Air France-KLM Takes Surprise Stake In Scandinavian Airline SAS

03.10.2023 - 20:03 / forbes.com

Struggling airline Scandinavian Airlines (SAS) has announced a proposed new ownership structure, with several surprising elements. Competitor Air France-KLM will take a one-fifth stake in the new-look ownership group, while current shareholders face the prospect of losing everything.

Air France–KLM, Lind Invest, and the Danish government have agreed to pour new funds into the airline. According to a stock market announcement, 12.9 billion Swedish kronor ($1.16 billion) of new capital has been committed.

Both Air France and KLM are members of the SkyTeam airline alliance. As part of the deal, SAS will leave Star Alliance, a group that SAS became a founder member of in 1997, and intends to join SkyTeam.

If approved, the new ownership structure will see Castlelake Investment Fund take the biggest share at 32%. The Danish government will own 25.8%, Air France-KLM 19.9%, and Lind Invest 8.6%. The remaining equity is most likely to be distributed to certain creditors who may receive recovery in equity, according to a SAS statement.

"This is a crucial milestone in our SAS Forward plan, demonstrating that our new investors believe in the potential of SAS," says CEO Anko van der Werff.

Parent company SAS AB plans to restructure the company in Sweden in 2024. This move will de-list the company's shares, effectively wiping out the value for current shareholders. Approximately 255,000 shareholders are affected. SAS said that “only a modest recovery” should be expected for the holders of commercial hybrid bonds.

The Danish and Swedish governments currently own roughly a fifth of the shares each. Norway’s government sold its ownership interest in SAS several years ago.

After facing significant financial issues, particularly in the wake of the pandemic, SAS has sought new investors for the past several months.

In July 2022, SAS filed for bankruptcy protection (Chapter 11) in New York. This action came a day after hundreds of SAS pilots went on strike due to unresolved wage negotiations between the airline and four pilot associations.

The protection provided SAS a reprieve from creditors, enabling them to devise a plan to secure the 9.5 billion Swedish kronor ($855 million) they required. With these recent investments, they have surpassed their goal, securing 12.9 billion Swedish kronor ($1.16 billion).

One notable absentee from the new ownership group is Apollo, an American capital fund that had been widely expected to take a significant stake in the company.

With the unexpected departure of SAS from Star Alliance, it will be interesting to see if and how SAS’ short-haul and long-haul operational strategy changes.

Scandinavia, and Norway in particular, are important markets for KLM. The airline operates multiple