first quarter even weaker than expected sas ab analyst handout … · 2 5/13/03 2 first quarter...

The SAS Group Investor RelationsTel. +46 (0) 8 797 1451 Fax: +46 (0)8 797 5110

e-mail: [email protected] --- Homepage: www.sasgroup.net -- Results Jan - Mar 2003

SAS ABAnalyst Handout

1st Quarter 2003

Stockholm – SAS Head office, May 13th

London – Savoy Hotel, May 15th

5/13/0322

First quarter even weaker than expected 1st Quarter 2003 – probably weakest quarter in history for European airlines

Unprecedented number of negative factors Weaker world economiesSignificant yield pressure and pressure on traffic volumesIraq and SARS situationAdditional pressure on traffic volumes

� Severe impact on revenues – difficult to offset in the short term

Short term actions Capacity reductions implemented and salary freeze 2003

Cost reductions highest priority. Significant measures under implementation

Plan A completed as plannedPlan B ahead of planPlan C rapid implementation

5/13/0333

Group airlines recent capacity adjustments

down 5-10% from May/June

down 5-10%

down 7%

down 5-10%

ASK

5/13/0344

SAS Group weakest Quarter ever

MSEK 2003 2002 Adj. change

� Revenue 13 710* 13 775* -4,5%**� EBITDAR -398 584

� EBT bef. overcapacity -1 739^ -1 446� EBT bef. cap gains -1 939 -1 313

* Spanair not consolidated Jan-Feb 2002** Adjusted for comparable units^ EBT before gains and cost of in phace out of overcapacity corresponding to MSEK 200

1st Quarter



5/13/0355

SAS Group 1st Quarter EBITDAR and CFROI

MSEK 2003 2002

� Revenue 13 710 13 775

� EBITDAR -398 584

� EBITDAR -3% 4%margin

� CFROI 11% 6%

5/13/0366

SAS Group 2002 – Quarterly EBTEBT bef gainsMSEK million

77 142

-421

-1613

-1313

1180

15

-809

-1939

-2 500

-2 000

-1 500

-1 000

-500

0

500

1 000

1 500

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2001 2002 2003

5/13/0377

Scandinavian Airlines2003/2002 Quarterly EBITDARdevelopment

EBITDAR, Scandinavian AirlinesMSEK

-500

0

500

1 000

1 500

2 000

Q1 Q2 Q3 Q4 Q1

2002 2003

5/13/0388

Severe Revenue Pressure Passenger revenues down 1 100 MSEKScandinavian Airlines

�Revenues 6 588 MSEK - 16.3 %

• Volume - 6.3 % • Yields* - 8.8 %• Currency -1.8 %

1st Quarter

* Including Intercont effect and reduced travel agency comissions



5/13/0399

SAS Group’s path to profitability and long term competitiveness

2001 2002 2003-

Short term measures Structural measures

• To compensate for

•Yield pressure

•Insurance costs

•Inflationary effects

Implemented according to plan

• MSEK 6 400 with full effect 2005 whereof 1 600 MSEK revenue enhancement

3 000 MSEK 2003

• 5 500 MSEK 2004

• 6 400 MSEK 2005

Implementation ahead of plan

MSEK 8 000 MSEK+ 1 000 MSEK in Subs. & Affiliated Airlines

•Efficient production platform

• New Business model

• Enable active price reductions

• Clear group portfolio view

Rapid implementation

Long term profitability and competitiveness

A B C

5/13/031010

Major steps of change implemented so far

New organization implemented in July 2002Clear responsibilities & transparency

New production philosophy hub and spoke 95%Reduced traffic peaks in Copenhagen

New distribution strategy – net pricingROSA – Reduction of Overhead Support & Administration –reduction of MSEK 800 in costsChanged labour agreements=> far reaching productivity and compensation improvementsNew product concepts – Scandinavian Direct and a new Europe conceptSalary freeze from April 2003

AESALC

A LFA MS

A RN

B DU

BGO

B OO

BR U

C DG

C PH

D UBD US

EVEEW R

F COF RA

GOT

HA U

KK N

K RS

L HR

MAN

MX P

N CE

SV GTOS

TRD

AALAARAGPAL CAMS

ARNBCN

BGOBHX

BKKBLQ

BRUBUD

CDG

CGNDEL

DUBDUS

EWR

FCOFRA

GDNGOT

GVAHAJ

HAMHEL

IADJKG

KGDKRKKSDLEDL HRL INMADMANM UC

MXPNCE

NRKNRT

ORBORD

OSLPEK

PMI

POZ

PRGSEA

SFJST N

ST R

SVGSVO

T LVT RD

TRFVIE

VNOVST

VXOWAWWROZRH

Nytt koncept

AGHAMS

BR UCD G

CPH

DU BD US

EW R

FCO

FRA

GOT

GV A

HAM

H EL

K ID

KL R

K RNK SD

LEDLH R

LINLL AMMXMX PNCE

OERORD

OSD

OS L

R NB

SDL

SFT

S TN

SV O

T KU

TLL

TMP

TXLUME

VNOVXO

W AWZRH

0

5

0

5

0

5

0

5

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Time

S03W02S02

5/13/031111

Key outcome of union negotiations� Pilots

– Work day from 10,5 to 12 hrs/day– Hours/week up from 42 to 45– Pilot blh

• 700 hours short haul 750 long haul– Pay freeze 2003/2004

� Cabin crew negotiations adjourned– Implementation of better utilization measures as

from July– Redundancies to come gradually July/August

� SAS Technical Services– Base Maintenance to Stockholm– New schedule agreements

� Other personell– Per diem– Overhead & Administration reduction of 50%

5/13/031212

Next steps

� New Organization Scandinavian Airlines– Three bases– Decentralization

� Production from bases– Crew– personell

� Significantly improve – aircraft utilization– crew utilization

� Technical Base Maintenance to Stockholm� Impact of Plan C in 2003 approximately

MSEK 400



5/13/031313

What characterizes an highly efficient What characterizes an highly efficient airline?airline?

