Could Norwegian state return to part-ownership of airline SAS?

Norway’s government is reported to be considering purchasing shares in Scandinavian airline SAS, which is currently part-owned by the Danish and Swedish states.

A SAS aircraft parked on the tarmac at Manchester Airport
A SAS aircraft parked on the tarmac at Manchester Airport in 2018. The Norwegian state could return to part ownership of the airline for the first time since that year. File photo: Christof STACHE / AFP

The Norwegian government is considering a return to part-ownership of airline SAS by purchasing shares, business media Dagens Næringsliv (DN) reports. As an alternative, the government may offer a loan to the struggling company.

Oslo is to consults financial services and legal advisors over the situation, according to DN.

The airline posted a net loss of 1.5 billion Swedish kronor (144 million euros) in the second quarter, compared to a net loss of 2.4 billion kronor a year earlier.

Earlier this week, SAS said it was seeking to convert “20 billion (kronor) of debt and hybrid notes into common equity,” and was seeking to raise 9.5 billion kronor in new capital.

As such, creditors behind the debt could be allotted shares in exchange for the debt being written down and the balances converted to equity.

SAS was founded in 1946 as a joint Scandinavian effort to increase air traffic between the Nordic region and North and South America.

The Norwegian government sold its remaining shares in the airline in 2018, leaving Denmark and Sweden as the remaining state owners. The two countries have over 20 percent of shares in SAS each, making them the largest shareholders.

During the Covid-19 pandemic, the Norwegian state gave 1.5 billion Norwegian kroner to SAS via loan guarantees. It is this debt which could conceivably be converted to shares.

An alternative scenario would involve a new loan from the Norwegian government to SAS, DN writes, comparable to a refinancing agreement given to another Scandinavian airline, Norwegian, in 2021. In that scenario, the government accepted a reduction of the first loan before providing a second loan on new and stricter terms.

“It’s a known fact that SAS is in a difficult situation. The Norwegian state is already an indirect creditor of SAS because the company has made use of a loan guarantee scheme for the aviation industry,” Norway’s Ministry of Trade, Industry and Fisheries told DN in a written comment on behalf of State Secretary Halvard Ingebrigtsen.

Swedish broadcaster SVT meanwhile reported on Thursday that the Chinese state is a potential part-owner of SAS.

In March, SAS sold four Airbus planes to an Irish subsidiary of the China Development Bank (CDB) and loaned them back on a leaseback agreement. SAS also has prior agreements with CDB.

Should SAS struggle with repayments, the Chinese company could potentially convert them to unpaid loans or shares in SAS, according to SVT.

READ ALSO: Scandinavian airline SAS hit by 1.5 billion kronor loss

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SAS pilots approve new collective agreement

93 percent of Danish SAS pilots have approved the agreement that ended strike action last month.

SAS pilots approve new collective agreement

93 percent of the Danish SAS pilots have voted yes to an agreement which ended strike action but also means, among other things, redeployments, longer working weeks and lower wages.

This was announced by Dansk Metal on Saturday morning. The pilots could have voted yes or no on the new collective agreement until midnight on Friday evening.

Pilots in Sweden and Norway have also approved the agreement.

Keld Bækkelund Hansen, head of negotiations at Dansk Metal, said “I am incredibly happy. It is a bit atypical to see that a collective agreement negotiation ends in agreements being made that reduce wages and conditions.”

“So of course it was exciting how our members viewed the new collective agreement. But they could also see that it was a necessity in relation to SAS’s situation,” he added.

The agreement comes after months of tug-of-war that finally saw SAS and the striking pilots reach a collective agreement on 19 July. It helped end a two-week strike.

Part of the background to the conflict between SAS and the pilots was that, during the COVID-19 pandemic, SAS dismissed around half of its pilots.

With the new collective agreement, however, all 450 dismissed pilots will be offered re-employment in the future.

At the same time, SAS pilots will see a 25 percent pay cut, and the limit for the workload is raised from 47 hours to 60 hours per week.

But even with strike action over and a collective agreement supported by pilots, the problems are far from over for SAS, which has suffered major financial losses during the conflict.

Currently, the airline plans to begin a reconstruction in the United States under bankruptcy protection in a so-called Chapter 11 process.

Bankruptcy protection will mean that SAS can continue to operate and pay wages while the process is ongoing.

SAS is seeking financing of up to $700 million- slightly more than DKK 5.1 billion.

SAS press manager Alexandra Lindgren Kaoukji said in a statement: “We are very happy and look forward to continuing our ongoing Chapter 11 process and our work to ensure a strong and sustainable airline for many years to come.The positive result of the vote will help SAS to attract long-term investors while we go through the Chapter 11 process and work further with the SAS Forward plan.”