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SAS Group Interim Report January-September 2007

November 8, 2007 08:00

Key ratios for the period• Operating revenue: MSEK 46,995 (45,468) (+3.4%)

• Number of passengers: 31.1 million (+6.2%)

• Earnings before nonrecurring items in continuing operations: MSEK 982 (239)

• EBT margin before nonrecurring items: 2.1% (0.5%)

• Net income for the period: MSEK 1,261 (93)

• Earnings per share: SEK 7.50 (0.09)

Comments by the CEO

Unfortunately, the recent months have been characterized by problems with our Dash 8 Q400 aircraft. In September, we had two accidents involving emergency landings due to problems with the landing gear. After being grounded for several weeks, with extensive replacements and inspections, the aircraft were successively brought back into operation. Unfortunately, on October 27, there was another emergency landing with the same aircraft type, once again as a result of problems with the landing gear, but with a different cause. Taking into consideration our customers, our employees and our brand, which is characterized by a focus on safety, punctuality and regularity, the management and Board of Directors decided to immediately discontinue all operations using this type of aircraft. The decision is unique and severe, but necessary.

We are now working intensively to deploy replacement capacity in various forms. We expect to be able to commence implementation of a long-term solution during the second half of 2008. The direct effect on earnings for the full year is estimated at MSEK 600-700, of which MSEK 200 pertains to the third quarter. We are involved in discussions with aircraft manufacturer Bombardier to identify potential solutions relating to the Q400 fleet, including compensation.

Despite the problems described above, we were once again gratified to achieve a record number of passengers during the quarter and have transported nearly 41 million passengers in the past 12 months.

The airline business is generally performing extremely well. For Scandinavian Airlines, the trend over the past nine months has resulted in an earnings improvement of slightly less than SEK 1 billion. Both Scandinavian Airlines Sverige and Scandinavian Airlines Norge have results that exceed or are close to the Group’s profitability requirement. Scandinavian Airlines Danmark improved its earnings month by month, despite problems with strikes and the Q400. Widerøe, Blue1 and airBaltic also recorded strong improvements in earnings. The earnings improvements by the airlines are attributable to a strong market, improved concepts, efficient control and traffic optimization, as well as continued cost measures.

The strategy plan launched in June (S11) is now being implemented with full force. For our customers, we have introduced a number of innovations and we are proceeding with concept development and harmonization. We have also launched a special focus on leisure travelers, starting in Norway, with 12 new destinations at reduced prices. We have also decided to expand our intercontinental fleet by one aircraft to open the Copenhagen-Delhi and Copenhagen-San Francisco routes. During the quarter, shares were sold in the Spanish ground handling company Newco and the process for the divestment of Spanair was started. The work to evaluate the future structure of SGS, STS and terminal handling at SAS Cargo is continuing and a decision will be made in December. Our cost program, comprising many components, is continuing with a large number of projects and we will gradually see the effects.

Unfortunately, the year has been characterized by several negative events that have affected our customers and employees, as well as having a negative impact on earnings. However, I am convinced that we will be stronger for this experience and, with the help of S11, will create a strong, sustainable and profitable SAS.

Mats Jansson
President and CEODirect 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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