Aircraft

• High utilizationShort/ Medium haul 9-10 hrs Long haul 15 hrs

• minimize stopovers

• Few aircraft types

•One base –one hub

The efficient airlineEfficient production platform

CrewCrew

Minimize passive transfers and night stops

Crew utilization –700-900 blh

Other conditions in line with government regulations

Few aircraft types

Technical maintenance

• Critical mass

• Allocation of bases

• A/c types

• standardized aircraft

Station service

• High level automation

•Uncomplicated products

Sales & Distribution

• Cheapest prices only on the internet

• Strong incentive to use internet for most other ticket types

• Simple price structures

• Efficient call center structure

Overhead & Support

• Simple organization

•Uncomplicated planning process – one base = one aircraft type

•Uncomplicated products

5/13/031414

The SAS Group targeted position in the aviation market – a greater diversity of travel choices

Traffic flowsTraffic flowsGeography Geography –– size of markets size of markets –– customers customers -- competitorscompetitors

Business modelsBusiness modelsAdapted for each business flowAdapted for each business flow

Efficient production platformEfficient production platformGiven flow and business modelGiven flow and business model

Competitiveness Competitiveness -- profitabilityprofitability

Future role of each Future role of each airline in the groupairline in the group Review of the roles of the group airlines in the groups traffic Review of the roles of the group airlines in the groups traffic networknetwork

5/13/031515

Traffic flow determine cost level

Competitive unit cost in each traffic flowDomestic and southern Europe most comodity like type of flow“Big five” European destination and intercontinetnal room for more premium product featuresEnable active price reductions

Long term profitability and competitveness

5/13/031616

Strategic development

� Intercontinental and Europe (2 service-levels)

– On par with best full service operators in Europe (price, costs, service)

– Lowest prices close to the levels of the low cost carriers (on main airports)

� Intrascandinavia, domestic and Southern Europe– On par with (price, costs and service) with the low

cost carriers (on main airports)



5/13/031717

Group gGroup gapap analysisanalysis vsvs high high efficiency airlinesefficiency airlines ((base base 2003)2003)

25-40% (pending type of traffic flow)Mainly in aircraft utilization, overhead costs, crew utilization, complexity

5-10% (Norwegian domestic) Mainly in aircraft and crew utilization

At least 10%

Meet most criteria's today

Meet most criteria's today –

(0-5% gap Finland- Scandinavia)

5/13/031818

Potential of 8 000 MSEK in Scandinavian Airlines & Support Businesses

8 000

1 000

3 400

600

1 500

600

900In flight

SGS/STS/WS

Overhead – SharedServices

Production

Overhead – SK

New agreements

– Servicelevel, call centers, increased on-line sale

– One base for heavy maintenance

– 50% staff reduction

New agreements with– Pilots– Cabin crew

Initiative

Total identified potential

- Separation of the bases- More effecient traffic planning and more co-ordination with crew

– staff reduction

Base 2003*

* Including effects from Structural measures 2003

5/13/031919

CPHCPH

OSLOSLOSLOSL

Streamlined organization for a/c and flight deck

OSL STO

CPH

�Advantage– Improved a/c productivity (less complex planning) – Reduced type costs for C/A and F/D (productivity and stand-by)– Reduced type costs for technical maintenance (personal, spare parts and quality)

Overhead reductions by 50% in Scandinavian Airlines- To be implemented as from August

OSL STO

CPH

� C/A, F/D� MD, 737, A321

� C/A, F/D� MD, 737, A321

� C/A, F/D� MD, 737, A321

� C/A, F/D � 737

� C/A, F/D � 737 (MD)

� C/A, F/D � MD

5/13/032020

SAS Technical Services (STS) concentrate its maintenance to Stockholm

Base maintenance to Stockholm but heavy maintenance in Oslo. Line maintenance at all airports.Approximately 900 redundancies due to shift

Additional measures to be implemented to reduce costs significantly



5/13/032121

Scandinavian Airlines production system simplified with full co-ordination with crew

� Before short term measures � Structural measures

� Long term competitiveness

� A/C� Crew

– No hub & spoke for aircraft

– No co-ordination between aircraft and crew

– Hub & spoke for aircraft– No co-ordination

between aircraft and crew

– Hub & spoke for aircraft– High co-ordination

between aircraft and crew

A/C and rew together

A B C

5/13/032222

Europe:

Business Class –premium market medium haul still valid� Service and new procedures

onboard focuses on Business Class

� A new meal concept meets customers’ expectations:fewer, bigger, simpler and tastier dishes of high quality

� Cold Scandinavian breakfast with warm bread and good coffee

5/13/032323

Snowflake – over 70% cabin factor in April

More than 100 000 bookings before first take offTrip is booked one way. Two single trips area round tripOne price is offered on each separate booking occasion No advance booking rules, no stay-away rules =

simple and clear rules

www.flysnowflake.com5/13/0324

24

1st Quarter revenues normally MSEK 1 500 – 2 000 weaker than Q2

January, February, July and December seasonally weak monthsRevenues in Q1 in average 16% lower than Q2 the last four yearsAcquisition of Spanair has reduced seasonality slightly

Winter WinterSummer

jan feb mar apr maj jun jul aug sep okt nov dec

1999

2000

2001

2002

2003



5/13/032525

Significant pressure on revenue halts EBITDAR improvement

EBITDAR MSEK million

� EBITDAR in Q1 2003 was -398 (584) MSEK

EBITDAR – Scandin Airl. -382 MSEK– Braathens 104 MSEK– Spanair -109 MSEK– Widerøe 56 MSEK– Air Botnia 6 MSEK

-1 000

-500

0

500

1 000

1 500

2 000

2 500

3 000

3 500

Q1 Q2 Q3 Q4

2001 2002 2003

5/13/032626

Earnings before tax - business area

Business area Q1 03 Q1 02 ChangeScandinavian Airlines -1 253 -849 -404Subsidiary & aff. Airlines -564 -350 -214Airlines Support Businesses -128 -19 -109Airline Related Businesses -16 +34 -50Hotels -115 -85 -30Group eliminations 200 -177EBT -1 876 -1 446 -430

5/13/032727

5/13/032828

Passenger revenue 6 588 7 866

Other revenue 846 710

Operating revenue 7 434 8 576

EBITDAR -382 257

EBIT -1 086 -664

EBT -1 253 -849

January – March 2003 2002

Weak and uncertainty on Scandinavian Airlines’ markets



5/13/032929

(1,2)

0,5

0,1

(0,5)

-1,4

-1,2

-1

-0,8

-0,6

-0,4

-0,2

0

0,2

0,4

0,6

Tota

lre

venu

e

Tota

lco

sts

Leas

e,de

pr, N

etfin

anc.

