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SAS to buy troubled Braathens

SAS to buy troubled Braathens

In a move which effectively completes the process of consolidation in the Scandinavian market in recent years, SAS has agreed to buy Norway's Braathens.

Presuming that clearance is given to the deal from Oslo and Brussels, SAS will purchase the 38%stake held by the Braathens family, plus the 30% held by KLM. SAS plans to reach agreement with remaining shareholders at a similar level to the NOK35 ($3.86) per share as offered to the other two main shareholders. This values the carriers at NOK1.1 billion. Once clearance has been given, Braathens will start to unwind its agreement with KLM.

Braathens has been struggling financially recently in a small domestic market served by two similar-sized players, with its 48-49% share countered by SAS's 38%. "This is very atypical of Europe," says Johnny Skoglund, vice-president Norwegian domestic at SAS, noting that national carriers normally dominate their home market.

According to SAS, Braathens contacted themabout a possible deal. "The owners and management at Braathens believe that the company is not viable as an independent organisation," says SAS.

SAS claims that both the international and domestic network will be strengthened, although competitors argue that it may seek to increase feed into its Copenhagen hub, with some regional services declining.

Not surprisingly, they also voice competition fears. "I expect to see fewer departures and higher prices," says Stig Willassen, managing director of regional Norwegian Air Shuttle. He adds that SAS's claim that there is over capacity in the Norwegian market is mainly down to expansion geared towards the new airport, and attempts to get rid of new competitors.

For its part, SAS says that prices will be kept on hold for the next two years, adding that by reducing excess capacity it will be able to establish new direct routes and increase frequency. Two separate frequent flyer programmes will be maintained, but with mutual earning and redemption across both carriers.

KLM, meanwhile, faces losing an important source of feed to its Amsterdam Schiphol hub.

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