Skift Take
With Sweden and Norway not wanting to remain long-lasting stakeholders, the survival of Scandinavian Airlines now depends upon Denmark. However, with Copenhagen’s stake set to increase to 30 percent, just how much of a deterrent would that be for potential personal investors?
Peden Doma Bhutia
Swedish loss-making airline company SAS is fighting for survival, the current carrier to strike monetary straits due to significant debts, stiff competitors and skyrocketing expenses, even as the travel market recuperates from the pandemic.
SAS has said a restructuring plan announced in February depends on it raising $946 million in cash and transforming $2 billion of debt to equity.
Numerous federal governments throughout the world assisted support their national carriers during the pandemic. However Sweden and Denmark, which both have 21.8 percent stakes in SAS, are taking very various techniques to the Scandinavian brand.
Denmark has said it wants to increase its ownership and cross out debt, however Sweden has actually refused to inject more money.
Why Does SAS Matter So Much to Denmark?
SAS AB, formally referred to as Scandinavian Airlines System Denmark– Norway– Sweden, is headquartered in Stockholm, however it uses Copenhagen Airport, the largest in Scandinavia, as its main center.
Denmark’s Finance Minister Nicolai Wammen has said SAS is necessary for the Danish economy and guaranteeing excellent travel connections from the Nordic country to the rest of Europe as well as long-distance flights to other continents.
SAS directly employs almost 7,000 people, similarly shared in between Denmark, Sweden and Norway. Prior to the Covid-19 pandemic, the business underpinned 20,000 tasks in the Scandinavian region, 6,800 of those in Denmark, according to a 2019 report by Copenhagen Economics commissioned by SAS.
SAS represented nearly a third of direct and indirect flights to Denmark, according to the report. It likewise represented 82 percent of transfer air traffic at Copenhagen airport in 2017.
To Danes, SAS has actually typically been connected to a sense of pride and even a collective sense of ownership as it developed to become a prominent premium carrier in the decades following its production in 1946.
What Has Gone Wrong?
At its height in the 1980s, SAS was called the world’s best airline by an industry group. However with the emergence of affordable competitors such as Ryanair things began to change.
The business has remained in nearly continuous financial trouble because the turn of the century, and last year lost $638 million, with revenue just a third of pre-pandemic levels.
On customer evaluation site Trustpilot, SAS is rated 1.5 out of 5 star, simply above Ryanair’s 1.4.
Adding to SAS’ problem, some 1,000 SAS pilots in Denmark, Norway and Sweden plan to go on strike on June 29 over disputes over earnings and cost-cutting plans.
What Does Denmark Want?
Denmark’s parliament agreed this month to cross out a few of SAS’ debt and convert some more into equity, in addition to inject brand-new money. That might increase Copenhagen’s stake in the airline company to up to 30 percent.
But the government has actually made it a condition of the cash injection that SAS gets personal investors to participate too.
Is This a Problem?
While the Danish government has assured to avoid of day-to-day organization, it wants to protect its interests.
Denmark wants “influence over the aspects in SAS that are central to maintaining SAS’ strong grip in Denmark and contribution to Denmark’s global accessibility,” the finance ministry stated this month.
That may deter large financiers and consortia that may have had an interest in making sweeping changes at SAS, according to Sydbank analyst Jacob Pedersen.
What is Sweden Doing?
Sweden, which has actually currently injected more than $800 million into SAS over current decades, has actually taken a harder line on new funding.
Stockholm said this month it would not supply brand-new money to SAS, though it approved the debt-for-equity strategy.
If the airline does raise brand-new equity, this will minimize Sweden’s stake. The country has said it wishes to exit SAS completely in the long term.
How About Norway?
Neighbouring Norway’s federal government offered its staying 10 percent stake in SAS in 2018, arguing there was no need for the state to own airline stocks.
Still, it is a significant creditor with $153 million in loans made during the pandemic.
On Tuesday, Oslo stated it would support SAS’ debt-to-equity strategy, under certain conditions, however did not strategy to remain a long-lasting stakeholder.
(Reporting by Jacob Gronholt-Pedersen and Nikolaj Skydsgaard, additional reporting by Gwladys Fouche. Editing by Mark Potter)
This short article was written by Nikolaj Skydsgaard and Jacob Gronholt-Pedersen from Reuters and was lawfully certified through the Industry Dive Content Marketplace. Please direct all licensing questions to [email secured]