The Swedish government will no longer provide money to SAS

When presenting its operating and financial results for the second quarter of its fiscal year, SAS noted that while it “continues to increase the number of operations and records the highest number of passengers since the start of the pandemic” , the government decided to no longer provide money to support the company. It is also continuing to implement its FORWARD plan.

The state will reduce its stake in the airline.

The SAS FORWARD plan was presented on February 22, during the publication of the results for the first quarter. It aims to ensure the company’s long-term competitiveness by substantially improving its liquidity position. In addition to reducing the cost structure and improving efficiency, SAS intends to convert approximately SEK 20 billion of debt into cash and capital. It will also seek to raise “no less” than SEK 9.5 billion of new equity through new financing.

In accordance with this plan, the Swedish Minister for Trade and Industry, Karl-Petter Thorwaldsson, announced at a press conference on Thursday May 2 that “the Swedish state will no longer inject money into SAS”. If it seeks new loans, the state’s stake in the company will be reduced.

In this regard, Thorwaldsson stated that “state ownership in SAS is likely to decline”. Currently, the Swedish state owns 21.8% of the airline; since 2010, Parliament has ordered a reduction of this post.

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On the other hand, the official pointed out that the State has accepted the proposal to convert the debt that the company has to the State into shares. In this regard, Thorwaldsson mentioned that even if the government “agrees to convert the loans into capital”, he added that “we are saying clearly: we will not bring in new capital. They can seek financing by other means, and from other investors”.

Financial and operational results

In the quarter under review, the airline lost SEK 1.6 billion before tax. Its liquidity was 8.5 billion SEK. This is an improvement of SEK 1.0 billion compared to the previous quarter and of SEK 0.7 billion compared to the same period last year.

Total expenditure for the quarter was SEK 7.8 billion. Operating profit amounted to SEK 7.0 billion. Total revenue increased by 27% compared to the first quarter, an improvement of approximately SEK 5.1 billion compared to last year. However, this remains 31% below the second quarter of 2019, the last period before Covid-19.

Operationally, demand has improved as travel restrictions have been phased out. Compared to the previous quarter, SAS carried 28% more passengers, with a load factor of 67% (11% more).

The airline added 3% of its capacity compared to the first quarter. According to the report, ticket sales continue to increase as the summer period approaches, and SAS aims to operate at 80% of summer 2019 capacity this year.

Future plan

The SAS FORWARD plan aims for a global transformation of the company. If successful, it will ensure the “competitiveness and long-term financial strength” of the company. Key elements include the following:

  • Cost savings of SEK 7.5 billion per year.
  • Overhaul of the fleet, the network and the product offer.
  • Digital transformation.
  • Positioning as a leader in sustainable aviation.
  • Acceleration of the operating platform.
  • Strengthened SAS balance sheet.
  • Conversion of debt into equity and capital increase.
  • Labor talks.

SAS continues to negotiate with its unions. In particular, certain concessions were demanded from the workers in order to form a competitive business model. For the company, “that employees waive certain benefits is an essential condition for the success of the FORWARD plan, and it will not be possible to raise new capital and ensure the future of the airline without these sacrifices” .

According to the airline, “given the limited progress made so far, there can be no assurance that the FORWARD plan will materialize.” If this were to happen, the company would not be able to maintain its current capital structure and liquidity levels, and it cannot be ruled out that it will have to default on its future obligations.

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