SAS Scandinavian Airlines (SK), owned by the governments of Sweden (21.4%), Denmark (14.3%) and Norway (14.3%), had to come up with a restructuring plan in November, after coming critically close to bankruptcy filling. The new restructuring plan builds on a year-old 4 Excellence, which the airline says was successful but required more efforts and some changes. SK points out that the new plan is self-financing and will not require any new capital as the airline works on becoming less dependent on external lenders in the future.
In total, SK hopes that the restructuring will amount to $455 million annually and expects to increase liquidity by around the same amount through asset sales. The carrier also signed an increased $530 million revolving credit facility from seven banks and the three states to secure its financial preparedness, which is conditional on parliaments in Sweden, Denmark and Norway approving the loan. A $175 million improvement in earnings before taxes is expected to be achieved this financial year, while the majority of annual benefits should be noticed in financial year 2013/14.
As requested by its banks and main shareholders, before the carrier was allowed to initiate the restructuring, it had to earn support from all eight labor unions with new collective agreements. The process went surprisingly quick, although it took one of Danish unions a bit longer to accept the new contracts. Negotiations have been exhausting, and although unions are far from happy, they believed there was no other way forward for the company. SK found itself literally on the verge of bankruptcy and even instructed its crews to fuel the aircraft so they can return to SK bases in case of sudden bankruptcy filling. The carrier also provided its crews with cash should they need to overnight in hotels after bankruptcy. Furthermore, after coming to agreements with unions, SK noticed a very sharp increase in bookings which were depressed for more than a week over bankruptcy speculation. The airline is now launching a promotional campaign.
SK is also looking into the sale of Wideroe, a subsidiary regional carrier based in Norway. Wideroe has a fairly extensive coverage of domestic destinations with several bases and only a handful of destinations in other Scandinavian countries and the United Kingdom. Some of its routes are operated as PSO (Public Service Obligation) flights. It is a niche carrier with rich history. Its fleet consists of close to 40 Bombardier Dash8 turboprops with all four variants.
In addition to Wideroe, another SAS Group carrier is set to experience changes as part of SK's restructuring. Blue1, operating mainly from Finland to destinations in Europe and Scandinavia, will become more of a unit for SK rather than a subsidiary. Blue1 will still have its own brand (including livery), but SK will take over some parts of its operation such as sales. Furthermore, SK is in negotiations over sale of ground handling unit and is examining other opportunities for outsourcing, like call centers. Additionally, the carrier will dispose of airport related real estate interest and aircraft engines.
SK is truly on thin ice now, as it might not be given more chances if this restructuring fails. But the airline is announcing several initiatives, which should help it stay afloat. It is criticized for being inefficient, in part due to conflicts between the three governments with stakes in SK and disagreements over its strategy.