SAS launches $125m takeover of rival Braathens

SAS, the Scandinavian airline, on Monday launched a NKr1.13bn ($125m) takeover of struggling rival Braathens, which would effectively create a monopoly in the Norwegian domestic air travel market.

SAS has agreed to buy out the airline’s two biggest shareholders – the Braathens family, which holds 38.8 per cent, and Dutch airline KLM, which has a 30 per cent stake.

The Stockholm-based airline also launched a tender offer for the remaining free float in Braathens at NKr35 per share. The bid is conditional upon regulatory approval.

The two carriers sought to head off competition concerns by arguing that Braathens could no longer survive on its own. Johnny Skoglund, vice president Norwegian domestic services at SAS, said he was “hopeful” the regulator would approve the takeover.

KLM had already made it clear it was not prepared to help solve what the Dutch airline termed Braathens’ “domestic problems.”

Braathens warned in February that the intense competition with SAS and overcapacity of around 12 per cent in the small Norwegian domestic market of 11m passengers would push it into losses this year.

If the deal is approved, SAS will have secured a complete monopoly in Norway, following its acquisition of a controlling stake in Wideroe, the only other sizeable Norwegian airline, four years ago.

SAS’s consolidation of its dominant position in its three national markets mirrors similar developments elsewhere in Europe since the creation of a single aviation market in 1997.

Larger airlines, such as Lufthansa, Air France and British Airways, have sought to shore up their own domestic markets as they compete more with one another.

Mr Skoglund said the deal would create cost-savings of some NKr600m next year, rising to around NKr900m by 2004. He said the aim was to avoid job losses among the two companies’ 14,000 employees in Norway but could not give any guarantees.

KLM, which took its 30 per cent stake in Braathens only four years ago, said it would sever its commercial relationship with the Norwegian carrier over the coming months. SAS will retain the Braathen’s brand in the short term and link the two airlines’ frequent flyer programmes.

Braathens’ operations in Sweden are not included in the deal and will be spun off into a separate company.

SAS is still 50 per cent owned by the governments of Denmark, Norway and Sweden with the remainder of the shares listed in each of the three countries through listed holding companies. The three governments recently agreed to simplify this arrangement by creating a single unified share structure.