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Friday, June 14, 2024

Giske forced SAS to sell Widerøe

Norwegian Trade Minister Trond Giske insisted on the pending sale of Bodø-based airline Widerøe, as part of the rescue package for its troubled parent company Scandinavian Airlines (SAS). Giske’s fellow Swedish and Danish government owners were more amenable to a bailout.

Widerøe serves many small airports all over Norway like here at Ørsta-Volda on the West Coast, and the airline has been profitable for the past 13 years in a row. Now it’s up for sale, to raise money for its parent company SAS, with Norwegian buyers already expressing interest. PHOTO:

It was the Norwegian government that put forward the toughest proposals to keep ailing SAS out of bankruptcy court,  reported newspaper Dagens Næringsliv (DN) on Tuesday. A sale of the profitable short-haul carrier Widerøe, which operates domestic flights within Norway and to a few destinations abroad, was one of Giske’s demands, in order for SAS to be offered new loans.

The governments of Sweden, Denmark and Norway all have stakes in SAS, and together make up about 50% of its shareholders. Giske is also under pressure, however, from SAS’ arch rival Norwegian Air, which thinks it’s unfair for SAS to get so much help from Scandinavian taxpayers in the form of capital at earlier stages and now in the form of loan guarantees. As shareholders, though, its in the interests of all three Scandinavian governments to keep SAS flying.

Giske balked at simply providing another round of new capital to SAS, or to back a new stock issue for SAS. He also demanded that SAS’ banks agree to the same terms and conditions of credit as the Danish, Swedish and Norwegian governments, in order for the rescue plan to go ahead.

For SAS, it reportedly was a painful loss to be forced to agree to sell its Norwegian regional airline. As well as being a successful and profitable airline in its own right, Widerøe also fed new passengers to SAS’ longer routes. Aviation analyst Hans Erik Jacobsen of First Securities told newspaper Aftenposten that “it will not be easier to sell SAS without Widerøe. Now SAS must do what it can to improve the financial situation in the parent company. And when you are short of money, you have to sell whatever you can.”

Positive spin
Giske, unsurprisingly, put a positive spin on the pending sale of Widerøe. He told Aftenposten that a sale would “strengthen SAS’ liquidity, and could also potentially give Widerøe a more independent position.” He is now keen for the company to be sold, preferably to Norwegian buyers.

He was reluctant to comment on the details of the intense negotiations with SAS but told DN that the Norwegian government felt a need to put tough demands on SAS. “Let me put it this way: We were clear in our demands for profitability and our demands for commercial viability,” Giske told DN.  “Norway was very clear that this must be the basis (of any deal). There’s no doubt that SAS plays a different role in the different countries. Kastrup (the main airport in Copenhagen) is an enormously important workplace for Copenhagen and Denmark. And in Sweden, SAS has its headquarters.”

That meant that the Danes and Swedes had more to lose if SAS were to be grounded, and thus were reportedly more willing to let SAS off easier than the Norwegians were. Giske also said he thinks SAS management should have pushed through more major cost-cutting programs earlier. Now SAS executives acknowledge this is their “last chance” to get the airline on the right course.

Norwegian buyer interest
Widerøe, meanwhile, has attracted potential buyers already but DN reported it faces major pension liabilities as its parent does. Future pension obligations mean Widerøe effectively has negative capital despite its profitability.

“This is something we must find a solution for, so that a sale can go through,” Lars Kobberstad, chief executive of Widerøe, told DN. “It’s also something a prospective buyer must have a good overview of, before going in on the ownership side.”

Giske hopes Widerøe will be taken over by Norwegian owners (its pilots and employees are keen to bid) and told Aftenposten that “it’s important that we maintain Norwegian control over a company that’s so important to us as Widerøe.”

But he also told DN that “first and foremost we want a good owner.” He said he thinks Norwegians will end up buying the company. “Regardless, it’s good for SAS that Widerøe is sold,” Giske told DN. “Then SAS can realize the values the company needs. For Widerøe, it will be good to operate as an independent airline, eventually in cooperation with others.”

Views and News from Norway/Elizabeth Lindsay

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