Tota

lch

ange

Measures and Turnaround offset by severe pressure on revenues

MRD

Volume (RPK) -6% -0,5Yield -9% -0,7

Turnaround +0,8Provisons +0,2Volume +0,2Increased prices:Fuel & Governm. - 0,3Inflationary comp. - 0,5Others incl curren. +0,1

5/13/033030

Number of employees down – payroll expenses up due to pensions and payroll ”overhang”from 2001

Act 2002

Act 2003

1 800

1 700

1 600

-1 593

-1 848

Pay increases

Volume Pension Currency Other

-130 +130 -210 -15 -30

MSEK

Number of employees down 8,5%, but offset by increased pension costs and pay increasesPay freeze as from April 2003 for all employees in Scandinavian Airlines 300 pilots to leave as from April 50% of overhead and administration reduction to be implemented in Plan C

Payroll cost Scandinavian Airlines

5/13/033131

Scandinavian Airlines Number of personnel

6 000

6 500

7 000

7 500

8 000

JAN02 FE

BMARAPR MAJJU

NJU

LAUGSE

POKTNOVDEC

JAN-0

3FE

BMARAPR MAJJU

NJU

LAUGSE

POKTNOVDEC

6 995

7 778

ACT

Forecast

6 607

5/13/033232

Operating unit cost trend reversed

�Units costs are down in spite of reduced volumes (ASK) (-3%)

�Cost reductions give effect

�Q1 affected by costs for over capacity

-4%

-2%

0%

2%

4%

6%

8%

10%

1st Q2001

2nd Q2001

3rd Q2001

4th Q2001

1st Q2002

2nd Q2002

3rd Q2002

4th Q2002

1st Q2003

Index last year(currency adjusted) Scandinavian Airlines

* * = Method change



3333

Plan B ahead of plan

290 300

440 430

Plan Status March 2003

20002600

44003800

Plan Status March 2003

Number of activities compared to plan

730 7306400 6400

Total financial effect of implemented activities compared to planMSEK

To be implemented

Implemented

41%

31%

40% 41%

3434

41% of Plan B implemented

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

nov-0

2feb

-03

may-0

3au

g-03

nov-0

3feb

-04

may-0

4au

g-04

nov-0

4feb

-05

may-0

5au

g-05

nov-0

5

Target - EBT effect 2005 Captured - EBT effect 2005

MSEK

5/13/033535

Domestic incl. intrascandEuropeIntercontinental

Total

Reduction in capacity in 2003 for Scandinavian Airlines

Capacity forecast for 2003 vs. 2002

-18%+4%

+11%

+1%

-2%-4%-3%

-3%

Recent adjustment

5/13/033636

Scandinavian Airlines keyairline profitability drivers

Traffic (RPK) down 6,3%Cabin Factor down 2,1 p.u.Yields (currency adjusted) down 8,8%

Unit costs down 2,0%

January-March

2003 vs 2002



5/13/033737

Passenger YieldJanuary-March 2003 vs 2002

Nominal Currency AdjustedRoute Sector yield effect yield

Scandinavian Airline 89 98 91

Intercontinental 87 108 94Europe 94 102 95Intrascandinavian 96 100 96Denmark* 132 101 133Norway 108 97 105Sweden 98 100 98*) Incl Greenland 2002

5/13/033838

Passenger load factor down for most Group airlines�Total traffic decreased by 4,2% vs. Q1 in 2002 �Total capacity reduced by 0,4% vs. Q1 in 2002

– Group passenger load factors hit by weak economies, Iraq and SARS situation

Q1 passenger load factorsScandinavian Airlines -2,1 p.u. 60,9% Spanair -4,3 p.u. 55,0% Braathens +1,3 p.u. 52,7%Widerøe +1,0 p.u. 49,1%Air Botnia -2,3 p.u. 41,0%

5/13/033939

SAS Group exposure for SARS

� SARS exposure to only 5% of revenues

Dom. Denmark2%

Intrascand12%

Europe42%

USA7%

Asia5%

Dom. Norway22%

Dom. Sweden10%

Revenue distribution 2002

5/13/034040

Scandinavian Airlines passenger load factors in line with AEA average

40

45

50

55

60

65

70

75

80

1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13

Pas

s lo

ad f

acto

r (%

) 3

wee

ks r

olin

g

SK (GeograpicalEurope)Spanair

AEA (GeograpicalEurope)

Source: AEAWeek 2002-2003



5/13/034141

Yield development under pressure Scandinavian Airlines

� Pressure on yield accelerated in 4th Quarter� Continued pressure 1st Quarter – same level

-15%

-10%

-5%

0%

5%

10%

Jan Feb Mar Apr May Jun jul Aug Sep Oct Nov Dec

Europe

2 per. Mov. Avg.(Europe)

