SAS Group Year-end Report January-December 2007

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SAS Group Year-end Report January-December 2007
Tekst
Key ratios for the period

- Operating revenue: MSEK 54,112 (51,670) (+4.7%)

- Number of passengers: 31.2 million (+2.9%)

- Spanair is reported as an operation under
discontinuation and goodwill impairment of MSEK 300
was made.

- Earnings before nonrecurring items in continuing
operations: MSEK 1,242 (727)

- EBT margin before nonrecurring items: 2.3% (1.4%)

- Net income for the period: MSEK 636 (4,740)

- Earnings per share: SEK 3.87 (28.10)



Comments by the CEO

The performance during the first three quarters was
positive, with favorable demand and, consequently,
a favorable traffic trend and yield. The fourth
quarter was strongly affected by our withdrawal of
the Q400 aircraft and replacement of these with
leased capacity. Overall, capacity was greater than
requirement, resulting in reduced load factors and
contributing to weaker yields. However, from a
customer perspective, it is important to maintain
traffic to as high a degree as possible. As well as
the direct Q400 effects, the end of the year was
also generally weaker for Scandinavian Airlines`
short-haul companies. This is probably a result of
uncertainty from customers following the Q400
problems and the strike threat relating to the
structural changes discussed, particularly in SGS,
but also due to increased capacity in certain
markets.

As a result of a weak fourth quarter, income before
nonrecurring items for the year was slightly more
than SEK 1.2 billion. The direct earnings effects
of the Q400 totaled approximately MSEK 700, of
which about MSEK 500 was charged to the fourth
quarter. The ECA agreement, which is a cooperation
between SAS, Lufthansa and British Midland, was
charged to our earnings in an amount of slightly
more than MSEK 600 in 2007 mainly as the result of
a weak earnings trend in British Midland. However,
the agreement expired at the end of 2007. In
addition, a number of strikes impacted earnings in
a net amount of approximately MSEK 200.

For the year as a whole, our airlines, except for
our intercontinental operations, improved their
earnings compared with 2006. The earnings
improvements were the result of favorable market
conditions, improved concepts, effective control,
traffic optimization and continued cost measures.
The traffic trend for our intercontinental
operations was better, especially in the second
half of the year, but earnings were impacted by
lower cargo revenue. The divestment process for
Spanair is in progress and is expected to be
completed during the second quarter of 2008.

Earnings in STS and SGS were strongly negative in
2007. The reasons include the main focus being on
delivery quality, as well as delays and
difficulties in implementing the necessary cost
program. A decision was made to divest Spirit
within SAS Cargo and to outsource maintenance of
the Boeing 737 Classic. An internal solution was
approved for SGS, providing that the company
implements cost reductions of MSEK 400 and a
quality-improvement program within 18 months.

We take a very serious view of the weaker trend at
the end of 2007 and the economic downturn that can
be foreseen. We also take a serious view of the
fact that S11, particularly due to cultural
problems, is delayed and is generating major future
challenges. This applies to the cost program and
other structural changes. In parallel with the
implementation of our `Strategy 2011,` in which
cultural turnaround is key, work is focusing on
regaining the customers` confidence, adapting
capacity where necessary and securing compensation
for the record-high fuel prices. Our assessment is
that we will also have a negative earnings effect
in 2008 as a result of the Q400 decision of
approximately MSEK 700-800.

Unfortunately, 2007 was a year characterized by
several major negative events that affected our
customers, our brand and our shareholders. In 2008,
the management`s focus will be on the continued
implementation of Strategy 2011 and taking further
measures as a result of the anticipated downturn in
the economy.

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

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
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