Commission approves €1.3 billion restructuring State aid for airline SAS

The European Commission has approved, under EU State aid rules, Denmark and Sweden’s plans to grant Scandinavian Airlines System AB (‘SAS’) restructuring aid for up to €1.3 billion (SEK 15 billion). The measure will enable the company to restore its long-term viability while minimising competition distortions.

The restructuring aid

In October 2020, the Commission approved under the COVID-19 Temporary framework a recapitalisation of SAS amounting to approximately €833 million (SEK 9.5 billion) by Denmark and Sweden. Following the annulment by the General Court, the Commission approved the recapitalisation again in November 2023. Despite the support, SAS did not manage to turn operations around and had to file for collective insolvency proceedings in the second half of 2022. As a result, SAS had to reorganise its business and Sweden and Denmark submitted to the Commission a restructuring plan supported with State aid.

The plan sets out a package of measures for streamlining SAS’ fleet, optimising its network, reducing costs, financial burdens and increasing revenues. The plan, which is supported with new aid from Sweden and Denmark through various instruments and different amounts, is necessary to make SAS viable again, following the slower than expected recovery of the air travel demand since the outbreak of the coronavirus pandemic and the adverse effects of Russia’s invasion of Ukraine.

The Commission’s assessment

The Commission assessed the State aid under its Guidelines for rescuing and restructuring non-financial undertakings in difficulties (‘R&R Guidelines’). In particular, it found that:

• The aid contributes to the development of air transport within, to and from Scandinavia, securing air connectivity that would otherwise be at risk with remote islands and other locations as well the international connectivity of Sweden and Denmark with the other Member States and other international destinations. The aid thereby contributes to avoiding hardship and market failure by enabling SAS to return to viability through the implementation of its restructuring plan.
• The restructuring measures tackle the main reasons for SAS‘ financial difficulties, in particular through the reduction of its indebtedness, the optimisation of its fleet and network and costs reductions, without which SAS, which is undergoing collective insolvency proceedings both in the US and in Sweden, would almost certainly be wound-up.
• The aid is proportionate, as SAS makes an own contribution of around €4.1 billion (SEK 47.3 billion) primarily in the form of fresh equity and new convertible debt by a consortium of financial and industrial private investors as well as debt write-downs and aircraft financing leases.  In addition, more than 200 000 existing shareholders of SAS and subordinated creditors duly contribute to burden sharing reducing the amount of aid because all their shares or subordinated debt instruments are planned to be fully written-off.
• The aid comes with safeguards to limit distortions of competition in the Single Market. These includes commitments from SAS to reduce its presence on the overall air transport market through (i) a reduced fleet, (ii) divestment of assets and (iii) the release of a significant number of slots, including at important coordinated EU airports.

On this basis, the Commission concluded that Denmark and Sweden’s measures are in line with EU State aid rules.