Europe (yield) change vs. last year

5/13/034242

-60

-40

-20

020

40

60

80

100

37 42 47 52 5 10 15 20 25 30 35 40 45 50 3 8 13

� Airbus A340 introduced on New York many routes

� Reductions to/from New York in April, May & June

� Traffic in Q1 2003:– European airlines

(AEA) traffic up 4,1%– SAS traffic up 15,6%

� Airbus A340 introduced on New York many routes

� Reductions to/from New York in April, May & June

� Traffic in Q1 2003:– European airlines

(AEA) traffic up 4,1%– SAS traffic up 15,6%

Cabin factor (%) North Atlantic

6065707580859095

100

Janu

aryFe

brua

ryMarc

hApr

ilMayJu

ne July

Augus

tSe

ptembe

rOcto

ber

Novem

ber

Decem

ber

Janu

aryFe

brua

ryMarc

h

Month SAS AEA

Traffic on North Atlantic hit by war in Iraq but recovery noted in bookings

RPK

5/13/034343

-30

-20

-10

0

10

20

30

40

39 43 47 51 3 7 11 15 19 23 27 31 35 39 43 47 51 3 7 11

Week SAS AEA

� Scandinavian Airlines ranked high in customer surveys

� Reduced capacity to Beijing and Bangkok/Singapore

�Strengthened market position

�Traffic in Q1 2003:– AEA traffic down 0,8%– SAS traffic up 6,6%

� Scandinavian Airlines ranked high in customer surveys

� Reduced capacity to Beijing and Bangkok/Singapore

�Strengthened market position

�Traffic in Q1 2003:– AEA traffic down 0,8%– SAS traffic up 6,6%

Cabin factor (%) Asia

70

75

80

85

90

95

Janu

aryFe

brua

ryMarc

hApr

ilMayJu

ne July

Augus

tSe

ptembe

rOcto

ber

Novem

ber

Decem

ber

Janu

aryFe

brua

ryMarc

h

Month SAS AEA

Asian traffic severely affected by SARS

RPK

5/13/034444

-20

-15

-10

-5

0

5

10

15

20

25

30

39 43 47 51 3 7 11 15 19 23 27 31 35 39 43 47 51 3 7 11

WeekSAS AEA

� Weak market� Cabin factor worse � Traffic in Q1 2003:

– AEA traffic down 0,1%– SAS traffic down 6,8%

� Some recovery in April

� Weak market� Cabin factor worse � Traffic in Q1 2003:

– AEA traffic down 0,1%– SAS traffic down 6,8%

� Some recovery in April

European routes affected by uncertain market conditions

Cabin factor (%) Europe

45505560657075

Janu

ary

Febr

uary

March

April

MayJu

ne July

Augu

stSe

ptem

ber

Octobe

rNov

embe

rDec

embe

rJa

nuar

yFe

brua

ryMar

ch

Month SAS AEA

RPK



5/13/034545

Yields under sever pressure2001- 1st Quarter 2003 Total system - currency adjusted

� Yields down 8,8% in 1st Quarter 2003– Class mix negative– Campaigns– More RPK’s of

intercontinental traffic with lower yield

– Positive Easter effect in March

� Reduced commissions by ~3%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

3rdQuarter2001

4thQuarter2001

1stQuarter2002

2ndQuarter2002

3rdQuarter2002

4thQuarter2002

1stQuarter2003

5/13/034646

ECA –European cooperation agreement continued negative effects

� Tri-party Joint Venture agreement with BMI, Lufthansa and SAS signed November 9, 1999

� In effect from January 1, 2000� Main scope: To integrate the parties scheduled pass.

transport to/ from London/ Manchester� Negative result effect 2002: MSEK 418 (335)

� Effect Q1 2003 - MSEK 120

5/13/034747

0

10

20

30

40

50

60

1998

-01-02

1998

-03-30

1998

-06-26

1998

-09-21

1998

-12-16

1999

-03-16

1999-0

6-15

1999

-09-08

1999

-12-01

2000

-02-29

2000-0

5-26

2000

-08-21

2000

-11-14

2001-0

2-12

2001-0

5-10

2001

-08-03

2001

-10-30

2002-0

1-25

2002-0

4-24

2002

-07-23

2002

-10-15

2003-0

1-10

2003

-04-04

US

Dol

lar p

er B

arre

l

0

50

100

150

200

250

300

350

400

450

US D

ollar per Metric Ton

Brent 1st Nearby Close

Jet CIF Cargoes NWE

Brent Crude vs. Jet FuelJanuary 1998 to Date

5/13/034848

2003 fully hedged

� Average rates:� 2000 265 USD/MT� 2001 255 USD/MT� Q1 2002 196 USD/MT� Q2 2002 226 USD/MT� Q3 2002 235 USD/MT� Q4 2002 258 USD/MT� Q1 2003 278 USD/MT

Current hedging until year end 95%Call options in jetEstimated jet fuel cost MSEK 3 400



5/13/034949

Scandinavian Airlines’ new net pricing concept as from 2003

• Net price concept to be introduced 1st January 2003

• Prices lowered with same amount as commissions (app 3%)

• Agent will set their own price to the customer

• Markup can vary from channel to channel

• Introduction of service fees in SAS’ direct channels

• Introduction of new agent program

• 90% of agents agreed

4/7 %

SA

S P

ric e

SA

S P

ric e

Agentmark-up

possibility

Today Tomorrow

SA

S P

ric e

SAS direct sales

mark-up

SAS Price

SAS Price

SAS Price

4,7%

5/13/035050

Electronic Channelsincreased to 31% in Q1

0%

5%

10%

15%

20%

25%

30%

35%

jan-0

0mar

-00

maj-00

jul-0

0se

p-00

nov-0

001

-jan

01-m

ar01

-maj

01-n

ovQ1-2

002

Q3-200

2Q1-2

003

% Sold - Travel Pass, Travel Pass Corporate, ETIX, Internet% Sold via Internet

� Important to reduce cost of sales

� Total volume E-channelsin Q1 MSEK 2 127

� 31% of total passenger sales in Q1

� Lowest price on homepage

5/13/035151

5/13/035252

Income Subsidiary & Affiliated Airlines

(MSEK) January – March2003 2002*

Operating revenues 3 798 2 832Operating expenses -3 726 -2 379

EBITDAR +72 +453EBT bef gains -564 -350

* = Spanair was included as an affiliated company Jan/Feb 2002



5/13/035353

Revenues 1 375 1,7% 1 549 3,5% 641 9,3% 223 -3,4%

EBITDAR -58 n.m 104 -63% 56 -33% 6 -84%

EBT -369-25,1% -92 n.m -31 n.m -29 n.m

Jan-Mar in MSEK

Subsidiary & Affiliated Airlines not immune by weaker marketNew improvement measures of MSEK 1 000 initiated

