The Scandinavian carrier refutes reports that it is planning to build up substantial stakes in the Baltic States carriers (804 words)

Published: 11/13/2001

Media reports that SAS is about to acquire substantial stakes in the Baltic States carriers have been dismissed by the company's Senior Vice President of partnerships and alliances, Lars Lindgren. Rumours have been circulating that SAS is eyeing not only a further stake in Air Baltic, but also in acquiring holdings in Estonia Air and Lithuanian Airlines. Lingren concedes that the airline perceives the Baltic region as “part of its extended home market”, but insists that, for the meantime, its primary focus is on the Latvian carrier, Air Baltic. In October, SAS increased its holding in Air Baltic from 34.2% to 47.2%, with the additional shares acquired at a reported cost of $9m from two investment funds, Sweden's Swedfund and the Danish Fund for Central and Eastern Europe. The other shareholders in the airline are the Latvian state, with 52.6% and Russia's Transaero, with 0.2%. According to Lindgren, the shareholder situation at the Latvian airline is now “stable” and that SAS, despite press reports, does not plan to increase its holding; nor was he aware that the Latvian government intended to sell a further holding. There is still plenty of speculation that, if the stake was up for sale, SAS would be reluctant to allow the stake to go to a third party, given the importance it attaches to the Riga connection as a feeder airport, both to Stockholm and, particularly, to Copenhagen. In this respect, Air Baltic with 45% of Riga's traffic is seen by the airline as an integral part of its coverage of the area along with SAS and SAS Commuter. In terms of SAS's future intentions, it might be as well to remember that the airline clearly stated last year that it had no plans to increase its stake in Air Baltic, but then did just that when the additional holding came up for sale. Arnis Muiznieks, responsible for aviation at Latvia's Ministry of Transport, also says that the state does not intend to reduce its holding in the airline. He points out that relinquishing control of the airline to a party outside Latvia prior to entry into the EU could result in the loss of routes, as current agreements would be considered to be no longer valid. He considers that the continuation of these would be down to the goodwill of other countries and he is not convinced that this would be forthcoming in every case. According to Lindgren, both SAS's and Air Baltic's business, as well as air travel generally within the region, has suffered to a lesser extent than elsewhere in Europe, although Latvian travel agents have reported bookings down by 10%. He remains optimistic about the growth prospects of the whole region, while accepting that there are distinct differences between these small markets. Overall, Lindgren anticipates that the markets will outperform the rest of Europe. Jens Helmo Larsen, President of Air Baltic, says that the airline has even increased its frequencies in the region, with twice daily flights to Helsinki, Tallin and Vilinius, although its flight to Budapest has been cancelled. The airline insists that it is on schedule for a profit in 2001. Lindgren also dismissed reports that Maersk Air was contemplating a sale to SAS of its 49% stake in the Estonian national carrier, Estonian Air. Lindgren said that SAS had received no offer of shares and has no plans to buy a stake in the airline. Olev Schults, Chairman of Estonian Air, acknowledged the benefits of its cooperation with SAS, but equally thinks that a sale of the stake is unlikely, especially given Maersk's considerable help recently when carrier's fleet was grounded owing to its inability to find war insurance. More likely is the purchase of the state's 34% stake - when it eventually comes up for sale - by the Estonian investment fund Cresco that currently holds 17%. The government will be keen to find a buyer within the country, given that further reductions in Estonian ownership would pose problems over routes, as in the case of Air Baltic. Estonian Air also made losses in 2000, but expects to return to profit in 2001. The reported interest of SAS in state-owned Lithuanian Airlines (Lietuvos Avialinijos) was also refuted by Lindgren, saying again that SAS has "no interest" in the airline and that the general operational situation at the Lithuanian carrier is "not very encouraging". Prior to 11th September, the airline had already started to cut headcount in the first half with losses of $2m recorded. The Lithuanian authorities, not surprisingly, have suspended the airline's privatisation until more favourable conditions emerge. But they may well be disappointed by SAS's denial of interest, as they had identified the airline as a prospective buyer when the sale finally goes ahead.

Article ID: 2907