SAS Group Interim Report January-June 2012

4Excellence generates results
-       Revenue measures lead to more passengers and increased revenue
-       The unit cost was reduced by 4%
April-June 2012

  · Revenue: MSEK 11,392 (11,319)
  · Number of passengers: increased by 228,000 (3.1%)
  · Passenger revenue adjusted for currency and nonrecurring items: increased by
2.8%
  · Income before tax and nonrecurring items: MSEK 137 (366)
  · EBT margin before nonrecurring items: 1.2% (3.2%)
  · Income before tax: MSEK 371 (730)
  · Net income for the period: MSEK 320 (551)
  · The cost for jet fuel increased MSEK 784 (compared with 2011)
  · Earnings per share: SEK 0.97 (1.67)
  · Cash flow from operating activities: MSEK 676 (731)

January-June 2012

  · Revenue: MSEK 20,983 (20,632)
  · Number of passengers: increased by 551,000 (4.1%)
  · Passenger revenue adjusted for currency and nonrecurring items: increased by
3.0%
  · Income before tax and nonrecurring items: MSEK -912 (-143)
  · EBT margin before nonrecurring items: -4.3% (-0.7%)
  · Income before tax: MSEK -761 (172)
  · Net income for the period: MSEK -409 (178)
  · The cost for jet fuel increased MSEK 1,116 (compared with 2011)
  · Earnings per share: SEK -1.24 (0.54)
  · Cash flow from operating activities: MSEK 1,891 (164)
  · SAS’s financial preparedness on June 30 amounted to SEK 8.2 billion

Important events during the quarter

  · The SAS Annual General Meeting was held on April 19,
    - SAS resolved that the fiscal year would be changed to the period November
1 – October 31, instead of the calendar year
    - All of the Board members were reelected and the Meeting also voted in
accordance with the proposals contained in the notification of the Meeting
    - The Meeting resolved that no dividend would be paid to shareholders for
the 2011 fiscal year.
  · SAS sold six properties to Swedavia totaling SEK 1.8 billion, with a cash
-flow effect of more than MSEK 440 and a capital gain of almost MSEK 340, which
were recognized in the second quarter of 2012
  · SAS and Apollo signed a historic partnership agreement valued at MSEK 920
  · The EFTA Surveillance Authority (ESA) in Brussels announced its view that
the current ban on earning EuroBonus points on Norwegian domestic flights is in
breach of EEA legislation.

Continued challenges in 2012 – measures totaling SEK 5 billion generate results
Due to the weaker economic trend, cost-saving measures in 4Excellence were
accelerated at the beginning of the year. These measures have now generated
results that will increase during the second half of 2012. In total, measures
corresponding to SEK 5 billion will be implemented during 2012-2013. In
combination, the uncertain economic trend, jet-fuel prices, exchange rates and
intense competitive pressure entail that SAS is not presenting a profitability
forecast for the full-year 2012.


Comments by the CEO

“4Excellence generates effects – the unit cost declined 4% during the quarter”

For the second quarter of 2012, SAS delivered positive income before tax and
nonrecurring items of MSEK 137. Due to a nonrecurring effect from a completed
property transaction, EBT amounted to MSEK 371. Despite an unsatisfactory
earnings level, we now see that our 4Excellence strategy is beginning to
generate results. Unit revenue (RASK) rose 0.3% during the quarter, driven by a
positive load factor. Our unit cost, excluding jet fuel, declined 4% during the
quarter. Also worth noting is that the underlying currency-adjusted earnings for
several key destinations demonstrated a positive trend compared with the year
-earlier period.

The relatively high jet-fuel price fell slightly during the second quarter only
to increase again during July, constituting a major challenge for the entire
aviation industry. During the second quarter, SAS’s fuel cost increased
approximately MSEK 800 compared with the corresponding period in the preceding
year, primarily due to the lower effect of fuel hedging this year and a weaker
SEK/USD exchange rate. As previously, SAS is dealing with fluctuations in jet
-fuel prices by hedging jet fuel, introducing jet-fuel surcharges and proactive
yield management. The yield declined 2.7% during the quarter, but adjusted for
the opening of a new intercontinental route to Shanghai and additional routes
for leisure travelers, the underlying yield was slightly positive.

