SAS Group Interim Report January-March 2010

SAS Group Interim Report January-March 2010

Key ratios January - March 2010

• Operating revenue: MSEK 9,495 (11,296) (-16.0%)

• Number of passengers:  5.735 million 

• Earnings before non-recurring items in continuing operations: MSEK -844 (-889)

• EBT margin before non-recurring items in continuing operations: -8.9% (-7.9%)

• Net income for the period: MSEK -712 (-748)

• Earnings per share[1]: SEK -0.29 (-0.74)



Highlights

• Cost savings program strengthened by SEK 2.5 bn and totals SEK 7.8 bn. 63%
implemented as of March 31. Earnings effect MSEK 750 in Q1

• Unit cost down 7.8%[2] in Q1

• RASK down 1.7%[2] in Q1, up 3.1%[2] in March 

• Rights issue of SEK ~5 bn with preferential right for SAS's shareholders in
progress

• Main conditions for the four principal owners' participation in rights issue
were satisfied: 
- Agreements with pilot and cabin crew unions for annual cost savings of MSEK
500
- Refinancing of SEK 2 bn of debt maturing in 2010 through SEK ~2.2 bn through
issuance of bonds and convertible bonds (additional SEK 1 bn to be issued
following the rights issue) 

• Negative earnings effect up to and including April 21 from disruptions due to
volcanic ash estimated to MSEK -460. Negative effect per day MSEK 50-90, higher
on busy travel days and lower on weekends, assuming all flights cancelled 

[1]  Based on 2,467,500,000 shares, 1,007,233,500 shares respectively
[2]  For Scandinavian Airlines, compared with the same period in 2009


Comments by the CEO

2009 was probably one of the most challenging years that the aviation industry
has experienced. GDP growth forecasts suggest that 2010 will be stronger than
2009, although forecasts for Sweden were recently revised slightly downward. In
its most recent full-year forecast in March, the IATA estimated global losses
for the aviation industry in 2010 to total USD 2.8 billion. However, due to the
recent effects of the extraordinary disruption to air travel services due to
volcanic ash, this forecast will be revised downwards - 2010 will continue to be
a tough year for the aviation industry. However, excluding recent events, some
signs of improving demand have been noted in SAS' markets but uncertainty still
remains regarding the yield development.

For January and February, which are the seasonally weakest months of the year,
the SAS Group posted income of MSEK -960 before non-recurring items, which was
in line with the Core SAS plan. However, performance in March was slightly
better than expected with a significantly improved load factor of 73.1%, up 8.6
percentage units compared with the same period last year. Revenue in relation to
capacity (RASK) increased 3.1% in March compared with the same period in 2009,
while our costs continued to decline. It is also highly gratifying that our
total passenger figures increased for the second consecutive month despite
extensive capacity reductions. 

The Group's income before non-recurring items in continuing operations amounted
to MSEK 116 for March, which was slightly better than anticipated. Accordingly,
income before non-recurring items for the first quarter totaled MSEK ‑844.
Non-recurring items totaled MSEK -128, which resulted in income before tax of
MSEK -972 for the first quarter. The Group's largest operation, Scandinavian
Airlines, reported EBIT before non-recurring items of MSEK ‑235 for the first
quarter, an improvement from the same period in 2009.

We can now see increasing effects of our Core SAS cost savings program. Measures
have been implemented according to plan and the effect on earnings for
January-March was MSEK 750 compared with the same period in 2009. Unit cost for
Scandinavian Airlines during the period fell 7.8% compared with the same period
in 2009, primarily due to lower costs for personnel, technical maintenance and
aircraft leasing. This shows that our cost saving measures are providing the
intended effects and we will continue to fully implement the outstanding
measures corresponding to SEK 2.9 billion. The total cost savings program now
amounts to SEK 7.8 billion and includes savings negotiated in collective
agreements effective April 1. The extensive centralization and
efficiency-enhancement process of the SAS organization, which is a key part of
the cost savings program and has been under way since the beginning of the year,
continue to show strong progress. The number of FTEs was reduced by 300 between
January and March 2010, in addition to the reduction of 2,900 FTEs that had been
implemented at year-end 2009. Accordingly, approximately 70% of the total
planned reduction of 4,600 FTEs had been implemented as of March 31. To balance
supply and demand, capacity reductions of 21 aircraft also form part of Core
SAS. 20 of these aircraft had been withdrawn from service by the end of the
first quarter and the final aircraft will be removed from operation by the end
of the third quarter in 2010. 

On April 7 the Annual General Meeting approved the Board's proposals of a rights
issue of approximately SEK 5 billion. The rights issue process is ongoing and we
are now in the subscription period which will continue up to and including April
29. In conjunction with the rights issue, our liquidity will be further
strengthened by an additional SEK ~3.2 billion through the issuance of bonds,
including the convertible bond issue and SEK 1 billion in new bonds which are to
be issued subject to prior completion of the rights issue.

As mentioned earlier, the Scandinavian airspace has been closed or partly closed
from April 15 due to ash from the Eyjafjallajökull volcano in Iceland. As a
consequence, we cancelled the majority of our flights from April 15. The
situation in the rest of Northern Europe is similar and represents a major hit
to the entire aviation industry. Up to and including April 21, the negative
impact on SAS' earnings is MSEK ~-460. With safety as the number one priority,
we are working closely together with other major European airlines and the
aviation authorities to find solutions to resume full operations. We regret the
situation and the consequences for our customers and SAS will do its utmost to
help them in a difficult situation.

Despite the uncertainty regarding potential additional effects on our operations
due to the volcanic ash, we continue to implement Core SAS according to plan.
With a satisfactory liquidity situation, and estimated remaining earnings effect
of SEK 4.8 billion in 2010-2012 from our cost savings program, we are confident
we can handle the negative effects in a tough 2010 and benefit from a potential
recovery in the market.


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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