Airline SAS SAS.ST said that it hopes to convert debt to equity and raise 9.5 billion Swedish crowns ($972 million) in new cash, warning of liquidity problems if it falls short as it posted a quarterly loss that was narrower than a year ago.
The carrier, part-owned by Sweden and Denmark, has been struggling for years and in February unveiled a major new restructuring plan that it said depended on raising then-unspecified new capital.
"In addition to reducing the cost structure and improving efficiencies, SAS is seeking to convert approximately SE 20 billion of debt and hybrid notes into common equity and will also seek to raise not less than SE 9.5 billion in new equity capital," SAS said on Tuesday.
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However, CEO Anko van der Werff told analysts on a call there had not been sufficient progress so far with the restructuring plans, and both governments declined to say whether they would pay up again after agreeing a 3-billion-crown rescue deal with the company in 2020.
SAS said that discussions with stakeholders overall had made "limited progress".
"In the event that the expected burden sharing, debt conversions, and new capital raise are not completed as planned, SAS will not be able to support its existing capital structure and current liquidity levels," it said.
SAS reported a February-April loss before tax of 1.56 billion crowns against a year-earlier 2.33 billion loss.
The carrier was already struggling before the coronavirus pandemic amid high costs and increased competition. The aviation industry is now struggling to recover from COVID and SAS has reduced its summer programme by 4,000 of 75,000 planned flights.
"We are seeing healthy underlying demand, but uncertainty persists," van der Werff said in a statement. "Traffic to and from Asia remains affected by remaining COVID-19 restrictions as well as the geopolitical situation."
He told Reuters one key element for the rescue plan was to slash costs for aircraft leased for Asian routes which have stood unused, and that SAS may take lessors to court if ongoing negotiations were unfruitful.
"We don't know when the Russian airspace is going to open again and we cannot pay for those aircraft because that will not allow us to attract investors. New investors will say 'you have to clean up, otherwise we will not invest," he said in an interview.
Group Of Investors Eye Takeover Of Airline SAS, Swedish Daily DI Reports
The above news was followed by news that a group of foreign investors is exploring a takeover of Scandinavian airline SAS SAS.ST, Swedish financial daily Dagens Industri reported late on Wednesday 1 June, citing anonymous sources.
The investors have appointed advisors to help facilitate a takeover, but any investment in SAS would be conditional on cost cuts and a restructuring of the Stockholm-based carrier's finances, according to the report.
Loss-making SAS on Tuesday said it hopes to convert debt to equity and raise 9.5 billion Swedish crowns ($966 million) in new cash, warning of liquidity problems if it falls short.
The carrier, part-owned by Sweden and Denmark, has been struggling for years and on Tuesday 31 May said that it had not yet made sufficient progress on a restructuring plan presented in February.
Airline SAS Hits Record Low As Sweden Halts Handouts
All of the above news was followed by news that the Swedish government will not inject new capital into SAS SAS.ST, its industry minister said on Tuesday 7 June, dealing a blow to the loss-making airline's restructuring efforts and sending its shares down 14% to record lows.
SAS said last week that a restructuring plan announced in February depended on it raising 9.5 billion Swedish crowns ($968 million) in cash and converting 20 billion crowns of debt to equity, warning of liquidity problems if it fell short.
But no shareholders, including main owners Sweden and Denmark with 21.8% stakes each, have yet committed to the carrier's plan.
"We want to be clear that we will not inject new capital into SAS in the future," Swedish industry minister Karl-Petter Thorwaldsson told a news conference.
Thorwaldsson said he would, however, propose to parliament that SAS be allowed to convert debt it owes to the government into equity capital. In the long term the government still wants to exit SAS completely, he added.
Denmark's finance minister, Nikolai Wammen, said he had noted the Swedish decision but Danish lawmakers were still assessing the airline's plans and how the state could "contribute".
A decision is expected by mid-June, Wammen said in a written comment.
A SAS statement said that Sweden's decision to support the debt conversion was an important step for a transformation to succeed.
Sweden has injected 8.2 billion crowns ($834 million) into the airline over recent decades, including loans to rescue the company from collapse during the COVID-19 pandemic.
The carrier was struggling even before the pandemic hammered the travel sector. Squeezed by growing competition from low-cost carriers such as Ryanair RYA.I and Norwegian Air NAS.OL, it has sought deals with labour unions on cost cuts.
"The Swedish decision puts serious pressure on creditors and employees to enter into agreements," Sydbank analyst Jacob Pedersen said in a note to clients.
"If the company can't attract capital, because Sweden and possibly Denmark won't invest more money, this risks being a step on the way to the grave."
Pedersen has a sell rating on the stock, which has lost 67% so far this year.
CEO Anko van der Werff last week said that SAS, to attract new investors, must cut costs for leased planes that stand idle because of closed Russian airspace and slow recovery in Asia.
SAS is not alone in its post-pandemic struggles. Air France-KLM AIRF.PA last month launched a €2.3 billion ($2.4 billion) share sale to boost its capital.
SAS Airline Pilots Warn Of Potential Strike From Late June
All of the above news was followed by news that some 1,000 SAS SAS.ST pilots in Denmark, Norway and Sweden could go on strike from late June over disagreements on wages and ways to cut costs at the struggling Nordic airline, labour unions said, drawing a sharp rebuke from the company.
"We have been negotiating for months without being able to agree," Danish Pilot Union leader Henrik Thyregod said in a statement on Thursday.
"We have gone to great lengths to help SAS, and we have offered the company huge savings. But we can under no circumstances agree to deteriorations (or wage cuts) of more than 30%, which SAS demands," he said.
Unions and management have negotiated since last November and the collective agreement between the airline and the SAS Pilot Group union expired on 1 April.
If an agreement is not possible, Danish pilots could go on strike from 24 June but would likely wait until 29 June when Swedish pilots can strike at the earliest according to local regulation, Danish chief negotiator Keld Baekkelund told Reuters.
The news comes at a difficult time for loss-making SAS, which seeks to restructure its business by undertaking large cost cuts, raising new cash and converting debt to equity as part of a plan to rescue the carrier from collapse.
"We think this is totally outrageous and shocking and shows a lack of understanding," an SAS spokesperson said, adding that the company was still hoping that it would not come to an actual strike.
"But just sending the signal by giving notice is extremely unfortunate," the spokesperson said.
The company has already cancelled many flights ahead of the busy summer season, part of a wider trend in Europe and across the globe that has seen labour strife and staffing shortages impacting travel.
"This is not what our customers want to hear, and it's not what the company needs at this point," the SAS spokesperson said.
Meanwhile, Nordic rival Norwegian Air said that it had secured a wage deal for its 668 pilots employed in Norway, stretching to October of 2023.
SAS' share price fell 5.5% by 1353 GMT on Thursday 9 June to an all-time low of 0.626 Swedish crowns.
Danish Government Aims To Own 22-30% Stake In SAS, Finance Minister Says
All of the above news was followed by news that Denmark is willing to forgive debt owed by loss-making airline SAS SAS.ST and also to inject more capital together with private investors, Finance Minister Nicolai Wammen said on Friday 10 June.
Denmark could raise its stake to between 22% and 30% from Friday 10 June's 21.8% in order to help secure the carrier's future, he said.