Stable liquidity
Cash flow from operating activities was positive during the quarter, amounting
to MSEK 676. Working capital also improved, primarily driven by a positive trend
in the number of bookings. We also see improvements in working capital in
general, a direct result of our focused efforts to reduce tied-up capital. SAS’s
financial preparedness amounted to SEK 8.2 billion on June 30, corresponding to
20% of revenue. Of this amount, SEK 3.2 billion comprised cash and cash
equivalents. During the second quarter, we also completed the sale of six
properties to Swedavia, corresponding to SEK 1.8 billion. This sale is part of
our strategy to reduce tied-up capital and the transaction released liquidity
corresponding to MSEK 440.

Accelerated 4Excellence measures beginning to generate results
The 4Excellence strategy aims to achieve Excellence in four core areas by 2015 –
Commercial Excellence, Sales Excellence, Operational Excellence and People
Excellence.

4Excellence generates revenue effects
We have observed the clear effect of 4Excellence on revenue. This is gratifying
since continuously increased capacity and intense competition was noted during
the entire second quarter. Efforts to improve our offering – aimed at delivering
value for time and money to our customers – will continue. We will open 38 new
routes in 2012 and in preparation for 2013, we announced an improved offering on
our USA routes with San Francisco as a new destination.

Other traffic revenue increased as a result of, for example, activities
implemented in ancillary revenues. During the first half of 2012, free tea and
coffee was reintroduced for all service classes, in-flight WiFi was introduced,
and such time-saving solutions as SMART PASS and Fast Track are available for
our travelers. The results of these features led to further improvements in our
customer satisfaction, passenger growth of 551,000 during the first half-year
and a 3% increase in currency-adjusted passenger revenue. In July, we noted
continued growth and further improvement in the load factor

Phasing in new aircraft
We recently signed an agreement to lease three A320s and a total of 60 new
aircraft will be joining our fleet over the next few years. Within two years,
all MD80 and B737 Classic aircraft will be phased out and replaced with modern
A320/B737NG aircraft. We also look forward to introducing the most efficient
aircraft in the market, Airbus A320neo, into our fleet. As the fleet is
rejuvenated, we can expect lower fuel costs, reduced maintenance costs and lower
CO2 emissions.

4Excellence generates cost effects
One of our strategic goals is a 3-5% reduction of the unit cost per year. Many
initiatives are now well underway to cut the unit cost, increase productivity
and reduce complexity. We can already see the effects, and the unit cost fell 4%
during the quarter. Collective agreements are in place with all unions, which
guarantees delivery of the announced cost-savings corresponding to SEK 1 billion
for the period 2012-2013. The effect of these savings was already noticeable
during the second quarter – payroll expenses per unit produced (ASK) decreased
6.3%. Lean activities also contribute to productivity improvements since we now
handle almost twice as many passengers per employee today compared with 2008.
Efforts to reduce administration progress according to plan and the 300
announced full-time positions have been, or are in the process of being, phased
out from the operations. Our new modern IT platform has been deployed, entailing
that most older systems can now be turned off, resulting in substantially
reduced complexity.

Future outlook
We anticipate passenger growth of 5-7% in the market in 2012. The SAS Group’s
available capacity (ASK) is expected to grow in pace with the market, namely
about 4-5%. The objective for 2012 is also to maintain a top position in terms
of punctuality in Europe, while continuing to improve the customer satisfaction
rate. We forecast and are planning for continuous pressure on yield and RASK
throughout the entire year. Due to the weaker economic trend, measures in
4Excellence were accelerated at the beginning of the year. Improvements
corresponding to SEK 5 billion will be implemented during 2012-2013. During the
second quarter, approximately one third of the program was implemented. The
measures in 4Excellence are now generating results and the effects are expected
to increase from the second half of 2012. In combination, the uncertain economic
trend, jet-fuel prices, exchange rates and intense competitive pressure entail
that SAS is not presenting a profitability forecast for the full-year 2012.

Rickard Gustafson
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.


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