2013‐09‐17

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SAS ABDebt investor presentationSeptember 2013 

Jan TorbergerGroup Treasurer

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Göran JanssonDeputy President and CFO

Group Treasurer

2013‐09‐17

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Agenda

• SAS Group and airline industry

• 4Excellence Next Generation

• Q3 update and financials

• Transaction summary

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• SAS is the largest carrier in the Nordic region,  in 2012 SAS had about 28 million customers

The Nordic region’s largest airline in terms of revenue, passengers & flights Share of capacity in the Nordic market, full year 2012

NorweiganSAS Group

Overview of SAS

2012 SAS had about 28 million customers 

• SAS route network comprises 136 destinations, mainly in continental Europe and a few selected long‐haul destinations to North America and Asia

• SAS is primary a regional operator, with 70% of its production on domestic, intra‐ Scandinavian and European routes. 

• Norwegian is the largest competitor

• During both 2012 and 2013, SAS has invested in new routes

0 5 10 15 20 25 30

AirBerlinEasyjet

Brittish AirwaysWirderøe

AirFrance/KLMFinnairRyanair

120

Number of transported passengers 2012 by European airlines 

new routes 

• 52 routes to be opened in 2013

0

20

40

60

80

100

120

Mill

ions

Shareholder  Total  Acc. 

The Swedish government 21.4% 21.4%

The Danish government 14.3% 35.7%

The Norwegian government 14.3% 50.0%

Knut and Alice Wallenberg's foundation 7.6% 57.6%

Other shareholders (60,361 shareholders) 42.9% 100%

Largest shareholders

2013‐09‐17

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SAS strategy and market position

SAS market share 2012• SAS focus is the Scandinavian frequent traveller (business and leisure)

• 5+ round trips/year• 5+ round trips/year

• Represent appr 70% of market revenues

• Scandinavia a substantial market of more than SEK 100 bn – most within Europe

• About 100 million passengers

• <10% passengers travelling long haul

• Nordic travelers by far the most active short distance travelers within Europe

• Sh t h l f i S di i i i li t

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• Short haul focus in Scandinavia requires airline to operate efficiently

SAS network and frequencies enable SAS to provide frequent travellers the ‘best product’

• 4XNG driving operational efficiency

SAS home market financially strong  

Per cent GDP growth in SAS home markets vs Eurozone

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S&P credit rating

1

2

3

6

‐1

02012 2013E 2014E 2015E

Norway Sweden DenmarkFinland Eurozone Ave. ScandAve. EU

Source: SEB/OECD

2013‐09‐17

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SAS on course in an industry in transition

Weak profitability amongst European airlines

• Competition continues to be intense LCCs share of capacity in the Nordic • Competition continues to be intense

• High LCC penetration

European legacy carriers response

• Implementation of efficiency measures

• Capacity reductions

• Phasing in of LCC sub carriers to defend position 10%

15%

20%

25%

30%

35%

40%

LCCs share of capacity in the Nordic market

position

Signs of market converging

• LCC moving upward in customer proposition

• LCC targeting business customers

7

0%

5%

4XNG

2013‐09‐17

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RASK and CASK diverged – necessary for SAS to take swift action in 2012

SEK

4XNG planned andUnit cost

Unit cost and RASK diverging

4XNG planned and initiated – autumn 2012

4XNG assumes:‐Continued RASK deterioration‐ Unit cost reduction by 15% in FY15

0,8 Time

g g

2012‐20152011‐2012

4XNG plan – three building blocks

Cost/flexibilityHistorical legacy and a geographical  home base in three countries have

LiquiditySAS has been too dependent on external credit facilities to be able to

EquityNew accounting rules for pensions to be applied from November 1 2013

Measures Main objective

Cost Flexibility Liquidity/Equity

New collective  agreements for flight crew √ √

home base in three  countries have created an expensive and inflexible cost structure.

external credit facilities to be able to maintain adequate financial preparedness.

be applied from November  1, 2013 will have substantial negative impact on the SAS Group’s equity.

