Sweden's government will propose to the country's parliament that SAS Scandinavian Airlines (SK, Copenhagen Kastrup) be permitted to convert debt it owes to the state into equity, its minister for business and industry said on June 7. But it will not inject any new capital into the struggling carrier.
The Swedish state also excludes itself from being a long-term owner in the airline, Karl-Petter Thorwaldsson warned during a press conference, and will eventually exit SAS altogether.
The airline said in a statement that the debt conversion was "an important step" for its new "transformation plan", which it calls SAS Forward and which aims to save SEK7.5 billion kronor (USD765 million) a year, to succeed.
"Today's announcement regarding the intention of the Swedish government to support the conversion of its debt holdings into SAS equity is an important step towards the success of the transformation plan," it said.
The plan's full implementation will ultimately "allow SAS to become a competitive player" in European aviation, thereby attracting the necessary new equity capital to restore its liquidity, deleverage its balance sheet, and invest in a new fleet of aircraft."
On the government announcing it would inject no additional capital into the carrier, SAS expressed its "appreciation of the support that has been given from the Swedish state over the years," adding that during the pandemic this support "was an absolute necessity for the company's survival."
SAS said last week that it needed a new capital injection of SEK9.5 billion (USD969 million) if its restructuring plan is to work. However, no shareholders, including Sweden and Denmark - the main owners with stakes of 21.8% each - have committed to the plan.
"Since 2010, the state has a mandate from the Riksdag [parliament] to reduce ownership in SAS. As the responsible owner, it is also important to make decisions that are not easy but which are the right ones," Thorwaldsson said, as quoted by financial daily Dagens industri. "With the mandate from the Riksdag to reduce our ownership, we therefore say no to raising capital in the SAS Forward plan. This means that the state’s ownership in SAS will in all probability decrease."
He then listed four points as the Swedish government's recommendation to the airline:
- Ready to convert loans into capital, which means conversion of debt into shares
- No to inject new capital
- The state's ownership in SAS will in all probability decrease
- The Swedish government is clear that it is not a long-term owner of SAS.
He clarified: "There is a limit where the state must say that SAS must manage on its revenues, and so we think it is reasonable that we comment on the loans we have in SAS but we also say clearly that we will not add new money into the SAS Forward plan."
In Copenhagen, the Danish finance minister, Nicolai Wammen, told the Norwegian newspaper Dagens Næringsliv that the Danish government was for now leaving the door open on a financing decision and "will, together with the parties to the agreement, assess SAS's plan and how the Danish state can contribute to SAS's overall plan. I expect we will have a decision on this in mid-June."
And in Oslo, four years after the Norwegian state sold its own stake in SAS, which at the time stood at just under 10%, the government said it could not exclude future re-entry into the ownership structure, a trade ministry spokesperson told the daily. It said it had hired ABG Sundal Collier and Wiersholm as advisers to help it look into this possibility.
Last week, after it emerged that a consortium of foreign investors had hired advisers with the goal of taking over SAS, Sveriges Television reported that economic collapse at the carrier could mean that Chinese state-owned China Development Bank becomes an indirect or direct owner.
In March 2021, CDB and SAS completed a transaction, a long-term agreement in which the airline sold four Airbus aircraft - three A320neo and one A350-900 - to the bank's Irish subsidiary CDB Aviation, which in turn leases the jets back to SAS. The Scandinavian company now wants to convert as much of its leasing obligations into shares as possible, the newspaper explained.