5/13/035454

Spanish market grad becoming weaker

Revenue declined by 1,8%

New price concept releasedOne way pricing and bookingAvailability pricingExtra 30 EUR for Business Class

Spanair joined Star Alliance as from April 2003


EBT -369 -295


5/13/035555

Weak Norwegian marketMaintenance costs increasedby 62 MSEKSubstantial new cost measures initiated

Braathens – hit by weak market and periodisation of maintenance costs


EBT -92 38


5/13/035656

Air Botnia affected by weak market


New nonstop route Helsinki-Brussel introduced as from Q4 2002 and Helsinki-Düsseldorf as from Q1 2003

Operating revenue 223 231

EBT -29 -4

Widerøe hit by weak yield development

Slowdown in Norwegian marketImprovement measures of under way


Operating revenue 641 586

EBT -31 3



5/13/035757

5/13/035858

Airline Support

Units included in the business area:

SAS Cargo SAS Technical ServicesScandinavian Ground ServicesSAS World Sales

January – March(MSEK) 2003 2002Operating revenues 4 755 4 973Operating expenses -4 721 -4 896

EBITDA +34 +77EBT -128 -19

5/13/035959

SAS World Sales (SWS)

Total revenue 1 241 1500Whereof external 25,5 11,3EBITDA 15 -22EBIT 1 -34Employees 2447 2553


Responsible for the SAS Group’s sales and distribution.Revenue decreased by MSEK 259Improvement measures according to plan

5/13/036060

SAS Technical Services (STS)

Total revenue 1 463 1 465Whereof external 14,1% 14,6%EBITDA 50 75EBIT -19 13Employee 3 690 3 895


� Responsible for technical maintenance

� Revenues under pressure as airlines reduce capacity

� Additional measures to be implemented to reduce costs significantly



5/13/036161

Scandinavian Ground Services (SGS)

Responsible for passenger and ramp servicesAffected by lower volumesAdditional measures to be implemented to reduce costs

Total revenue 1 392 1 473Whereof external 12,3% 10,9%EBITDA -77 25EBIT -110 -7Employee 6 835 6 497


5/13/036262

Increased volumes for SAS Cargo

Total revenue 748 647Wherof traffic rev 557 523EBITDA 24 0EBIT 14 -11EBT -3 -10


Improved result although yield down by 9,2%Weak market to USAAdditional improvement measures under implementation

5/13/036363

5/13/036464

Income Business Area Airline Related BusinessSAS Cargo moved to Business Area Airlines Support Businesses in 2002

January - MarchMSEK 2003 2002

Operating revenues 1 166 1 467Operating expenses -1 128 -1336

EBITDA 38 131

Income before taxes -16 34



5/13/036565

Total revenue 523 557Wherof external rev 9,4% 3,9%EBITDA 35 49EBIT 10 16EBT 10 16


Scandinavian IT Group

Implementation of Turnaround according to planNew agreement with TravelSky for the chinese market

www.scandinavianIT.com5/13/0366

66

SAS Trading – affected by weaker NOK

www.scandinavian.net

Total Revenues 346 474

EBITDA -39 -5

Profit before taxes -30 -13

January-March2003 2002

SAS Trading is a business in the SAS Group and a operator within Travel Retail. SAS Trading had 471 employees at year end 2002

Result negatively affected by weaker Norwegian currency

A new Flightshop opened at Poznan airport in March

5/13/036767

SAS Flight AcademyTraining centers for pilots andother personell.

About 10 new customers in Q1

www.sasflightacademy.com



EBITDA 26 46

Profit before taxes 1 20

5/13/036868

Jetpak� The company is 100% owned by SAS

Group and has 176 employees� Jetpak is one of the fastest growing

companies withing expresslogistic in the Nordic countries.

� Weak market in first quarter, butgood cost controll offset negative result

www.jetpak.com



EBITDA 7 2

Profit before taxes 5 0



5/13/036969

5/13/037070

Rezidor SAS Hospitality –expanding with new brands

1

1

111

6

1

2

3

1

2

1

2

20

3

1

5

1

16

1

1

8

22

2

1

1

1

1

4

4

5

19

Large potential of chain brands in EuropaThree new brands added:

Market position

Number of hotels

0

50

100

150

200

250

'94 '95 '96 '97 '98 '99 '00 '01 '02Q1 2

003

FranchisedManagedLeasedOwned

5/13/037171

New loyalty program introduced -Goldpoints14 new Park Inn hotel launched in Sweden and one in BerlinNew hotels opened in Tashkent and Cologne

Recent events for Rezidor SAS Hospitality

Cologne Tashkent

Berlin

5/13/037272

REZIDOR SAS Hospitality –REVPAR under pressure but still better than industry

SIH

-25%-20%-15%-10%-5%0%5%

10%15%

01-jul

sep 01-nov

02-jan

mar may jul sep nov jan

REVPAR - Rezidor REVPAR - Market



5/13/037373

Revenues 842 746 +12,9%

Operating result -75 -61 -23%

Adjusted EBITDA -76 -58 -31%

Pre tax profit -115 -85 -59%Including gains

Jan-Mar 2003in MSEK

REZIDOR SAS Hospitality –negatively affected by weaker markets and high energy costs in Norway

Jan-Mar 2002 Change

5/13/037474

Financials

5/13/037575

Clear Targets to Reduce Indebtedness- Long-term Targets established

� Key figures Today Target� Equity/assets ratio (solidity) 21% >30%� Financial net debt/ equity 154% <50%� Fin. net debt+NPV Oplease/ equity 240% <100%� Fin. net debt+7* Oplease/ equity 330% <100%

� Targets will be reached by: – Turnaround measures– Relesase of main assets:

