Air France-KLM is buying into Scandinavian airline SAS. The Franco-Dutch airline group is acquiring 19,9% of Danish-Swedish SAS, which has been struggling for several years, for 144,5 million dollars.

The deal also includes SAS’s exit from Star Alliance, the airline alliance that includes Germany’s Lufthansa (and its Belgian subsidiary Brussels Airlines) and US-based United Airlines. SAS, a founding member of the Star Alliance and Scandinavian’s leading airline since 1946, will join the SkyTeam formed by Air France.

Lingering financial crises

SAS, of which the Swedish and Danish states are currently the principal shareholders with 21,8% each, has been in financial difficulties since the coronavirus crisis. In July last year, the company filed for protection from its creditors through the famous ‘Chapter 11’ bankruptcy protection in the US to restructure.

The company, with a fleet of 180 aircraft flying to 90 destinations, also suffered a setback in early May, when the European Union’s Court of First Instance annulled a comprehensive recapitalization plan of just over a billion euros, set up in 2020 with support from the Danish and Swedish states – the Norwegian government sold all its shares in SAS in 2018.

Before the outbreak of the health crisis, with some 28,6 million passengers annually, it was the eighth-largest airline in Europe and the largest in Denmark and Sweden.

In June, SAS began accepting seat reservations for its groundbreaking commercial electric flights in Sweden, Norway, and Denmark in 2028. It was the first major airline company to open reservations for a fully electric flight in five years.

Total investment of $1,175 billion

In that ‘Chapter 11’ procedure, Air France-KLM has now made a winning bid for SAS in a consortium with US and Danish investment funds Castelake and Lind Invest. Together with the Danish state, they are investing 1,175 billion dollars, including 475 million dollars in ordinary shares and 700 million dollars in guaranteed convertible bonds.

Air France-KLM will own up to 19,9% of SAS, which will be delisted because of the deal. Castelake can count on about 32% of the shares, Danish state 25,8%, and Lind Invest 8,6%. The remaining 13,6% would go to certain creditors. The Swedish state threw in the towel and is no longer a shareholder. However, the deal still needs approval from several authorities.

Subject to certain conditions, Air France-KLM will be able to become a controlling shareholder of SAS after two years. The group has been content to remain at the 20% mark to avoid an investigation by the competition authorities, the timing of which would not have been compatible with the operation.

A condition of the investment does mean that SAS would leave the Star Alliance international airline alliance, a group it helped found more than 25 years ago. SAS would switch to the SkyTeam alliance of 19 airlines from five continents, including Air France-KLM.

However, until the transaction, expected for the second quarter of 2024, is complete, SAS remains part of Star Alliance, and for customers, nothing is changing.

On a pink cloud

With the new investment, Air France-KLM will be able to develop in the Scandinavian region, where ticket prices are generally high. It will also have access to the very renowned SAS loyalty program.

The deal is another example of Air France-KLM shaking off the dark years of the past health crisis. The group lost more than 11 billion euros during the pandemic, but with help from the government and two restructurings, it returned to profit in 2022 and the first half of 2023 for a combined 1 332 million euros.

Recently, it expanded and renewed its long-haul fleet with several orders of Airbus A350s.

Air France-KLM has also expressed interest in the Portuguese airline TAP, of which Lisbon announced on September 28 that it had launched the privatization of at least 51%.