State aid: European Commission approves €1 billion Danish and Swedish measure to recapitalise SAS


The European Commission has approved Danish and Swedish plans to contribute up to SEK 11 billion (approximately €1 billion) to the recapitalisation of SAS. The measure was approved under the State aid Temporary Framework. The recapitalisation measure is part of a larger recapitalisation package, which also foresees a significant participation of private investors, including the conversion of outstanding privately-held debt instruments into equity.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: SAS plays a key role for the connectivity and economy of Scandinavian countries. As many other companies active in the aviation sector, SAS has been severely hit by the current crisis. With this measure, Denmark and Sweden will contribute up to €1 billion to SAS’s recapitalisation and help the airline weather the current crisis. At the same time, the Member States will be sufficiently remunerated for the risk taxpayers assume, and the support will come with strings attached to limit distortions of competition. I welcome the participation by private investors to the plan, as it limits the need for State aid, while contributing to the recovery of companies affected by the coronavirus outbreak.”

The Danish and Swedish recapitalisation measure

Denmark and Sweden notified to the Commission, under the Temporary Framework, a State recapitalisation of SAS of up to SEK 11 billion (approximately €1 billion), of which about SEK 6 billion (approximately €583 million) will be provided by Denmark and SEK 5 billion (approximately €486 million) by Sweden. The recapitalisation by the two Member States comprises:

  • Around SEK 2 billion (approximately €194 million) equity participation through the subscription of new shares, shared between Denmark and Sweden;
  • Up to around SEK 3 billion (approximately €292 million) equity participation through the subscription and underwriting of new shares in a rights issue, shared between Denmark and Sweden; and
  • SEK 6 billion (approximately €583 million) newly issued State hybrid notes with the features of an equity instrument non-convertible into shares, of which SEK 2.5 billion (approximately €243 million) is allocated to Sweden and SEK 3.5 billion (approximately €340 million) is allocated to Denmark.

Following the recapitalisation, a revolving credit facility (on which Denmark and Sweden granted 90% public guarantees, which were approved by the Commission on 15 April 2020 and 24 April 2020) will be cancelled.

SAS is a major network airline operating in Denmark, Sweden and Norway. It has its main hub at Copenhagen airport and, under normal circumstances, provides two-thirds of intra- Scandinavian air connectivity. It also contributes to over 30% and 25% of Denmark’s and Sweden’s international traffic, respectively.

In the second quarter of 2020, SAS suffered substantial losses due to the coronavirus outbreak and the travel restrictions that Denmark, Sweden and other countries had to impose to limit the spread of the coronavirus. Despite the State aid already granted to the company by Denmark and Sweden (cases SA.56795, SA.57061 and SA.56774), the significant drop in travel demand and the measures implemented to limit the spread of the virus continue deteriorating the financial situation of the airline. As a result, SAS is currently facing a risk of default and insolvency.

The Commission found that measure notified by Denmark and Sweden is in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. In particular, as regards:

  • Conditions on the necessity, appropriateness and size of the intervention: The measure will not exceed the minimum needed to ensure the viability of SAS and will not go beyond restoring its capital position before the coronavirus When assessing the proportionality of the recapitalisation measure, the Commission took also into account the other State aid measures in favour of the company in the context of the coronavirus outbreak.
  • Conditions on the States’ entry, remuneration and incentives to exit from the capital of the company: The recapitalisation aid will prevent insolvency of SAS, which would have serious consequences on Danish and Swedish employment, connectivity and foreign trade Denmark and Sweden will receive appropriate remuneration for the investment, and there are additional mechanisms to incentivise SAS to redeem the States’ equity participations and the new State hybrid notes obtained as a result of the recapitalisation. Denmark and Sweden submitted a business plan prepared by SAS to redeem, by fiscal year 2025, the recapitalisation instruments. They also committed to work out a credible exit strategy within 12 months after the aid is granted, unless the States’ intervention is reduced below the level of 25% of equity by then. If six years after receiving the recapitalisation aid the States’ intervention is not reduced below 15% of SAS’s overall equity, a restructuring plan for SAS will be notified to the Commission.
  • Conditions regarding governance: Until the States have exited in full, SAS and its subsidiaries are subject to bans on dividends and share buybacks, other than in relation to the Moreover, until at least 75% of the recapitalisation is redeemed, a strict limitation of the remuneration of SAS’s management, including a ban on bonus payments, is applied. These conditions aim at incentivising an exit of the two States as soon as the economic situation allows.
  • Prohibition of cross-subsidisation and acquisition ban: To ensure that SAS does not unduly benefit from the recapitalisation aid by the States to the detriment of fair competition in the Single Market, it cannot use the aid to support economic activities of integrated companies that were in economic difficulties already on 31 December Moreover, until at least 75% of the recapitalisation is redeemed, SAS is in principle prevented from acquiring a stake of more than 10% in competitors or other operators in the same line of business.
  • Public transparency and reporting: SAS will have to publish information on the use of the aid received, including on how the use of the aid received supports the company’s activities in line with EU and national obligations linked to the green and digital transformations.

The Commission concluded that the recapitalisation measure will contribute to manage the economic impact of the coronavirus outbreak in Denmark and Sweden: the measure aims at restoring the balance sheet position and liquidity of SAS in the exceptional situation caused by the coronavirus pandemic while maintaining the necessary safeguards to limit competition distortions. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the two Member States, in line with Article 107(3)(b) TFEU and the general principles as set out in the Temporary Framework.

On this basis, the Commission approved the measure under EU State aid rules.

17 August 2020, Brussels



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