• Aircraft• Properties• Non-core subsidiaries

5/13/037676

Surplus values despite reduced aircraft prices and weaker USD to SEK

Surplus value, aircraft

0

10002000

3000

40005000

6000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Q1 20

02Q2

2002

Q3 20

02Q4

2002

Q1 20

03

MS

EK



5/13/037777

Gearing level peakingConsolidation ahead

� Leverage to peak during 2003

� Clear targets to reduceLeverage

Leverage Ratios

-10%40%90%

140%190%240%290%340%

dec-98 dec-99 dec-00 dec-01 Dec-02 mar-03

%

Net Debt / Equity Fin Net Debt / Equity Fin. Net Debt + 7*Op lease / Equity

5/13/037878

Commited Credit Facilities of MSEK 8 350

MSEKLiquid Funds 31/03-03 8 535

Available Credit Facilites:Revolving Credit Facility (MUSD 700) 3 550

Aircraft Finance Lease Facility 2 600

Bi-lateral Facilities 1 150

Others 1 050

Total Available Facilities 8 350

Total Available Funds 16 885

5/13/037979

Reduced CAPEX will improve free cash flow going forwardMSEK January – March 2003 2002

Cash flow from operations -1 095 -428Change in working capital -584 -180

Net financing from operations -1 679 -608Investments, advance payments - 964 - 1 950Acquisition/sale of subsidiaries (net) -19 +135Sales of fixed assets, etc. +302 +1 221

Financing deficit/surplus -2 360 -1 202Changes in external financing, net +173 -1 272

5/13/038080

SAS Group entering CAPEX holiday as from 2003

SAS Group CAPEX 1995-2006 (Aircraft and expected other investments)

-1000

1000

3000

5000

7000

9000

11000

13000

1995

1996

1997

1998

1999

2000

2001

2002

2003

e20

04e

2005

e20

06e

MSE

K



5/13/038181

High financial maneuverability

Liquidity of MSEK 8 534Committed credit facilities MSEK 8 350Slightly less than half of the A/C fleet is UnencumberedNo Rating TriggersNo onerous Financial Covenants

Additional sources of capitalAircraftReal estatesNon-core businesses

5/13/038282

Interest coverage ratio low in historic terms

0

1

2

3

4

5

6

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Q1,2003

Interest coverage ratio

5/13/038383

Summary & Outlook 2003

5/13/038484

Weak traffic figures in Scandinavia 1Q�Group passenger load factor down by 2,3 p.u.�Scandinavian Airlines load factor down by 2,1 p.u

Passenger- Seat capacity Cabin-traffic (RPK) (ASK) factor

SAS Group Total -4,2% -0,4% 58,7%Intercontinental +2,9% +12,5%Europe -5,7% -0,8%Domestic and -10,2% -10,1%Intrascandinavian



5/13/038585

Some recovery on traffic to US and Europe in April�Group passenger load factor down by 5,6 p.u.�Scandinavian Airlines load factor down by 9,2 p.u�Group traffic in Europe up by 8,0%

Passenger- Seat capacity Cabin-traffic (RPK) (ASK) factor

SAS Group Total -5,6% -3,1% 60,5%Intercontinental -12,6% +25,0%Europe +8,0% +9,4%Domestic and -17,9% -20,4%Intrascandinavian

5/13/038686

� Worst quarter in history� Severe pressure on revenues� Significant pressure on revenues

due to– Weak economies– Iraq/SARS

� Most forceful measures ever implemented in Scandinavian Airlines– unit cost to come down 30%

� Sufficiently strong balance sheet and liquidity position to manage the current situation in the industry

� Good financial manoeuvrability to implement & carry through turnaround

Sum up

5/13/038787

Assessment for full year 2003:

The Board of Directors

� Continued weak economies � Uncertainty remains regarding other external factors� Some recovery on U.S and European routes in April� Plan B implementtion ahead of plan� Plan C SEK 8 billion – rapid implementation� Additional MSEK 1 000 in Subsidiary & Affiliated Airlines

5/13/038888

Thank you for your attention!

This presentationcan be downloaded at the SAS Group’s homepage

www.sasgroup.net



5/13/038989

APPENDICES

Traffic DataYieldUnit costFleet Financial key figures

5/13/039090

Traffic and YieldJanuary-March 2003 vs 2002

Scandinavian Airline IndexTotal Scheduled 2003 2002 variance

Production (mill ASK) 8 040 8 288 97Traffic (mill RPK) 4 900 5 229 94Cabin factor (%) 60.9 63.1 -2.1 Yield (öre/RPK) 134.5 150.5 89Currency adj. yield 134.5 147.4 91

5/13/039191


Index

Braathens (Total scheduled) 2003 2002 variance

Production (mill ASK) 1 142 1 023 112Traffic (mill RPK) 601 526 114Cabin factor (%) 52.7 51.4 +1.3Yield 88

*) local currency

5/13/039292


Index

Spanair (Total scheduled) 2003 2002 variance

Production (mill ASK) 1 549 1 556 99Traffic (mill RPK) 852 922 92Cabin factor (%) 55.0 59.3 -4.3Yield *) 107

*) local currency



5/13/039393


Index

Spanair (Charter) 2003 2002 variance

Production (mill ASK) 1 029 970 106Traffic (mill RPK) 879 873 101Cabin factor (%) 85.4 90.0 -4.6

*) local currency

5/13/039494


Index

Wideroe 2003 2002 variance

Production (mill ASK) 233 191 122Traffic (mill RPK) 114 92 125Cabin factor (%) 49.1 48.2 +1.0Yield *) 82

*) local currency

5/13/039595


Index

Air Botnia 2003 2002 variance

Production (mill ASK) 206 155 133Traffic (mill RPK) 84 67 126Cabin factor (%) 41.0 43.3 -2.3Yield 76

*) local currency

5/13/039696

(currency adjusted)

Yield Development Q1 2002 – Q1 2003

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

1st Quart

er 2002

2nd Quarter 2

002

3rd Quarter

2002

4thQuarter 2

002

1st Quart

er 2003

Yields are under pressure from negative class mix /route mix, lower comissions and intercont effect



