(Bloomberg) -- Three months after exiting a bruising bankruptcy-protection plan, SAS AB wants to play a role in European airline consolidation by pitching itself to part-owner Air France-KLM as an attractive conduit to well-heeled Scandinavian travelers.
The airline is already back to about 95% of corporate travelers compared with pre-pandemic levels, a ratio that will return fully next year, Chief Executive Officer Anko van der Werff said in an interview. SAS is putting a focus on its premium credentials with Copenhagen as its primary hub and will reintroduce business class on its intra-Europe services featuring hot meals and blocked out middle seats, he said.
“The trigger is with the owners, not with me, but I would really like to be a part of that consolidation,” Van der Werff said in an interview at SAS’s headquarters on the outskirts of Stockholm this month. “It’s definitely a path that I’ll explore deeply.”
SAS went through a two-year reorganization process after filing for Chapter 11 bankruptcy protection, during which Air France-KLM swooped in to take a 19.9% stake. The Franco-Dutch carrier has an option to raise its holding to become a controlling shareholder after at least two years.
Van der Werff said Europe must catch up on consolidating a still splintered aviation industry, saying that the region is far behind the US, where only about a handful of players dominate the air travel market.
Besides its renewed focus on lucrative business travel, SAS also offers a strong Nordic market position with attractive landing slots and about 8 million loyalty-card members — assets that go well beyond anything Air France-KLM could easily build in the region by itself, according to Van der Werff. With its current stake, Air France-KLM is a de-facto competitor, and there’s no room to align on pricing, capacity or network, the CEO added.
A spokesman for Air France-KLM said the group has an option to take a controlling stake in SAS as of the middle of 2026, provided that certain targets are met.
Speaking on a call with analysts earlier this month, Air France-KLM Chief Financial Officer Steven Zaat said “we have two years where we actually will have the same basis, so we work on the commercial cooperation. I think that is an opportunity.”
Van der Werff, 49, said that European countries should make sure they optimize their resources rather than being too focused holding onto a national carrier. It’s a lesson that Italy learned the hard way after trying unsuccessfully for years to turnaround the deeply unprofitable Alitalia, now rechristened as ITA, before settling on a sale.
Europe has seen increased activity on the consolidation front in recent years. Deutsche Lufthansa AG is awaiting final approval from the European Commission for its takeover of ITA, while the Portuguese government is looking for new owners for state-owned TAP SA. Another asset in play is Air Europa, which IAG SA tried to take over before being blocked by European regulators. Now Air France-KLM is reportedly considering buying a minority stake in the Spanish carrier.
While SAS has a loyal following in Scandinavia, the airline has struggled over the years with striking personnel, low-cost competition and not least the pandemic that grounded the entire aviation industry for more than a year. Further complicating operations has been the closed-off Russian airspace, which has extended flight times to Asia. As a result, SAS has pulled out of China completely.
SAS still flies to Japan and Thailand, the latter being a popular travel destination for Swedes during their winter months. To support its global ambitions, SAS will take delivery of more Airbus SE A350 aircraft in coming years, adding to a long-distance fleet that now stands at four A350-900 models and eight A330-300 jets.
Besides Air France-KLM, other shareholders in the Scandinavian carrier include Castlelake LP and the Danish state, which holds about 25.8%. Sweden is no longer a shareholder. Should Air France-KLM decide to maintain its current stake and not go higher, SAS might pursue a path back to becoming a publicly listed company via an initial public offering, Van der Werff said.
“It’s not like we’re going to wait for Air France-KLM and others,” Van der Werff said. “You can’t sit on the fence forever.”
--With assistance from Charles Daly and Albertina Torsoli.
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