JOHAN NILSSON
It's tough to find anyone who thinks state ownership in airlines is a good idea anymore. Even in Scandinavia, where government ownership is not uncommon, there is little appetite to participate in an industry where low-cost competitors are breathing down the necks of long-established airlines.
No surprise then that Sweden, Norway and Denmark - who together own about 50 per cent of Nordic airline SAS - have aired a desire to unload their partial stakes in the struggling carrier. Since 2008, rumours of an imminent takeover have been making the rounds, with Lufthansa cited as a likely suitor.
The latest buzz began over the holidays, following a report that Air France-KLM, Lufthansa and British Airways were preparing for a bidding war. Since late December, SAS stock has gained about 30 per cent.
Much of the talk died down however, after Norwegian trade minister Trond Giske acknowledged that Norway was not in talks with any of the rumoured bidders.
The fact is, SAS is a tricky sell, even in the midst of an industry wide wave of consolidation.
For one thing, the airline is in rough financial shape. Folks in the Nordic Nordic region are relatively wealthy and like to travel but, like most of us, they like to do it as cheaply as possible. Over the last decade, low-cost carriers like Norwegian Air Shuttle and Ryanair have been reeling them in while SAS struggled to cut costs and negotiate with more than 40 unions in Sweden, Denmark and Norway.
The results have been punishing - SAS lost money in all but one of the last 12 quarters and posted a loss of three billion Swedish kronor ($427-million U.S.) in 2009. Over the past two years, the airline has been forced to ask state and other shareholders for major capital injections through a pair of rights issues totaling 11 billion kronor.
"There are a lot of reasons you have people talking about a takeover of SAS, but I have to say I don't see it happening," said Jacob Pedersen, an airline industry analyst for Sydbank. "From my point of view the company is not worth as much as the stock is at today."
Complicating matters is the complex ownership of the airline, analysts say. Any offer for SAS would have to address not just financial but social policy concerns, including the government's desire to protect jobs. Stockholm, Copenhagen and Oslo are also eager to maintain their existing routes lest they "have less connectivity to the world should SAS break up," said Andrew Lobbenberg, an analyst with RBS in London. For the same reason, the state owners are likely reluctant to sell their own stakes individually for fear of losing air traffic to the others.
"If Lufthansa, Air France-KLM or British Airways take over an uncompetitive company they're bound to close routes," Mr. Pedersen said.
Mr. Pedersen doesn't expect any formal talks at least until the end of the year when the airline's financial picture becomes clearer. In the meantime, the competition is only getting hotter. Norwegian Air Shuttle will continue to give SAS a run for its money in 2011, expanding in the Swedish and Finnish markets and exploring long-haul flights.
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