5/13/039797

Passenger YieldJanuary-March 2003 vs 2002

Nominal Currency AdjustedRoute Sector yield effect yield

Scandinavian Airline 89 98 91

Intercontinental 87 108 94Europe 94 102 95Intrascandinavian 96 100 96Denmark* 132 101 133Norway 108 97 105Sweden 98 100 98*) Incl Greenland 2002

5/13/039898

Unit Cost January - March 2003 vs 2002

MSEK

Volume = average decrease in ASK: -3.0%

Adjusted Share ofJAN-DEC 02 JAN-MAR 03 Var. % total var %

Personnel 1 558 1 848 18,6% 3,6%Fuel 619 755 21,9% 1,7%Gov. charges 818 796 -2,7% -0,3%Selling costs 1 192 855 -28,3% -4,2%Ground Services 1 319 1 168 -11,5% -1,9%Technical 1 136 1 247 9,8% 1,4%Other oper. 885 922 4,2% 0,5%

TOTAL OPER NET COS 7 528 7 591 0,8% 0,8%Aircraft costs 445 491 10,4% 0,6%ADJUSTED EBIT 7 972 8 082 1,4% 1,4%

5/13/039999

Unit Cost (adjusted)January - March 2003 vs 2002

MSEK

Volume = average decrease in ASK: -3.0%

Volume and curr. adjusted Share of

JAN-DEC 02 JAN-MAR 03 Var. % total var %

Personnel 1 624 1 763 8,5% 1,7%Fuel 619 755 21,9% 1,7%Gov. charges 818 796 -2,7% -0,3%Selling costs 1 192 855 -28,3% -4,2%Ground Services 1 319 1 168 -11,5% -1,9%Technical 1 136 1 247 9,8% 1,4%Other oper. 948 922 -2,7% -0,3%

TOTAL OPER NET COST 7 657 7 506 -2,0% -1,9%Aircraft costs 445 491 10,4% 0,6%ADJUSTED EBIT 8 101 7 997 -1,3% -1,3%

5/13/03100100

Key airline profitability driversJanuary-March 2003 vs 2002

�Traffic growth (RPK) down 6.3 %�Cabin Factor down 3.0 p.u.�Yields down 8.8 %�Unit costs up 1.4 % *

*) Adjusted for method change = down 1,3%



5/13/03101101

Passenger Revenue AnalysisJanuary-March 2003 vs 2002

�Revenues 6 588 MSEK - 16.3 %

• Volume - 6.3 % • Yields - 8.8 %• Currency - 1.8 %

5/13/03102102

Moving 12 months values

63%

64%

65%

66%

67%

68%

69%

DEC94 DEC95 DEC96 DEC97 DEC98 DEC99 DEC00 DEC01 DEC02

Passenger load factor – long term trend positive1995-2003

5/13/03103103

Weaker USD offset by increased yield pressure

6

7

8

9

10

11

12

2003200220012000

Positive effect on operation costsQ1 by 415 MSEKWeak USD => increased yield pressure

5/13/03104104

Currency Effects – SAS GroupJanuary-March 2003 vs 2002

MSEK JAN-MAR

Total revenues -189Total costs +546Forward cover costs & working cap. +50

Income before depr. +407Financial items +175

Income before tax +582



5/13/03105105

Currency Effects – SAS GroupJanuary-March 2003 vs 2002

Total revenues & costs:(Total +357 MSEK)Major approx. effects:USD +415DKK +6NOK +38EUR -2Asian curr. -50All others -50

Forward cover costs:(Total -39 MSEK)2002 +392003 0

Working capital:(Total +89 MSEK)2002 -902003 -1

Financial items:(Total +175 MSEK)2002 +1282003 +303

Grand total +582 MSEK

5/13/03106106

Expenses

DKK15%

EUR14%

GBP2%

NOK26%

SEK20%

USD22%

Others1%

Revenues

DKK10%

EUR17%GBP

4%

NOK33%

SEK22%

USD10%

Others4%

Currency distribution in the SAS Group 2002

5/13/03107107

Financial key figures and aircraftfleet data

5/13/03108108

Balance SheetMSEK 31MAR03 31DEC02

Liquid funds 8 534 10 721Other interest-bearing assets 7 902 7 487Aircraft 27 530 27 256Other assets 21 188 21 346

Total assets 65 154 66 810

Operating liabilities 17 846 18 068Interest-bearing liabilities 29 448 28 867Subordinated debenture loan 905 915

Deferred tax 3 517 3 606Minority interests 76 166Equity 13 362 15 188

Total liabilities and equity 65 154 66 810

Financial net debt 20 554 17 872



5/13/03109109

SAS Group Equity / Assets Ratio 9212-0303

0%5%

10%15%20%25%30%35%40%45%50%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Including pare nt company from January, 2000 .

Including Braathe ns from De ce mbe r, 2001 and Spanair from March, 2002.

5/13/03110110

SAS GroupFinancial Net Debt/Equity Ratio 9212-0303

0,00,30,50,81,01,31,51,82,02,32,5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Including pare nt company from January, 2000 .Inc luding Braathe ns from De ce mbe r, 2001 and Spanair from March, 2002.

5/13/03111111

SAS Group Development of financial net debt 9212-0303

0

5 000

10 000

15 000

20 000

25 000

92-12 93-12 94-12 95-12 96-12 97-12 98-12 99-12 00-12 01-12 02-12

MSE

K

Average 93 MSEK 15.900






Average 99MSEK 6.750


Average 01MSEK 9.150

Including parents company from January,2000Including Braathens from December, 2001 and Spanair from March, 2002.


