Interim Report January-March 2008

Interim Report January-March 2008

Key ratios for the period

• Operating revenue: MSEK 12,833 (11,887) (+6.3%) *

• Number of passengers: 7.3 million (+2.6%)

• Earnings before nonrecurring items in continuing operations: MSEK -973 (-94)

• EBT margin before nonrecurring items: -7.6% (-0.8%)

• Net income for the period: MSEK -1,134 (-47) 

• Earnings per share: SEK -6.55 (-0.11) 

• A short-term action plan corresponding to SEK 1.1 billion will be implemented.
A total of 44% of the long-term cost program corresponding to SEK 2.8 billion
has been implemented.

* Currency adjusted


Comments by the CEO

The negative earnings trend we experienced in November and December last year
continued in the first quarter of 2008. The primary reason for this is the rapid
rise in jet fuel prices to record high levels that could not be offset, while
unit earnings fell as a result of further intensification of competition. There
is also certain overcapacity in the market and tendencies toward a decline in
business travel. Managing this market situation is currently a challenge faced
by the entire air-travel industry. We have seen how companies in the local
market have adjusted their forecasts downward at the same time as carriers in
the US and Asia have filed for bankruptcy. Consolidation in the industry on a
global scale is continuing with full force.

Accordingly, the SAS Group's earnings for the first quarter were very weak, with
an outcome of MSEK -973, which is a substantial decline compared with the
year-earlier period. The first quarter is seasonally a weak quarter, which was
further amplified by Easter falling in March this year. However, the underlying
decline is deemed to amount to approximately MSEK 600. We continued to incur
increasing expenses as a result of the Q400 problems, but the amount of
compensation received from Bombardier will mostly offset this during the
quarter.  

There are indications that that global trends are so serious that we must
prepare for a more enduring economic downturn. The macroeconomic problems, which
essentially derive from the overutilization of the US credit market, are now
having knock-on effects in the financial system. 

To turn around the earnings trend and manage the challenging market situation,
we have extended the action plan announced in February and grouped it together
under the name Profit 2008. These measures shall generate an earnings effect in
2008 of SEK 1.1 billion, including price adjustments, changes to the traffic
programs, additional efficiency enhancements of overheads and the
discontinuation and postponement of certain planned activities. Furthermore, we
have decided to reduce capacity by 11 aircraft (5%) commencing in autumn 2008
and have decided not to implement the planned increase of one intercontinental
aircraft. In total, the number of positions will reduced by approximately 1,000
FTEs. 

In parallel with these measures, we will continue to implement the S11 strategy
program - “Strategy 2011.” Major focus is being directed toward a cultural
turnaround and to improving our customer satisfaction, for example by providing
more stable delivery quality and continuous product improvements. 

The situation in the air-travel industry is serious. For this reason it is vital
that we turn around the earnings trend and at the same time keep S11 on track to
ensure that we can develop SAS to become an even stronger and more competitive
airline.    

Mats Jansson
President and CEO