The European Commission has re-authorised the 2020 Covid-era EUR833 million euro (USD911 million) recapitalisation of SAS Scandinavian Airlines (SK, Copenhagen Kastrup) by Sweden and Denmark, but ordered it to include a new step-up provision incentivising the governments to exit the shareholding.

The two governments will have two months after being formally notified of the decision to amend the terms of the aid and include the step-up mechanism. The mechanism, as proposed, would entail unilateral commitments from SAS to issue new hybrid notes to the governments without any consideration. It has to be approved by SAS's general meeting of shareholders as the airline and the Swedish government are related parties under the Swedish Companies Act.

The re-authorisation does not affect the amount of the aid and has no direct financial implications, as the assistance was paid already in 2020. Chief Executive Anko van der Werff told Bloomberg the decision was expected.

SAS received EUR833 million (USD911 million) in 2020, comprising approximately EUR175 million (USD191 million) in fresh equity, SEK6 billion (USD575 million) in newly issued state hybrid notes with the features of an equity instrument non-convertible into shares, and approximately EUR131 million (USD143 million) equity participation through the subscription and underwriting of new shares in a rights issue. All three components were shared by the governments of Sweden and Denmark, which currently hold a 21.8% stake each in the airline.

The EU General Court annulled the previous European Commission authorisation of the aid in May 2023 due to the lack of a step-up mechanism. The mechanism was introduced into the temporary framework governing state aid to airlines during the pandemic, which relaxed the normally very strict rules about government assistance in the European Union.

The annulment of the aid approval brought about significant uncertainty, as with no re-authorisation SAS would have to legally return the funds.

The Scandinavian carrier stressed that the renewal had no impact on its ongoing Chapter 11 restructuring and the recently approved USD1.2 billion funding from new investors. van der Werff confirmed that the airline was on track to obtain the US court approval for its restructuring in early 2024. It will then go through the Swedish reorganisation and have to secure the necessary European Commission approvals, which will take another few months. He expects to conclude the Chapter 11 process by June 2024.