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SAS Group financial update

March 30, 2010 12:30

Summary financial update January-February 2010

• January-February EBT before non-recurring items MSEK –960

• First quarter estimate for EBT before non-recurring items in line with Core SAS plan at approximately SEK –1 bn

• Unit cost down 7%, RASK down 4.7%

• Positive cash flow from operating activities, MSEK 418 (85)

Background of this report

The SAS Group is publishing this January-February financial update in order to provide the market with updated financial and operating information prior to the launch of the rights issue. The Group has prepared the financial information included in this report in line with its normal standards for preparation of interim financial information. The financial and operating information included in this report has not been reviewed or audited by the Group’s external auditor.

The first quarter interim report of 2010 and the supplementary prospectus, consisting of the interim report will be published on April 22, 2010 during the subscription period for the rights issue, in order to provide investors with a financial update during the rights issue.

January-February highlights

· Operating revenue: MSEK 5,888 (6,951), compared to January-February in 2009*

· Yields still under pressure (currency adjusted): –12.2%

· Positive trend in load factor continued: +5.0 p.u. (SAS Group)

· RASK (total traffic revenue/ASK) down 4.7%

· EBT before non-recurring items in continuing operations: MSEK –960 (–420) affected by MSEK –719 in currency effects (year on year)

· SEK 4.3 bn (55%) implemented of total Core SAS cost savings program of SEK 7.8 bn, which is according to plan

o Additional earnings effect in January-February from cost savings program: MSEK 450

o Additional reduction in FTE of 200, bringing the total reduction to 3,100 or 67% of the planned reduction of 4,600 FTE

o Unit cost down 7.0% (currency and fuel adjusted)

o Remaining earnings effect of MSEK ~5,200 in 2010–2012

· Negative currency effects of MSEK –719 compared with the same period in 2009 (year on year) mainly due to effects of weaker USD/SEK exchange rate and corresponding losses from certain hedging arrangements

· Cash flow from operating activities for the period was MSEK 418, an improvement of MSEK 333 compared to the same period in 2009

First quarter estimate and process update

· Load factor and RASK are improving further in March and results are expected to be significantly better than the same period in 2009

· Estimate for first quarter earnings before non-recurring items in continuing operations: SEK –1 bn (MSEK – 889 in Q1 2009) in line with the Core SAS plan

· Both main conditions for the four main owners participation in rights issue satisfied:

o Final agreement signed on March 12, 2010 with pilot and cabin crew unions of annual cost savings of MSEK 500, with effect from second quarter in 2010

o Refinancing of SEK 2 bn of bonds maturing in 2010 secured through:

– Issue of bonds in the EMTN market with an aggregate principal amount of MEUR 60 (approximately MSEK 580)

– SEK 1.6 bn offering due 2015 of convertible bonds on March 19, 2010

– Issue of bonds with an aggregate principal amount of SEK 1 bn secured on March 30, 2010

* All numbers in brackets represent January-February 2009 figures and percentage changes are compared to the same period.

January-February in summary with outlook for the first quarter

The first two months of 2010 developed according to plan for the SAS Group, with an EBT before non-recurring items in continuing operations of MSEK –960. January and February are the seasonally weakest months of the year in terms of demand for air travel in the Nordic region. In addition, the Group´s result was negatively affected by changes in currency exchange rates of MSEK –719 compared to the same period in 2009. The pressure on passenger yield continued to be significant and the yield for Scandinavian Airlines (adjusted for currency effects) decreased by 12.2% compared to the same period in 2009, but the load factor improved 5.3 p.u., continuing the positive trend which began in July 2009. As a result, RASK fell by 4.7%. It should however be noted that the change in passenger yield was positive in January-February 2009 compared to the same period in 2008, primarily due to higher fuel surcharges imposed in early 2009.

Implementation of the Core SAS cost savings program, which amounts to a total of SEK 7.8 bn in annual cost savings, has proceeded as planned, and an additional MSEK 800 of cost saving measures have been implemented since year end. In total, 55% or SEK 4.3 bn of the total cost savings program had been implemented as of February 28. Of the total planned FTE reduction of 4,600 during 2009-2012, FTEs were reduced by an additional 200 FTE in January-February, increasing the total implemented reduction to 3,100 FTE or 67%. The unit cost for Scandinavian Airlines is continuing to decline, and was down 7.0% (currency and fuel adjusted) compared to the same period in 2009, despite large capacity reductions.

Several cost items decreased significantly during the period, e.g., costs for personnel adjusted for currency and volume effects, was down 9.6% and aircraft related costs were down by 21.7% compared to the same period in 2009. Remaining annual earnings effect from the total cost savings program amounts to MSEK ~5,200 in 2010–2012.

Total currency effects for the period were negative and amounted to MSEK –719 compared to the same period in 2009. The effects on revenue and operating expenses were positive MSEK 50 and MSEK 150 respectively. Due to the significant decrease in USD to SEK, currency effects on certain hedging arrangements and working capital were negative at MSEK ~–770 compared to last year. Effects on net financial items were MSEK ~–150.

Scandinavian Airlines operating profit, EBIT, improved by MSEK 46 to MSEK –586 (–634) compared to the same period last year despite the challenging market conditions and negative currency effects.

In March 2010, passenger yield is expected to continue to decline, partly due to seasonality effects due to the Easter holidays, thereby negatively affect revenues for the first quarter of 2010 as compared with the same period in 2009. EBT before non-recurring items in continuing operations for the first quarter is expected to SEK –1 bn.

In March 2010, the court of appeals (Lagmansretten) in Oslo reached a decision in the appeal by SAS and Norwegian Air Shuttle of a ruling in the dispute in 2008. The court ruled in favor of Norwegian but the judgment was not unanimous. SAS is currently evaluating a possible request to the Norwegian Supreme Court for leave to appeal. If the request is not granted or successful, the recent judgment by the court of appeals will have a negative effect on the Group’s results and liquidity of approximately MSEK 200.

Direct questions to: Investor Relations SAS Group: Vice President Sture Stølen +46 8 797 14 51, e-mail: investor.relations@sas.se

All reports are available in English and Swedish and can be ordered on the 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

For definitions, refer to the SAS Group website, www.sasgroup.net, or contact investor.relations@sas.se

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