Q4 2023: SAS SECURES FINANCING FOR THE FUTURE – KEY MILESTONE IN SAS’ CHAPTER 11 PROCESS

I am pleased to conclude a busy year for SAS. Some 6.8 million passengers traveled with SAS in the fourth quarter, which means that, in total, some 23.7 million passengers traveled with SAS during the full fiscal year 2022/2023. This represents a passenger volume increase of 18 percent for the fourth quarter, and a 33 percent year-on-year increase for the full fiscal year. This is a clear confirmation of passengers continuing to return to SAS, and that our ramp-up efforts throughout the year have been successful. We are also proud to have achieved a five-star rating from our customers in the 2023 APEX Awards.

We are making steady progress in our Chapter 11 process in the US and in reaching our overall targets in the SAS FORWARD plan with one major milestone reached during the quarter. On October 3, SAS announced that Castlelake, Air France-KLM and Lind Invest, together with the Danish state, had been selected as the winning bidder consortium in SAS' exit financing solicitation process. We entered an investment agreement with the bidding consortium shortly after the end of the quarter. The agreement includes a total investment in the reorganized SAS corresponding to approximately SEK 13.2 billion, including approximately SEK 5.2 billion in new unlisted equity and approximately SEK 8 billion in secured convertible debt. The investment comprises a key step in our SAS FORWARD plan, and confirms that our new investors believe in SAS and our potential to remain at the forefront of the airline industry for years to come.

We currently target receiving approval of the Chapter 11 plan from the US court in early 2024, to be followed by obtaining regulatory approvals and the implementation of a Swedish company reorganization at the SAS AB level (likely to be filed by SAS AB in 2024). As a result of that process, all of SAS AB’s common shares and listed commercial hybrid bonds are expected to be cancelled, redeemed and delisted (currently expected to take place during the second quarter of 2024). Consequently, there is no expected value for existing shareholders in SAS AB and only a modest recovery is expected for the holders of commercial hybrid bonds. SAS expects that its operations will be unaffected by such legal proceedings and that it will continue to serve its customers as normal.

AUGUST 2023–OCTOBER 2023

• Revenue: MSEK 12,019 (10,651)
• Income before tax (EBT): MSEK -2,110 (-1,701)
• Income before tax and items affecting comparability: MSEK -2,113 (-1,626)
• Net income for the period: MSEK -1,928 (-1,238)
• Earnings per common share: SEK -0.27 (-0.17)

NOVEMBER 2022–OCTOBER 2023

• Revenue: MSEK 42,043 (31,824)
• Income before tax (EBT): MSEK -5,516 (-7,846)
• Income before tax and items affecting comparability: MSEK -5,661 (-7,941)
• Net income for the period: MSEK -5,701 (-7,048)
• Earnings per common share: SEK -0.78 (-0.97)

SIGNIFICANT EVENTS DURING THE QUARTER

• Higher costs from adverse trends in currencies and fuel price cloaked improved operational and commercial performance.
• The CJEU upheld the General Court’s ruling that the loan guarantees granted by Sweden and Denmark in 2020 were compatible with the applicable EU rules.
• Castlelake, Air France-KLM, Lind Invest and the Danish state were appointed the winning bidder consortium in SAS’ equity solicitation process, including an agreement with Castlelake for new DIP loan to refinance SAS’ original DIP loan. SAS currently aims to receive approval from the US Court of the Chapter 11 plan in early 2024, to be followed by obtaining regulatory approvals and a likely Swedish company reorganization at the SAS AB level. SAS expects that there will be only modest recovery for general unsecured creditors, no recovery for subordinated unsecured creditors and that there will be no value for existing shareholders in SAS AB following the completion of the restructuring proceedings. All of SAS AB’s common shares and listed commercial hybrid bonds are expected to be cancelled, redeemed and delisted.

SIGNIFICANT EVENTS AFTER THE QUARTER

• SAS entered into an investment agreement with the winning bidder consortium and a DIP term loan agreement with Castlelake. The agreements have been approved by the US court.
• On Nov 15, SAS repaid its original DIP term loan that was provided by Apollo Global Management.
• On Nov 29, the EU Commission announced that the recapitalization of SAS in 2020 complies with state aid rules and is approved.

OUTLOOK

• The year-end report includes a financial outlook on page 10.

