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Monday, July 15, 2024

SAS and Norwegian hang on to cash

Both Scandinavian Airlines (SAS) and Norwegian Air would probably already have had to file for bankrupcty, claims a leading analyst, if it weren’t for all the massive state funding they’ve received during the Corona crisis. Now they’re struggling to hang on to their cash, and SAS issued a formal apology Tuesday over its failure to refund tickets on cancelled flights.

SAS and Norwegian jets, shown here parked side-by-side at Oslo’s main airport at Gardermoen, are fierce rivals but share huge challenges in trying to survive the Corona crisis. PHOTO:

Jacob Pedersen, chief analyst at Denmark’s Sydbank, has followed the airline industry and SAS in particular for many years. He told Oslo-based newspaper Dagens Næringsliv (DN) on Tuesday that emergency financial aid offered through various packages by Scandinavian governments has clearly kept both airlines aloft so far.

Norwegian Air is also expected to report heavy losses this week. In SAS’ case, they amounted to a stunning SEK 2.7 billion from May to July. Revenues alone fell from SEK 13.4 billion in the same period last year to just SEK 2.5 billion, after the Corona crisis grounded most flights and paralyzed the travel industry.

SAS’ loss is its biggest ever during the important summer season, which is traditionally high season for the airlines. While revenues dove by 81.3 percent, passenger numbers crashed by 85.6 percent.

‘Holding back refunds’
Now both analysts, large travel agencies and passengers stuck with tickets on cancelled flights think SAS and Norwegian Air are consciously holding back refunds owed their customers. They have blamed the huge numbers of refunds owed and claimed they haven’t had capacity to process them all, but  that’s widely viewed as an excuse to hang on to their passengers’ cash for as long as possible by dragging out the refund process.

“Job number one is to preserve and protect the cash as well as possible,” Pedersen told DN, “not just at SAS but within the entire airline industry.” He and many others believe there’s an intense rescue operation going on within the airlines to hang on to much cash as possible, simply to survive.

Norwegian Air, meanwhile, claims it has issued refunds totalling more than NOK 5 billion to more than 2 million passengers so far. “We understand that it’s been frustrating for passengers to wait,” Norwegian spokesman Lasse Sandaker-Nielsen told DN, “but we can assure everyone waiting that the money will come.”

Travel agency BCD Travel is among those that have strongly protested the airlines’ alleged delaying tactics. “We’re still waiting for refunds of as many as 600 tickets,” BCD’s commercial director Bernt Roger Eliassen told DN. “Many other airlines were also holding out, but now unfortunately the most claims remain against SAS.”

‘We are sorry…’
On Tuesday SAS’ chief executive Rickard Gustafson apologized for the delayed refunds. “We are sorry that many customers are still waiting for refunds from cancelled flights,” wrote Gustafson in a statement tied to the airline’s losses. “I want to stress that customers who have a right to receive refunds will get them, and we have increased capacity to handle the large number of cancellations.”

As SAS’ cash runs out of the airline, negotiations continue with its largest owners, which include the Swedish and Danish governments and Sweden’s Wallenberg family. Gustafson noted that despite the terrible financial results this week, it was “encouraging” to see that demand for airline travel is “slowly coming back” as a rescue plan delivered June 30 awaits a green light from shareholders.

“Even though there are considerable challenges ahead, I’m confident that SAS will come back as a sustainable and profitable company after we’ve gone through with a recapitalization plan,” Gustafson said. Berglund



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