Air France-KLM Group To Acquire Non-Controlling Stake In SAS

The Air France-KLM Group has purchased 19.9% of Scandinavian flag carrier SAS as part of the airline’s restructuring efforts. SAS is now owned by a consortium led by American private equity firm Castlelake (32%), Lind Invest, and the airline group, which together will invest $1.175 billion. With AF-KLM stepping in, SAS plans to leave Star Alliance and begin commercial operations with the French-Dutch giant, paving the way for the carrier to move to the SkyTeam alliance.

New ownership

SAS filed for Chapter 11 bankruptcy protection last July following a series of setbacks, including a pilots strike and closure of Russian airspace. Since then, the airline has been working hard to enact its “SAS Forward” plan to streamline business operations and emerge better capitalized. While it initially hoped to emerge from the process in under 12 months, the process has dragged on, despite securing $700 million in debtor-in-possession funding from private equity giant Apollo Global Management.

However, the business reorganization plan took a huge step today as the Air France-KLM Group announced that it has secured a non-controlling stake in SAS, up to 19.9%. According to Reuters, while Apollo was the favorite to win the bid, Castlelake emerged as the surprise winner and will on 32% of the carrier along with Danish investment firm Lind Investment (8.6%), while the Danish state will continue to hold 26%.

Photo: Jonathan Hendry | Simple Flying

The consortium will invest a total of $1.175 billion in SAS, with $475mn in common stock and $700mn in secured convertible bonds. SAS will now be delisted from the stock exchange and exit Chapter 11 bankruptcy protections in the coming weeks and months. In a statement, Benjamin Smith, CEO of Air France-KLM, said,

“We are pleased to be part of the winning bidding consortium selected by the board of SAS. Air France-KLM looks forward to establishing strong commercial ties with SAS. With its well-established position in Scandinavia and strong brand, SAS offers tremendous potential to Air France-KLM. This cooperation will allow Air France-KLM to enhance its position in the Nordics and improve connectivity for Scandinavian and European travelers. We look forward to being a part of this new chapter in SAS’ history and thank the board of SAS for their trust.”

Goodbye Star Alliance

With AF-KLM chipping in $144.5 million in total ($109.5 in stock and $35 million in bonds), it expects to rapidly see returns on its investment. Most notably, SAS will be departing Star Alliance in a bid to secure a commercial agreement with Air France-KLM. The announcement notes that “Air France-KLM will strengthen its footprint in Scandinavian markets, where the SAS brand and loyalty program are well-established.”

The move would mean that Frankfurt-based Star Alliance would lose a key partner in Northern Europe to its direct rivals, strengthening its position on the continent. While any cooperation will be subject to an exit, it’s likely that SAS will end up a member of SkyTeam, if not a close partner of Air France and KLM.

Photo: Wirestock Creators / Shutterstock

More to come

The recent changes will help SAS get back on its feet financially and secure its long-term future, without the threat of bankruptcy. The coming months will reveal more about Castlelake and AF-KLM’s plans for the Scandinavian airline but expect big changes.

What do you make of the new ownership of SAS? Let us know in the comments!

Source: Reuters