…and we are dealing with them now

Outsorcing of Ground Handling, customer service and certain administrative functions

√

Centralization of administration, staff cuts and market‐based remuneration

√

New pension agreements with defined contribution pensions

√ √

Savings and streamlining measures in IT √ √

Asset sales √

4XNG will deliverimprovement inearnings (EBIT) by ca SEK 3 bn and liquidity effects of ca SEK 3 bnpertaining to the sale of assets

2013‐09‐17

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Financial targets

Long term: FY 15

ProfitabilityEBIT %

>8%

Equity ratioEquity/Assets, %

>35%NEW

NEW 11

22

11

Financial preparednessCash & unutilized credit facilities / Fixed cost

>20% (70 days)

NEW 33

Initiatives Progress

New collective agreements

• Compensation effective as of December 2012

• New schedules effective as of Mar ch13

M b l l d S d /D k

4XNG – SEK 3bn in cost reductions

Cost measures

MSEK 700

Admin centralization

New pension schemes

IT restructuring

• Move to contribution plans implemented in Sweden/Denmark; Norway to be completed by end of the year

• New early retirement conditions implemented in Q2

• Majority of 1,000 FTE reduction to be completed FY2012/13• All employees to leave SAS in FY13 have been identified and

agreements reached with 85%• OCC centralized to Stockholm

• Contract agreement signed with new IT-supplier, Tata Consultancy Services (TCS)

• Agreement to outsource revenue management systems• SAS sales organization undergoing restructuring and centralization

MSEK 500

MSEK 750

MSEK 550

Commercial &sales

• SAS sales organization undergoing restructuring and centralization• Network efficiency being enhanced through better utilization of

existing resources • Call Centres – Agreement signed with Sykes

Increase proportion of variable costs

Commercial & SalesMSEK 500

• Outsourcing of SAS Ground Handling− Reduces exposure of external revenue− Switching SEK 5 bn to variable costs

• Increased use of wet lease• Outsourcing of call centres

2013‐09‐17

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Through new union agreements, capacity can be increased without adding resources

Flight hours per month

2013

2012

2013

Summer programWinter program

AprMarNov Dec Jan Feb OctSepAugJulJunMay13

Asset disposal of close to SEK 3 already completed

Sale of Widerøe

• Agreement to sell 80% of Widerøe to be completed in September 2013.MSEK

Liquidityeffect

Sale/lease back of engines

• Aircraft and loans relating to aircraft sold and transferred to Widerøe.• SAS to receive about SEK 2 billion in conjunction with the sale

− Approximately SEK 1 billion will have a positive effect on liquidity− Net debt to be reduced by approximately SEK 2 bn

• A sale and leaseback agreement of spare aircraft engines was entered into in February with a liquidity effect of slightly more than MSEK 700.

MSEK 1,000

MSEK 700

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Aircraft financing

• Additional aircraft refinancing has been carried out for a number of aircraft, which had a combined effect on liquidity of about SEK 1 billion.

MSEK 1,000

2013‐09‐17

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Effect of the revised IAS 19 and new pension terms, SEK bn

New pension plans being implemented and reducing pension commitment by SEK 19 bn

Defined-benefit pension commitment

13,5 ‐3.4

‐1.5‐1.7

6,9

Actuarial Effect of new Reversal of Amortization of Estimated

33.5

14,0

~ 60%

Actuarial gains/losses, Oct 31,2012

Effect of new pension terms

Reversal of deferred tax liabilities

Amortization of actuarial 

gains/losses and sale of WF

Estimated actuarial 

gains/losses pro forma

New contribution pension plans implemented in Sweden and DenmarkNorway to be implemented before year end

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Oct 31, 2012

ProformaNov 1, 2013

Planned earnings effects from 4XNG

~30 4

Incremental EBIT effectsSEK billion

~30.4

1.2

1.5

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TotalFY 14/15FY 13/14FY 12/13

2013‐09‐17

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This is what the future SAS will look like

Administrative locationsAdministration

t li d i SE3 administrative l tiAdministrative locations centralized in SElocations

Divestments andconsolidation

No. of employees ~15 000 ~9 000

Distribution of entire workforce in Scandinavia

30% 34% 36% 38% 31% 31%

Next generation fleet 80 % 100 %

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This is what the future SAS will look like

Crew cost per ASK

Administration

Reduction through redundancy and

outsourcing 1,000 FTE (from ~2,500 to 1,500 FTE)

‐ 33%

Admin costs per ASK

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‐ 43%Admin costs per ASK

2013‐09‐17

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Q3 update

Strengthened SAS delivers positive result in Q3

Passenger revenues up 5.3% (FX adjusted)• 32 new routes introduced

Restructuring status32 new routes introduced

• Capacity up 7.7%• Traffic up 5.6%• Yield down 0.6%

Restructuring drives improvement• Operating expenses down 5% while capacity

is up 7.7%• Unit cost down 5 8% (ex fuel)

Cost and efficiency

Pension switch overUnit cost down 5,8% (ex fuel)

