SAS Group Interim Report January-September 2007

SAS Group Interim Report January-September 2007

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 CEO

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