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May 26, 2024
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SAS Scandinavian Airlines is more optimistic about its long-term financial position and has revised upward guidance on key financial targets. This follows on a more detailed review since the airline shared preliminary figures in late February. SAS more bullish about its FY26 financial outlook.

Compared to February, SAS is projecting revenues to increase in FY26 to SEK 58 billion, up from SEK 49 billion. Earnings before tax (EBT) should reach SEK 5.0 to 6.0 billion or a margin of nine to ten percent versus SEK 3.0 to 4.0 billion and a margin of six to eight percent in the previous guidance.

“The improvement in EBT amounts and EBT margin is a result of increased projected revenue, mainly due to the increase in assumed demand and capacity, as well as a reduction in financing costs resulting from an assumption that some of the Company’s future fleet can be self-financed (acquired without debt or lease financing).”

For FY23, the liquidity level should “significantly exceed” the fifteen percent level that was mentioned before, but this is subject to the actual financial performance, the equity capital raise, the fleet plan, and other material expenditures.

The carrier reiterates an Adjusted EBT of SEK -4 to -5 billion for FY23, given that many of the cost efficiencies of the SAS FORWARD plan are either ramping up over fiscal year 2023, or have been implemented but cannot be recognized in the Company’s financial results until post emergence from Chapter 11, including cost savings resulting from the fleet restructuring.”

Solicitation process

In line with what it said in February, SAS is about to launch the solicitation process to raise fresh equity this month. Today, the airline will file an Equity Solicitation Procedures Motion with the Bankruptcy Court of the Southern District of New York to seek approval for the procedures to raise the new equity. As part of its SAS FORWARD restructuring plan, the carrier hopes to raise SEK 9.5 billion in equity financing.

“Through these procedures, SAS will run a competitive and broad solicitation process to secure the best available terms and conditions for new equity capital. Potential investors can place bids to take a lead position or be paired with other investors in acquiring equity interests of the reorganized SAS. SAS will continue to operate the business and serve its customers as usual throughout this process,” the airline says in a media statement. A hearing about the motion is scheduled for April 19, after which a procedure will start to select a lead investor. This will take approximately twelve weeks.

The equity raise and the reduction or conversion of SEK 20 billion in debt will result in “only modest recovery for general unsecured creditors and little or no recovery for subordinated unsecured creditors upon emergence from the Chapter 11 process. Further, given that shareholders are lower in priority of payment in relation to creditors, there is currently an expectation that there will be no or very little value for existing shareholders in SAS AB at the end of the Company’s restructuring proceedings.”

Before SAS exits Chapter 11 restructuring later this year, it will have to repay the $350 million it received in Debtor-in-possession loans and related fees to Apollo Global Management that kept it going concern during the Chapter 11 period. The airline said on April 17 that it will not need a second tranche of $350 million in DIP funding as the liquidity position is stronger than expected. When it exits Chapter 11, SAS should have reduced net debt to SEK 17 billion, the majority in lease liabilities and aircraft debt. In FY26, SAS should be net-debt-free thanks to a strong financial position.

author avatar
Richard Schuurman
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016. Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.

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