EBT MSEK 1 120• EBT before non-recurring items doubled to

MSEK 973

Decision taken to renew fleet

Financial preparedness

2013‐09‐17

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Improved cost structure and efficiency

Increased passenger revenuesvs last year, SAS Group, FX adjusted

Increased Aircraft utilizationA/C utilization vs. LY

+6 7%

Unit cost decreasing FX & Fuel adjusted unit cost vs LY

Operating expenditure*vs last year SAS Group

+4.0%

Q3

+6.7%

Q2

+4.2%

Q1

+6.3%

Q3

+5.3%

Q2

+4.4%

Q1

FX & Fuel adjusted unit cost vs. LYvs last year, SAS Group

Q3-5.8%

Q2

-3.9%**

Q1

-2.8%

Q3Q2Q1

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NEXT GENERATION

4.7%

-4.0%** -5.0%

*Excluding non‐recuring items ** Excludes MSEK 450 in reduced pension costs          

Optimized summer program tailored to frequent Scandinavian Travellers

Increased share of EuroBonuscustomers

Increased capacity (European routes)

Jun‐Jul 2012 Jun‐Jul 2013

+46%

Jun‐Jul 2012 Jun‐Jul 2013

+14%

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• Introduction of SAS Go and Plus

• ~100,000 more passengers in Q3

• Yield down as expected but passenger revenues up 5.3% in Q3

• 32 new routes during summer

• Traffic up 11% on European routes in June-July

• More frequencies to USA and introduction of San Francisco

2013‐09‐17

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Liquidity position strengthened by SEK 1.3bn  since Q1

• Operating cash flow before change in working capital

Financial preparednessPer cent of last 12 months fixed cost

capital

• Improvement by MSEK 304 in Q3

• Negative change in working capital due to higher utilization of pre-booked tickets in Q3

• Asset disposals and positive cash flow strengthening SAS financial preparedness

• SAS accessing the debt market

20% 18% 21%

Financial net debt, MSEK

Q1 Q2 Q3

• SAS accessing the debt market

• Issue of MEUR 35 within the EMTN program

• S&P upgrade of SAS credit rating to B-

• Moody’s places SAS on positive outlook (13 Sep 2013)

7,760

5,957 5 791

Q1 Q2 Q3

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Overview of credit facilities – July 2013 and after the sale of Wideröe

Available funds, SEK billion Jul 2013 Maturity Proforma 1 Oct

2.70.20.30.0

3.2

5.11.9

Mar 2015Jan 2016, Oct 2017

Sep 2021Feb 2020

Undrawn portion ofcredit facilities

Total undrawn credit facilities

Total credit facilities- Drawn portion of credit facilities

Revolving Credit Facility, SEK 2.7 bn

Credit Facility, MUSD 125 & 62

Credit Facility, MUSD 67

Others (MUSD 120)

2.00.20.30.0

2.5

4.41.92 53.2- Undrawn portion of credit facilities

• After the sale of Wideröe, the financial preparedness proforma (using cash situation as at July 2013) is expected to be approximately 22%.

2.5

2013‐09‐17

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Secured a competitive fleet “roadmap” 

Harmonized fleet• Boeing 737NG in Stockholm/Oslo

• Airbus A320 in Copenhagen

Renewal of long haul fleet• 4 A330-300E and 8 A350-900

• First delivery in 2015

Renewal of short haul fleet• 30 A320 ith fi t d li i 2016

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• 30 A320neo with first delivery in 2016

• MD80 fully replaced (by B737NG/A320) already in October 2013

Cabin upgrade on existing fleet• Long haul: New IFE-system and new seats

(incl. fully flat business seats)

• Short haul: New seats for improved comfort and enhanced fuel efficiency

Financing of fleet renewal

• New aircraft attractive for secured financing

• Financing options

• Export credit financing

• Sale and leaseback

• Enhanced Equipment Trust Certificate EETC

• Commercial bank financing

• SAS to seek a diversification of finance options to reduce risk exposure

• Mix between leasing and finance/ownership

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2013‐09‐17

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• Restructuring measures being implemented swiftly according to plan

Summary and outlook

Restructuring measures being implemented swiftly according to plan

• Cost and efficiency

• Pension switch over

• Financial preparedness

• Productivity and efficiency driven growth tailored to Scandinavian frequent travelers

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• Renewal of fleet underway – both long and short haul

• Outlook for 2012/2013 remains firm:

• EBIT-margin of >3% and a positive EBT

Thank you!

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