SAS Group Interim report November - January 2012-2013

November-January 2012-2013

  · Revenue: MSEK 9,597 (9,299)
  · Traffic: up 4.3%
  · Passenger revenue adjusted for currency: up 6.3%
  · Income before tax and nonrecurring items: MSEK ‑801 (‑656)
  · EBIT margin: ‑6.1% (‑10.4%)
  · Income before tax: MSEK ‑823 (‑2,686)
  · Net income for the period: MSEK ‑630 (‑2,541)
  · Earnings per share: SEK ‑1.91 (‑7.72)
  · Cash flow from operating activities MSEK ‑441 (‑662)


Statement by the President and CEO of SAS:
“SAS is continuing to deliver, step by step, in accordance with the
restructuring plan that was presented in November of last year. Behind this
progress lies one of the most extensive restructuring plans in the Scandinavian
business sector – under an agreement with our employees, SAS expects to reduce
its outstanding pension obligations by about SEK 19 billion, which substantially
reduces its financial risk.

We have also achieved a number of key milestones – we have presented a letter of
intent with Swissport concerning the Ground Handling operations and we entered
into a sale and leaseback agreement regarding reserve engines with a liquidity
effect of about MSEK 700. The new market-based collective agreements have
reduced our direct expenses and enable us to compete effectively in the growing
leisure travel market, with more departures and destinations. The unit cost,
excluding jet fuel, declined 2.7% during the quarter, and in January, when we
began noting the effects of the new collective agreements, the unit cost,
excluding jet fuel, declined 6.9%.

At the same time, we must confirm that SAS reported a loss for the quarter, and
although seasonal effects are amplified by the new fiscal year, we are far from
satisfied. Accordingly, we remain focused on completing the action plan and our
aim to achieve a positive income before tax for the full-year remains firmly in
place.”



Comments by the CEO

  · SAS delivers in accordance with the adopted plan
  · Letter of intent with Swissport regarding Ground Handling
  · A sale and leaseback agreement was entered into in February regarding
reserve engines with a liquidity effect of about MSEK 700
  · The new collective agreements have begun to generate effects in the form of
lower expenses and the more efficient utilization of resources

SAS is delivering in line with the plan that we have adopted. The implementation
of the actions in the 4XNG restructuring program is proceeding as planned, and
it is gratifying to be able to confirm that we have now achieved several key
milestones – on March 7 we signed a letter of intent with Swissport regarding
the outsourcing of our Ground Handling operations. Centralization of the
administration is now fully under way, including the centralization to Stockholm
of the traffic-monitoring units. Consequently, the staff requirement has been
reduced by 30%, with retained traffic punctuality and regularity. We have also
signed an agreement on the outsourcing of our call centers to a third party and
entered into a sale and leaseback agreement regarding reserve engines with a
liquidity effect of about MSEK 700 during the second quarter.

The yield improved by 1.6% compared with the year-earlier period and the unit
cost, excluding jet fuel, declined 2.7%, which was the result of the
restructuring program that is currently under way. In January, when we
experienced a significant impact from the new agreements, the unit cost declined
6.9%, excluding jet fuel.

At the same time, SAS reported a negative income before tax and nonrecurring
items of MSEK 801, which was in line with or somewhat better than our
expectations late last year. However, seasonally, the first quarter is our worst
quarter and this effect has essentially been amplified due to the new fiscal
year. However, we must naturally never be satisfied when reporting a loss, and a
great deal of work remains to be done to make SAS profitable again.

The responsible actions taken by our employees and trade union representatives,
which enabled us to enter into new and market-based agreements, were a crucial
step toward making SAS profitable. In December, the agreements enabled us to
secure a new credit facility in the amount of SEK 3.5 billion. This shored up
our financial preparedness, which was 20% at January 31.

The agreement also laid the foundation for one of the most extensive financial
restructuring programs in the Scandinavian business sector, which allows us to
replace most of the current benefit-based pension terms with premium-based
solutions. This means that our pension obligations are expected to be reduced by
about SEK 19 billion, down nearly 60%. This is decisive for SAS from two
perspectives. Firstly, the financial risk has decreased and the predictability
increased and secondly, SAS now has its shareholders’ equity under control. The
negative impact on shareholders’ equity that is recognized in November has now
been sharply reduced. Accordingly, we expect our equity/assets ratio to remain
above our target of 20% when shareholders’ equity is adjusted in accordance with
the new accounting policies as of November 1, 2013.

The changes also pave the way for a significantly more flexible platform from
which SAS can conduct its business. Competitive terms in our collective
agreements also enable us to compete more effectively in the growing leisure
travel market. We can expand our customer offering during the summer season and
holidays, and generate greater efficiency in our utilization of aircraft and
personnel – a step in the pursuit of which is the decision to launch 45 new
routes in 2013.

We are putting another intensive quarter behind us. We have created the means to
strengthen our competitiveness, we are well on our way to completing the
restructuring plan and we have secured our financial stability. Overall, we have
now provided ourselves with greater control of our fate at the same time as the
4XNG actions are being implemented as planned. Provided that there are no
significant unforeseen external events and that jet-fuel prices remain stable
around current levels, we believe that there is a possibility of achieving a
positive EBIT margin in excess of 3%, and a positive EBT for the full-year
2012/2013.

Stockholm, March 8, 2013

Rickard Gustafson,
President and CEO


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 March 8, 2012 at 8:00 a.m.