SAS Group's three government owner states believe their proposed participation in the company's restructuring is based on market terms, and that their assistance will help lead to the sale of national shareholdings in the airline company.

The governments have submitted these views to their respective parliaments as part of a formal request for approval to support a new credit facility.

Both Norway and Denmark, as 14.3% owners of SAS, intend to contribute the equivalent of SKr500 million ($75 million) to the SKr3.5 billion credit facility while Sweden, with a 21.4% share, will provide SKr749 million. While the European Commission has not given a formal prior assessment of the funding, it has been briefed on the plan through informal contact.

Norway's government, in its proposal to parliament, feels a private investor would have "acted in a similar way" towards SAS and that it believes the state's participation in the facility "is in line" with the market investor principle and "therefore does not constitute state aid".

But it says the Commission could yet look more closely at the scheme to examine whether the intended participation amounts to illegal government support.

It points out that contributing to the credit facility, enabling SAS Group to carry out its new restructuring plan, will probably make the company "more attractive to strategic partners".

"The government still believes that the company is best-served with a new industrial partner," it adds, and participation in the facility will "hopefully pave the way for a sale of government shares in SAS".

The Danish finance ministry says there is no requirement for the European Commission to clear the planned investment in SAS Group, because it believes the injection is "justified".

Sweden's government, in its own proposal, points out that 11 European airline companies have collapsed over the course of the past year, including Swedish operator Skyways Express, Denmark's Cimber Air and SAS's former affiliate Spanair.

SAS has struggled financially since around 2001. Increasing fuel expenditure and high salary costs have conflicted with the pressure of low-cost carrier competition and falling fares, all set against a poor economic trend.

While the company has attempted to cope through various cost-cutting measures since 2003, it has only been briefly profitable in that time, and has been posting losses since 2008. While the owner governments have participated in new share issues to recapitalise SAS, fuel costs and the bankruptcy of Spanair in 2011 have continued to weaken the company.

The Swedish government echoes the Norwegian view that the new business plan will make SAS more interesting to potential buyers, increasing the potential for Sweden to "eventually reduce state ownership".

It says the plan will provide SAS Group with a liquidity reserve until the company's restructuring plan, designated 4XNG, enables it to turn in profits.

All three states must agree to participate in the credit facility no later than 20 December, it adds.

Source: Air Transport Intelligence news