SAS in bankruptcy and on the verge of going under foreign flag: what impact for customers?

The Scandinavian airline, on the verge of bankruptcy, is likely to be taken over by foreign investors. If its survival does not seem compromised, the pill may be bitter for its loyal customers depending on the identity of the investors in question.

SAS, a historically fragile airline

The health of SAS has been fragile for a long time and its main shareholders, the governments of Sweden and Denmark, have often had to come to its aid.

The COVID has not helped the situation and the recovery is very difficult for an airline burdened by high wage costs and union agreements with its pilots that it is dragging around like a ball and chain.

Add to this the fact that this airline does not have a huge fleet, that it has a limited long-haul network and that its medium-haul network is being hit hard by low-cost competition (without the long-haul network being able to compensate) and you will understand thatit is less well equipped than others to emerge from the crisis. It is fortunate for her that, due to geography and climate, Scandinavians fly much more than the rest of Europeans.

SAS on the verge of bankruptcy

Faced with the criticality of the situation, the airline’s management has launched a plan called SAS Forward, which aims to refocus its fleet on long-haul flights and save more than 700 million euros per year.

Despite this, SAS continues to lose money (144 million euros from February to April 2022…).

The airline being on the verge of bankruptcy, it was urgent to move on to something more radical.

Financial restructuring in sight

SAS therefore reported to launch a financial restructuring plan by converting debt into shares and raising 1 billion euros on the markets in the form of a capital increase. An operation in which it is supported by the Swedish state, which nevertheless refuses to provide fresh cash. It will therefore be necessary to find other investors.

Here is the list of current SAS shareholders.

Investors have come forward and the only thing we know about them is that they are “non-Scandinavian” and condition their investment on a drastic reduction of costs.

We do not believe today that the airline is in mortal danger. It has a market, solid shareholders who will not abandon it even if they seek new partners, and it is an instrument of sovereignty for the two countries concerned. It can even be a good deal for whoever buys it, as long as they do some internal cleaning. This is a far cry fromthe pitiful Alitalia soap opera.

But depending on who the investors are, it may be a rude awakening for the airline’s loyal customers. And this is not only true for SAS, but for any airline that is taken over or disappears: as we have already explained for Alitalia,it is always the loyal customer who suffers.

Which investors for SAS?

We will pass over the possible repositioning that these investors would impose on the airline in terms of range, network, or service, which would concern everyone, to focus on the airline’s loyal passengers.

If it is aninvestment fund, nothing will change. And so much the better for the customers.

If it’s another airline, then it can be a rude awakening.

Indeed, if the SAS Eurobonus loyalty program is neither the best nor the most generous, it has an advantage for its members: qualification thresholds that are very easy to reach (and we know something about this at TravelGuys…)

Who says takeover says logically change of program to adopt that of the acquirer and in this case it is obvious that many SAS customers will quickly lose their SAS status which can be a real concern because nothing will prevent them from going to the competition, including Lufthansa Group which with Lufthansa and Swiss serves Scandinavia very well with several flights per day to Stockholm, Copenhagen or Gothenburg.

For example, imagine a takeover by Lufthansa and the adoption of Miles&More as a loyalty program! Knowing that it is almost twice as hard to reach a Senator Miles&More status than Gold Eurobonus while both are equivalent in terms of recognition within the alliance (Star Alliance Gold) we let you imagine the damage. Only Eurobonus Diamond members, the top of the line, would manage to have a status that is worthwhile.

We take Miles&More as an example because it is a program with which the gap would be the most obvious and, in addition, because Lufthansa would be the most logical and legitimate contender if it were an airline that bought SAS. But it does not seem to us that this is the direction in which SAS is heading (we think rather to an investment fund) and moreover Lufthansa Group is already on the ITA case, but that gives you an idea of what it would imply for the customers.

Bottom line

A group of non-Scandinavian investors, whose identity is unknown, proposes to save SAS from bankruptcy. If it is an investment fund, things can go well for the clients, if it is another airline, the frequent clients risk to suffer a real degradation of their status

Photo Credit:SAS Scandinavian Airlines aircraft by Robert Buchel via Shutterstock

Bertrand Duperrin
Bertrand Duperrin
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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