Scandinavian Airlines System to sell stake in airBaltic and Spanair

Scandinavian Airlines System (SAS), the leading carrier in the Scandinavian countries, is selling its stake in airBaltic, the national airline of Latvia, to airBaltic’s management.

SAS said in a statement that the sales price of its 47.2% holding amounted to about 220 million Swedish crowns ($28.62 million) and that the transaction would result in a gain of around 175 million Swedish crowns.

Scandinavian Airlines System also said it would sell a majority holding in its wholly owned company Spanair to a group of Spanish investors for an undisclosed sum, but did not specify how large the stake would be.

Scandinavian Airlines System (SAS), the multi-national airline for Denmark, Norway and Sweden, is based in Stockholm, Sweden. It is a founding member of the Star Alliance, and also the founder of Air Greenland, Linjeflyg, Spanair, Thai Airways International and the former charter airline Scanair. Scandinavian Airlines System operates out of three primary hubs –Copenhagen Airport, Stockholm-Arlanda Airport, and Oslo Airport, Gardermoen.

In addition to Spanair and airBaltic, Scandinavian Airlines System is at present made up of the airlines SAS Denmark, SAS Norway and SAS Sweden, as well as low-cost carriers Blue 1 and Wideroe, which together transported 33.42 million passengers in 2007. SAS also owns 20% the United Kingdom-based airline British Midland.

Air Baltic Corporation, operating as airBaltic, is based in Riga, the capital of Latvia, and has its main base at Riga International Airport. The airline was established on  August 28, 1995, with the signing of a joint venture between Scandinavian Airlines System and the Latvian state. airBaltic’s operations started on October 1, 1995.

Scandinavian Airlines is resorting to the two sales in an attempt to cope tide over its financial crisis. It has been struggling for the past decade with financial troubles, suffering considerable losses, and was on the verge of bankruptcy after the September 11, 2001, terrorist attacks on the United States, the war in Iraq and the outbreak of the severe acute respiratory syndrome (SARS) epidemic in 2003.

Following a series of savings programmes, the management of SAS succeeded in getting the company out of the red in 2006, but the situation again got bad in 2007. The rise in prices of fuel and the global economic recession in 2008 made matters worse.

In the third quarter of 2008, SAS announced a record net loss of nearly 2.0 billion kronor (200 million euros/$260 million) compared to a profit of 701 million kronor in the same period a year ago.

In August 2008, SAS announced that it was intensifying its restructuring programme, which included a 10% reduction of its fleet to about 300 aircraft as well as a cut of 2,500 jobs.

A few days after SAS announced the restructuring programme, an aircraft of Spanair crashed on August 20, 2008, at an airport in Madrid, in which 154 people died.

The cause of the Spanair plane’s crash – the worst air accident in Spain 25 years – is yet to be ascertained, but media reports have suggested that the plane’s wing flaps failed to extend properly when it attempted to take off, causing it to lose altitude and crash.