QUARTERLY RESULTS

We noted continued healthy passenger demand through the fourth quarter with the total number of passengers up 17.9 percent compared with the same period last year. Year-on-year, our RPK increased 17.2 percent, while capacity increased 16.2 percent. Our flown load factor for the quarter was 77.8 percent, up 0.7 percentage points compared with the same period last year.

The increase in passenger demand and production led to a year-on-year increase of 13 percent in our total operating revenue, which landed at SEK 12,019 million for the quarter. After the significant depreciation of the Swedish Krona towards the end of the quarter and the increase in jet fuel prices in the same period, earnings before tax ended at a negative SEK 2,110 million, representing a year-on-year decrease of SEK 409 million. However, for the full year, EBT increased SEK 2,330 million to a negative SEK 5,516 million. The higher costs from adverse trends in currencies and fuel prices are cloaking a significant part of the achievements from stronger operational and commercial performance.

Cost reductions across the business remain in focus to secure our cost competitiveness, and total operating expenses for the quarter ended at SEK 12,681 million. Many of the cost efficiencies of the SAS FORWARD plan are ramping up over time, and some have been implemented but cannot be recognized in our financial results until after emergence from Chapter 11, including cost savings from the fleet restructuring.

The cash balance at the end of the quarter was SEK 6,160 million. Cash flow from operating activities during the quarter amounted to an inflow of SEK 81 million.

UPDATE ON SAS’ TRANSFORMATION PLAN

We launched our comprehensive business transformation plan SAS FORWARD in conjunction with the publication of the first quarter report for FY2022, in the end of February 2022. The aim of the plan is to secure long-term competitiveness for SAS in the global aviation industry. On July 5, 2022, to accelerate the implementation of SAS FORWARD, we announced that we had voluntarily filed in the US for Chapter 11, a well-established and flexible legal framework for restructuring businesses with operations in multiple jurisdictions. Through this process, we aim to reach agreements with key stakeholders, restructure the company’s debt obligations, reconfigure our aircraft fleet and emerge with a significant capital injection.

On October 3, SAS announced that we had selected Castlelake, Air France-KLM and Lind Invest, together with the Danish state, as the winning bidder consortium in our exit financing solicitation process. We entered into an investment agreement with the bidding consortium shortly after the quarter ended. The agreement entails a total investment in the reorganized SAS corresponding to approximately SEK 13.2 billion, including approximately SEK 5.2 billion in new unlisted equity and approximately SEK 8 billion in secured convertible debt. As part of the transaction, we have also secured new Debtor-in-Possession (“DIP”) financing of SEK 5.5 billion from Castlelake. The funds from the new DIP financing agreement are being used for, inter alia, refinancing SAS’ original DIP term loan, increasing liquidity, and supporting SAS’ path to exit from its voluntary restructuring proceedings. The refinancing of SAS’ original term loan was completed in November 2023.

As part of the transaction, SAS also intends to eventually exit the Star Alliance and join the SkyTeam Alliance, of which Air France-KLM is a founding member. This move towards a partnership with SkyTeam determines a clear path forward for the company. Through the completion of this process and the opportunities presented by being part of SkyTeam, we will be able to further enhance SAS’ offerings for the benefit of our colleagues, customers and communities. This is a truly exciting step for SAS. However, it is important to note that nothing is changing immediately. SAS is still part of Star Alliance and our EuroBonus members will continue to enjoy their usual benefits when flying on our partner airlines. Members can continue to accrue and redeem points – just like today, and their benefits when they fly with SAS will not be impacted.

The agreed exit transaction remains subject to approval in connection with the confirmation of SAS’ Chapter 11 reorganization plan. We currently target to receive approval of the Chapter 11 plan from the US court in early 2024, to be followed by obtaining regulatory approvals and the implementation of a Swedish company reorganization at the SAS AB level (likely to be filed by SAS AB in 2024). As a result of that process, all of SAS AB’s common shares and listed commercial hybrid bonds are expected to be cancelled, redeemed, and delisted (currently expected to occur during the second quarter of 2024). Consequently, there is no expected value for existing shareholders in SAS AB and only a modest recovery is expected for the holders of commercial hybrid bonds. SAS expects that its operations will be unaffected by such legal proceedings and that it will continue to serve its customers as normal.