Average Q1 03 MSEK 19.150

5/13/03112112

Summary pension schemes

SAS Group follow IAS accountingExtremely low return on stock market has put pressure on SAS pension plans as wellIn spite of situation – still surplus funds MSEK 1 200SAS plans relatively robust if assumptions should change No need for write down at current levelsNo effects on cash flowNo effects on net debt as pensions are excluded



5/13/03113113

SAS Group fleet as of Mar 31, 2003 SAS Group Owned Leased Total Leased On(Incl SK, BU, JK, KF, WF) Mar03 In Mar03 Out OrderAirbus A340-300 5 2 7 0 0Airbus A330-300 2 1 3 0 1Airbus A321-200 8 4 12 0 4Airbus A320 0 8 8 0 0Boeing 767-300 3 6 9 0 0Boeing 737-400 0 4 4 0 0Boeing 737-500 0 14 14 0 0Boeing 737-600 12 18 30 0 0Boeing 737-700 8 7 15 0 0Boeing 737-800 14 5 19 4 4Boeing 717 0 4 4 0 0Douglas MD-81 5 10 15 0 0Douglas MD-82 17 26 43 0 0Douglas MD-83 2 22 24 1 0Douglas MD-87 10 6 16 0 0Douglas MD-90-30 8 0 8 0 0Avro RJ-85 0 5 5 0 0Embraer ERJ 145 0 3 3 0 0Fokker F28 7 0 7 2 0Fokker F50 7 0 7 2 0deHavilland Q100 16 1 17 0 0deHavilland Q300 0 8 8 0 0deHavilland Q400 10 18 28 0 0SAAB 2000 0 5 5 0 0Total 134 177 311 9 9

SAS Group Owned Leased Total Leased On(Incl SK, BU, JK, KF, WF) Mar03 In Mar03 Out OrderSAS 114 81 195 9 9Spanair 0 50 50 0 0Braathens 4 23 27 0 0Wideroe 16 13 29 0 0Air Botnia 0 10 10 0 0Total 134 177 311 9 9

Average Age Average Age Average Age

Owned Leased In Total

6,92 8,04 7,400 10,02 10,02

1,5 9,25 8,149,03 7,14 8,06

0 3,8 3,87,01 8,45 7,83

SAS Group(Incl SK, BU, JK, KF, WF)SASSpanairBraathensWideroeAir BotniaTotal

5/13/03114114

Limited CAPEX – SAS Group Firm Order CAPEX MUSD 400Firm Aircraft Orders

Total 2003 2004 2005 2006as per 31/03-03

Airbus A330 1 1Airbus A320 2 1 1Airbus A321 4 3 1Boeing 737 4 1 1 2

Tot No. of A/C 11 2 3 5 1

CAPEX (MUSD) 402 72 151 146 33

5/13/03115115

Limited CAPEX – SK Firm Order CAPEX MUSD 340Firm Aircraft Orders

Total 2003 2004 2005 2006as per 31/03-03

Airbus A330 1 1Airbus A321 4 3 1Boeing 737 4 1 1 2

Tot No. of A/C 9 1 2 5 1

CAPEX (MUSD) 342 42 121 146 33

5/13/03116116

SAS financial position adequate

� Equity MSEK 13 438� Equity ratio 21%

� Financial net debt MSEK 20 554

� Fin net debt/ equity 153%

Equity / Total Assets

0%

10%

20%

30%

40%

50%

dec-98 dec-99 dec-00 dec-01 Dec-02 mar-03

%



5/13/03117117

SAS GroupFinancial Net January – March 2003

(MSEK) 03-03-31 02-03-31 Difference

Interest net and others -254 -168 -86

Exchange rate differences +303 +128 +175

Financial net +49 -40 +89

(in % p.a. of averagefinancial net debt) +1,0% -1,1% +2,1 p.u.

5/13/03118118

SAS Group - Development and Break Down of Financial Net Debt 030331

(MSEK) 030331 021231 Difference

Cash 8 534 10 721 -2 187

Other interest bearingassets 1 265 1 189 +76

Interest bearingliabilities -30 353 -29 782 -571

Financial Net debt -20 554 -17 872 -2 682Net debt -13 917 -11 708 -2 209

5/13/03119119

SAS Group - Development and Break Down of Financial Net Debt 030331

(MSEK) 030331 020331 Difference

Cash 8 534 9 188 -654

Other interest bearingassets 1 265 1 558 -293

Interest bearingliabilities -30 353 -28 248 -2 105

Financial Net debt -20 554 -17 502 -3 052Net debt -13 917 -11 574 -2 343

5/13/03120120

SAS share

Price development



5/13/03121121

Development of Market capitalization

02 0004 0006 0008 000

10 00012 00014 00016 00018 00020 000

jan-99apr-99jul-99okt-99jan-00apr-00jul-00okt-00jan-01apr-01jul-01okt-01jan-02apr-02jul-02okt-02jan-03

5/13/03122122

* Peers: Alitalia, Air France, British Airways, Finnair, KLM, Lufthansa &Rynair

SAS share price vs. Peers 2002-2003

40

50

60

70

8090

100

110

120

130

31-dec-01

31-j an-02

28-feb-02

31-mar-

02

30-apr-02

31-maj -02

30-jun-02

31-jul-02

31-aug-02

30-sep-02

31-ok t-02

30-nov-02

31-dec-02

31-j an-03

28-feb-03

31-mar-03

Index Peers Index SAS

SAS Market Capitalization vs. European Peers* measured in SEK(December28, 2001 - March 31 2003)

53,650,3

1040145L 123123

Volume in SAS in Stockholm

Average daily number of shares traded in Stockholm per month

0

50 000

100 000

150 000

200 000

250 000

300 000

Janu

aryFe

brua

ryMarc

h

April

May

June July

Augus

tSep

tember

October

Novem

ber

Decem

ber

Janu

aryFe

brua

ryMarc

h

2002 vs 2001 2003 vs 2002

1040145L 124124

Weak volume in industry downturn SAS AB

N u m b e r o f sh a r e s t r a d e d i n S A S p e r m o n t h

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

16 000 000

March

April

June

July

Augus

tSe

ptembe

rOcto

ber

Novem

ber

Decem

ber

Janu

aryFe

brua

ry

March

2003 vs 20022002 vs 2001

first quarter even weaker than expected sas ab analyst handout … · 2 5/13/03 2 first quarter...

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