Terje Solsvik & Stine Jacobsen

OSLO (Reuters) – Industry Minister Karl-Petter Thorwaldsson stated Tuesday that Sweden will not provide new capital to the loss-making airline SAS. The government also does not plan on being a long-term investor in the company.

The airline is part-owned by Sweden, Denmark and the Netherlands. Last week, it said that there had been no progress in its restructuring plan known as SAS Forward.

Thorwaldsson declared, “We want it to be crystal clear that SAS won’t inject additional capital into the future.”

Over the past decades, Sweden has invested 8.2 billion Swedish crowns (834 million dollars) in the airline. These loans were also used to save the company during the COVID-19 epidemic.

Minister said that he will propose to Parliament for SAS to be permitted to convert government debt into equity capital.

SAS Stockholm said that on May 31, it had declared its intention to convert the debt it holds to equity into equity, and to raise cash of 9.5 billion Swedish crowns. It warned it could face liquidity issues if they fail to do so.

The company also explored deals with labor unions to reduce costs and give employees more flexibility in their work hours as part of its plans.

Jacob Pedersen from Sydbank wrote to clients that “the Swedish decision places serious pressure upon creditors and employees in entering into agreements.”

Pedersen holds a sell rating and stated that “if the company cannot attract capital, since Sweden and perhaps Denmark won’t spend more money on it, then this could lead to the death of the company.”

SAS’ largest shareholders are both the Swedish and Danish government, which each hold a 21.8% interest. Denmark has not yet responded to the restructuring plan.

A request to comment was not received by the Danish government immediately.

($1 = 9.8346 Swedish Crowns