FIVE-STAR RATING IN GLOBAL CUSTOMER RANKING

In September, SAS earned a five-star rating in the prestigious global APEX customer ranking at the 2023 APEX Awards. The ranking is based on neutral, third-party passenger feedback and insights gathered through APEX’s partnership with the world’s highest-rated travel-organizing app. We are thrilled to achieve the highest rating from our customers, and this recognition is a testament to the tireless dedication of the SAS team in ensuring safe journeys, championing sustainability initiatives and offering the highest service standards.

RED DOT AWARD FOR THE SAS APP

In September, SAS also won a Red Dot Award for its redesigned mobile app. The Red Dot Award is one of the most prestigious and internationally recognized design competitions, and celebrates outstanding achievements in the field of design, creativity, and innovation. The SAS app received an award in the Brands & Communication Design 2023 category. This achievement is a result of the hard work and dedication of our talented team, and all supporting teams, who continuously strive to create innovative solutions that deliver exceptional experiences for our customers.

STEPS TOWARDS FOSSIL-FREE AVIATION

SAS aims to decarbonize aviation and progress on this ambitious plan can only be achieved through collaboration. By involving our customers and teaming up with them, we can reduce CO₂ emissions and enable increased large-scale production of sustainable aviation fuels.

SAS strives to be a driving force in sustainable aviation and is proud to participate in a large-scale international study using a SAS aircraft at Copenhagen Airport to investigate sustainable aviation fuel (SAF) flights’ impact on local air quality. The project began during Q1 FY2023, and one of the conclusions drawn is that bio-based aviation fuel reduces the number of ultra­fine particles that are emitted from the aircraft engines by approximately 30 percent, thereby improving air quality. SAS is very proud to participate in this project as it is a great example of how our collective efforts can enable further discoveries of sustainable solutions for the aviation industry. The findings of this unique experiment at Copenhagen Airport showcase that using SAF not only reduces CO₂ emissions but also enhances local air quality.

THE COMING WINTER SEASON

We have entered the winter season and we look forward to flying our passengers to their destinations. We have added several new routes and destinations for the winter season. In October, SAS inaugurated the new winter season route to Bangkok from Copenhagen. Thailand is a favorite destination among many passengers during the winter season and the Bangkok route will offer a perfect entry point for wider Thailand and Asia, and be a great option both for business and for leisure travelers. SAS operates the Bangkok route with Airbus A350 aircraft, which have much lower fuel consumption and up to 30 percent lower CO₂ emissions than previous comparable aircraft.

We continue our work towards completing our Chapter 11 process in the US, and towards reaching the objectives in the SAS FORWARD plan. The aim is currently to receive approval from the US court of the Chapter 11 plan in early 2024, to be followed by obtaining regulatory approvals and the implementation of a Swedish company reorganization at the SAS AB level. While work still remains, I am pleased to see the substantial progress we are making to becoming a competitive and financially strong company.

I am grateful for the really hard work of my colleagues at SAS for the progress of SAS FORWARD to date, and for everything they do to ensure that we take the best possible care of our customers on a daily basis. Thank you for all your efforts!

As always, we look forward to welcoming our customers on board our aircraft.

Anko van der Werff
President & CEO
Stockholm, November 30, 2023

Teleconference – Q4 2023
A teleconference and webcast for investors, analysts and media will be held at 10.00 AM CET. Anko van der Werff, President & CEO and Erno Hildén, Executive Vice President & CFO, will present and comment on the report. The presentation will be held in English.

Access via web link (no advance notification is necessary): https://ir.financialhearings.com/sas-q4-2023

Link to register for participation via telephone: https://conference.financialhearings.com/teleconference/?id=5007048

After registration you will be provided phone numbers and a conference/user ID to access the conference. You can ask questions verbally via the teleconference.

For further information, please contact:
SAS press office, +46 8 797 29 44
Investor relations, +46 709 977 070

SAS, Scandinavia’s leading airline, with main hubs in Copenhagen, Oslo and Stockholm, flies to destinations in Europe, USA and Asia. Spurred by a Scandinavian heritage and sustainability values, SAS aims to be the driving force in sustainable aviation and in the transition toward net zero emissions. We are continuously reducing our carbon emissions through using more sustainable aviation fuel, investing in new fuel-efficient aircraft and technology innovation together with partners – thereby contributing towards the industry target of net zero CO2 emissions by 2050. In addition to flight operations, SAS offers ground handling services, technical maintenance, and air cargo services. Learn more at https://www.sasgroup.net

This is information that SAS AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of Erno Hildén, at 08:00 a.m. CET on November 30, 2023.