Loss-making Swedish airline SAS is struggling to survive, the newest airline reeling from monetary hardship due to heavy debts, fierce festival and sky-high costs, even as the industry recovers from the pandemic.
SAS said a restructuring plan announced in February depended on raising SEK 9. 5 billion ($946 million) in money and converting SEK 20 billion into capital.
Many governments around the world have helped strengthen their domestic operators during the pandemic. But Sweden and Denmark, which have a 21. 8% stake in SAS, take very different approaches to the Scandinavian brand.
Denmark said it was willing to increase its ownership and cancel its debt, but Sweden refused to inject more money.
WHY IS SAS SO IMPORTANT TO DENMARK?
SAS AB, formerly known as Scandinavian Airlines System Denmark – Norway – Sweden, is headquartered in Stockholm and uses Copenhagen Airport, the largest in Scandinavia, as its main hub.
Danish Finance Minister Nicolai Wammen said SAS is vital to the Danish economy and provides smart links between the Nordic country and the rest of Europe, as well as long-haul flights to other continents.
SAS employs about 7000 people, similarly divided between Denmark, Sweden and Norway. Before the COVID-19 pandemic, the company generated 20,000 jobs in the Scandinavian region, and added 6800 in Denmark, according to a 2019 report by Copenhagen Economics commissioned through SAS.
SAS accounted for nearly a third of direct and oblique flights to Denmark, according to the report. It also accounted for 82% of air traffic on the move at Copenhagen Airport in 2017.
For Danes, SAS has been linked to a sense of pride and even a collective sense of belonging as it evolved into a leading premium airline in the decades following its creation in 1946.
WHAT HASN’T HAPPENED?
At its peak in the 1980s, SAS named the world’s most productive airline through a trade group. But with the emergence of cheap competition like Ryanair, things began to change.
The company has been in near-constant financial trouble since the turn of the century and lost SEK 6. 5 billion ($638 million) last year, with revenues a third of pre-pandemic levels.
In the Trustpilot customer review, SAS has a rating of 1. 5 out of five stars, just above Ryanair’s 1. 4.
In addition to SAS’s problems, some 1,000 SAS pilots in Denmark, Norway and Sweden plan to go on strike on June 29 over disagreements over salaries and cost-cutting plans.
WHAT DOES DENMARK WANT?
Denmark’s parliament agreed this month to cancel some of SAS’s debt and convert more into equity, as well as inject new cash. This can increase Copenhagen’s stake in the airline by up to 30%.
But the government has made it a condition for the injection of liquidity that SAS also involves investors.
IS THAT A PROBLEM?
While the Danish government has promised to stay out of business as usual, it needs to protect its interests.
Denmark needs “influence over SAS elements that should maintain SAS’s strong presence in Denmark and contribute to Denmark’s foreign accessibility,” the Finance Ministry said this month.
This may deter large investors and consortia that have been interested in making radical adjustments to SAS, according to Sydbank analyst Jacob Pedersen.
WHAT IS SWEDEN DOING?
Sweden, which has already injected more than SEK 8 billion into SAS in recent decades, has focused on new funding.
Stockholm said this month it would not provide a new budget to SAS, it had approved the debt-to-equity conversion plan.
If the airline gets new capital, it will have Sweden’s stake. The country has said it needs to leave SAS absolutely in the long term.
WHAT ABOUT NORWAY?
Norway’s neighboring government sold its remaining 10% stake in SAS in 2018, arguing that it did not want the state to hold shares in airlines.
However, it is a major creditor with 1. 5 billion Norwegian kroner ($153 million) in loans granted by the pandemic.
On Tuesday, Oslo said it would do the SAS debt plan, under certain conditions, but that it did not plan to remain a long-term shareholder.
($1 = 10. 0434 Swedish kroner)
($1 = 9. 7801 Norwegian kroner)