Denmark is willing to write off debt owed by loss-making airline SAS SAS.ST and inject more capital provided private investors also contribute, Finance Minister Nicolai Wammen has said.
The share price of the carrier, which is struggling to cut costs and seeking to avert a strike by pilots, surged by as much as 45% following the news. It later pared some gains to trade 25% higher at 1332 GMT.
"We imagine to have an ownership share somewhere between 22% and up to 30%," Wammen told reporters after meeting with members of parliament. The state owns 21.8% of SAS.
"There is a commitment from a large and broad majority in parliament that we continue to take responsibility and we want to contribute to a solution, but now all other parties must do their share as well," he said.
Lawmakers had agreed to accept writedowns, the conversion of debt and to inject new equity depending on private investors also taking part, the finance ministry said in a statement.
"If SAS does not succeed in convincing the markets that they have a viable and profitable future, then no money will come from either the market or from the Danish state," Rasmus Jarlov of the Conservative Party said.
Government support is also contingent on its being able to maintain influence over a range of decisions to ensure SAS keeps a strong presence at Danish airports, for example, which is important for the Danish economy and ensuring good travel connections to the rest of the world, Wammen said.
Copenhagen Airport KBHL.CO is the airline's largest hub and is strategically and economically important to Denmark.
The state's demand for influence was likely to deter many investors, Sydbank analyst Jacob Pedersen said.
"I absolutely do not think this makes it easier to save SAS. Big consortiums which might otherwise have wanted to come in and make changes to SAS will run away screaming," he said.
SAS is restructuring its business by cutting costs, raising new cash and converting debt to equity as part of a plan to rescue the carrier from collapse.
The Swedish government, which also has a 21.8% stake in SAS, took a tougher stance on Tuesday 7 June, saying it agreed to debt conversion, but would not inject more cash.
Adding to the trouble at SAS, some 1,000 pilots in Denmark, Norway and Sweden on Thursday 9 June threatened to go on strike from late June over disagreements on wages and ways to cut costs.
SAS said in a statement that it saw the news from Copenhagen as a declaration of confidence and support for its transformation plan.
"We appreciate today's announcement from the Danish government and a broad majority in the Danish parliament that they intend to support SAS by converting the debt and potentially investing new capital," it said.
Swedish Parliament Gives Nod To SAS Debt Conversion Plan
The above news was followed by news that Sweden's parliament on Tuesday 21 June approved a proposal by the government to allow loss-making airline SAS SAS.ST to convert debt borrowed from the state into equity, as part of a process to help rescue the carrier from collapse.
Fighting to survive, SAS, which is part-owned by Sweden and Denmark, plans comprehensive reorganisation to slash costs, raise 9.5 billion Swedish crowns ($942 million) in cash from owners and investors, and convert 20 billion of debt to equity.
The Swedish government this month suggested parliament agree to the debt conversion, but said no to injecting more cash than it already has into the long-struggling airline.
The Danish government has said that it is willing to write off debt and inject more capital however - as long as private investors get on board too.