SAS Agrees To Sale of Norwegian Regional Subsidiary
Struggling Scandinavian flag carrier SAS has signed an agreement to sell its regional subsidiary Widerøe as part of an ongoing restructuring program to achieve financial stability. SAS will sell 80 percent of Widerøe to Norwegian companies Torghatten ASA, Fjord1 AS and Nordland Fylkeskommune. The sales will include seven Bombardier Q400 turboprops that SAS currently leases to the regional carrier. The transaction must be approved by Norwegian authorities, and is expected to close in September.
Announcing the sale on May 3, SAS said that it will retain a 20-percent share in Widerøe, but that it intends to transfer full ownership of the regional carrier in 2016. The company will receive two billion Swedish kronor ($310 million) from the initial divestment, including proceeds from the aircraft sales. “SAS and Widerøe will have a continued close commercial cooperation after the transaction, with Widerøe remaining an important regional partner to SAS,” the company said.
Based in Bodø, Norway, Widerøe is the largest regional carrier in Scandinavia; it operates 39 Bombardier Dash 8 and Q400 turboprops. The investment group that is acquiring the airline consists of Torghatten ASA, a bus and ferry operator; Fjord1, Norway’s largest ferry company; and the county authority of Nordland.
The sale is part of SAS’s “4Excellence Next Generation” restructuring program, which it launched last fall. The effort is designed to position the financially ailing flag carrier for long-term stability. In December, SAS secured a SEK 3.5 billion ($540 million) credit line from major shareholders and banks that was contingent on renegotiating contracts with several labor unions. The company expects to reduce its pension obligations by nearly 60 percent through the agreements. In February, the group agreed to sell and lease back 19 spare engines. In March, SAS and Swissport International signed a letter of intent to transfer ownership of SAS’s ground-handling operations in Sweden, Denmark and Norway, which employ about 5,000 people. SAS is also outsourcing some call centers and consolidating its administration in Stockholm.
In a quarterly report for the period of November through January, SAS said that it lost SEK 801 million ($123 million) before taxes and nonrecurring items. “Although seasonal effects are amplified by the new fiscal year, we are far from satisfied,” the company said. “Accordingly, we remain focused on completing the action plan, and our aim to achieve a positive income before tax for the full-year remains firmly in place.”
Separately, in other financial news from the European airline sector, Air France-KLM announced worse-than-anticipated operating losses for this year’s first quarter. The group, which continues to be burdened by high costs, suffered a €530 million ($694 million) loss in the first three months of this year, despite reducing underlying costs by 1 percent and trimming its debts slightly.