Air France-KLM had already flagged its intent to take a controlling stake in SAS, but its announcement on 4 July that it was formally beginning that process came ahead of previously discussed timelines.
So, why it is so keen to speed up the process of making Copenhagen airport the group’s third major hub alongside Paris Charles de Gaulle and Amsterdam Schiphol?
“The management team [at SAS] led by Anko van der Werff has done an outstanding job over the past year or two,” says Air France-KLM chief executive Ben Smith on a call with analysts.
SAS is therefore significantly ahead of schedule in terms of its emergence from Chapter 11 last year, according to Smith.
He cites two specific metrics: SAS’s operational performance has become “very strong and world-leading”, while it is already reaching EBIT margins in line with Air France-KLM’s.
The group has previously stated an ambition to reach an 8% operating margin in the 2026-28 timeframe.
“We don’t want to wait anymore to see the benefits of synergies for Air France-KLM… and for SAS,” Smith says.
The Franco-Dutch group is therefore moving ahead with plans to buy Castlelake’s and Lind Invest’s stakes in SAS, which will propel it from a 19.9% stake to a 60.5% one. Those two businesses took their stakes, alongside Air France-KLM, as part of the package of restructuring measures that saw SAS emerge from bankruptcy protection in August last year.
The Danish state will keep its 26.4% investment, Air France-KLM says, while the 13.1% held by shareholders in relation to the Chapter 11 process will be delt with in due course.
It will soon put forward the plan to European Union regulators and it foresees a conclusion to the process happening in the second half of 2026, rather than the previously mooted 2028.
But while it is seeking a speedier conclusion to the process, Air France-KLM’s rationale for taking control of SAS is unchanged.
HUB HOPES
“This will be our third hub in Europe and we’re expecting significant synergies and to strengthen our position in Europe,” Smith says.
Fundamentally, Smith suggests SAS was neglected by its former Star Alliance partners for too long.
As a result, it has a “relatively small long-haul network given the size of Scandinavia”, he suggests, citing the airline’s 12 widebody aircraft, which are a mixture of Airbus A350s and A330s. That is in a market where yields are relatively strong, he notes.
In contrast, Smith says, “we’ve got 65 long-haul airplanes based in Amsterdam and we have over 120 based at CDG in Paris”.
“If you look at the markets sizes… there is a disproportionate amount of traffic being flown by other airlines,” he says of Scandinavia, where SAS also has secondary hubs at Oslo and Stockholm.
Furthermore, Copenhagen is a logical third major hub for the group, Smith explains, given its “geographical positioning” for flights east and west, and the “favourable” Danish government policies towards aviation in the country, including the recent lifting of restrictions on flying from the airport.
Smith also reiterates that SAS “has not benefited from being part of a joint venture” across the Atlantic.
“They’ve been at a big disadvantage,” he says of the carrier’s time in Star Alliance, where it was excluded from the Air Canada-United Airlines pact, leaving it short of ticket sales originating in North America.
Indeed, van der Werff previously described SAS’s Star relationship as “a bad marriage”.
“This is another big opportunity for us,” Smith adds.
The plan is for SAS to eventually become part of Air France-KLM’s transatlantic joint venture with Delta Air Lines and Virgin Atlantic, having already joined SkyTeam alliance in September last year. Developments there are contingent on the approval of the US Department for Transportation in particular.
GROUP APPROACH
Ultimately, there are many business advantages that might emerge from SAS becoming part of the Air France-KLM group, chief financial officer Steven Zaat says on the same call.
“There are a lot of synergies to gain if you are together in one group,” he states.
Among them he lists loyalty programmes, codeshares and commercial cooperation, the aforementioned transatlantic JV, the strengthening of the SkyTeam partnership, complementary and aligned networks, revenue synergies, and integration of global distribution systems.
He further cites “cost synergies” on fleet and ground services, on financial operations including fuel hedging, on IT, and on business overheads.
Also speaking on 4 July, SAS chief van der Werff describes the development as a “defining moment” for SAS and “a strong signal of confidence in the direction we’re heading”.
He continues: “It brings not just stability but will also allow for deeper industrial integration and the full backing of one of the world’s leading airline groups, once regulatory approval has been obtained.
“Together, we will be better positioned to deliver greater value to our customers, our colleagues, and the wider region.”
The announcement comes days after SAS revealed in Copenhagen an order for up to 55 Embraer 195-E2 jets as part of an expansion of its feeder operations to its hubs in Denmark, Norway and Sweden.
That event was billed as a “major announcement” regarding SAS’s future, likely meaning assembled journalists missed out on receiving the Air France-KLM news at the same time, amid last-minute negotiations over the deal.
