Air France-KLM plans a 19.9% non-controlling stake in Scandinavian Airlines System (SAS), a move that would lead to much closer commercial ties and the move of SAS from Star Alliance to SkyTeam.
The Future Of SAS In Star Alliance in Doubt After Air France-KLM Pursues Sizable Stake
Air France-KLM is taking advantage of the weakened position of SAS to seek a sizable but non-controlling share in the beleaguered airline (“Air France-KLM Group, Castlelake, L.P., on behalf of certain funds or affiliates, and Lind Invest ApS (collectively, the ‘Consortium’)”). Under the proposal, Air France-KLM would control just shy of 20% of the Danish-Norwegian-Swedish airline and closely collaborate to increase commercial ties.
Air France CEO Benjamin Smith lauded the news:
“This is an important day for SAS and for Air France-KLM. We are pleased to be part of the winning bidding consortium selected by the board of SAS. Air France-KLM looks forward to establishing strong commercial ties with SAS. With its well-established position in Scandinavia and strong brand, SAS offers tremendous potential to Air France-KLM. This cooperation will allow Air France-KLM to enhance its position in the Nordics and improve connectivity for Scandinavian and European travelers. We look forward to being a part of this new chapter in SAS’ history and thank the board of SAS for their trust.”
Before the agreement is finalized, it must receive approval from:
- European Commission
- the US court overseeing the bankruptcy
- a Swedish court
Upon arrival, the consortium and Danish government plans to invest $1.175 billion, of which $475 million in common shares and $700 million in the form of secured convertible bonds. Of that total, Air France-KLM’s investment would total $144.5 million, of which $109.5 million would be invested in common shares and $35 million would be provided in the form of secured convertible bonds.
Closer commercial cooperation will be contingent upon SAS leaving Star Alliance. SAS is one of the five founding members of Star Alliance. It will join SkyTeam upon partnering with Air France-KLM.
As part of the transaction, SAS is intended to eventually join the SkyTeam Alliance (“SkyTeam”), of which Air France-KLM is a founding member, and exit the Star Alliance, subject to any relevant approvals and emergence from the chapter 11 process.
SAS CEO Anko van der Werff spent 10 years at Air France-KLM before working for Qatar Airways, Aeromexico, Avianca, and now as CEO of SAS. How much does he stand to gain from the deal? And will van der Werff run SAS into the ground as he did with Avianca?
Air France-KLM is proposing a 19.9% stake in Scandinavian Airlines as it emerges from bankruptcy. While the agreement is subject to regulatory and court approval, the move would represent a substantial change in the landscape of the European market and also mark an alliance shuffle, with SAS leaving Star Alliance.
More details here.