amount of slightly more
than MSEK 600 in 2007 mainly as the result of a weak earnings trend in British
Midland. However, the agreement expired at the end of 2007. In addition, a
number of strikes impacted earnings in a net amount of approximately MSEK 200.

For the year as a whole, our airlines, except for our intercontinental
operations, improved their earnings compared with 2006. The earnings
improvements were the result of favorable market conditions, improved concepts,
effective control, traffic optimization and continued cost measures. The traffic
trend for our intercontinental operations was better, especially in the second
half of the year, but earnings were impacted by lower cargo revenue. The
divestment process for Spanair is in progress and is expected to be completed
during the second quarter of 2008.  

Earnings in STS and SGS were strongly negative in 2007. The reasons include the
main focus being on delivery quality, as well as delays and difficulties in
implementing the necessary cost program. A decision was made to divest Spirit
within SAS Cargo and to outsource maintenance of the Boeing 737 Classic. An
internal solution was approved for SGS, providing that the company implements
cost reductions of MSEK 400 and a quality-improvement program within 18 months. 

We take a very serious view of the weaker trend at the end of 2007 and the
economic downturn that can be foreseen. We also take a serious view of the fact
that S11, particularly due to cultural problems, is delayed and is generating
major future challenges. This applies to the cost program and other structural
changes. In parallel with the implementation of our "Strategy 2011," in which
cultural turnaround is key, work is focusing on regaining the customers'
confidence, adapting capacity where necessary and securing compensation for the
record-high fuel prices. Our assessment is that we will also have a negative
earnings effect in 2008 as a result of the Q400 decision of approximately MSEK
700-800. 

Unfortunately, 2007 was a year characterized by several major negative events
that affected our customers, our brand and our shareholders. In 2008, the
management's focus will be on the continued implementation of Strategy 2011 and
taking further measures as a result of the anticipated downturn in the economy.

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

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Internet: www.sasgroup.net or from: 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