The European Commission has opened an in-depth investigation to assess whether a Danish and Swedish recapitalisation measure of approximately €1 billion (SEK 11 billion) in favour of SAS AB is in line with EU State aid rules.
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The measure was initially approved on 17 August 2020 by the Commission under the State aid COVID Temporary Framework, but subsequently annulled by the judgment of the General Court of 10 May 2023.
SAS is a major network airline operating in Denmark, Sweden and Norway. It has its main hub at Copenhagen airport and, under normal circumstances, provides two-thirds of intra-Scandinavian air connectivity.
It also contributes to over 30% and 25% of Denmark's and Sweden's international traffic, respectively. In 2020, SAS was at risk of default and insolvency due to the coronavirus pandemic and the travel restrictions in place to limit the spread of the virus.
On 11 August 2020, Denmark and Sweden notified to the Commission a recapitalisation measure of approximately €1 billion (SEK 11 billion) in favour of SAS.
The recapitalisation by the two Member States comprises:
• Around SEK 2 billion (approximately €194 million) equity participation through the subscription of new shares, shared between Denmark and Sweden;
• Up to around SEK 3 billion (approximately €292 million) equity participation through the subscription and underwriting of new shares in a rights issue, shared between Denmark and Sweden; and,
• SEK 6 billion (approximately €583 million) newly issued State hybrid notes with the features of an equity instrument non-convertible into shares, of which SEK 2.5 billion (approximately €243 million) is allocated to Sweden and SEK 3.5 billion (approximately €340 million) is allocated to Denmark.
On 17 August 2020, the Commission approved the recapitalisation measure notified by Denmark and Sweden. The Commission found the measure to be compatible with EU State aid rules.
In its judgment of 10 May 2023, the General Court annulled the 2020 Commission's decision.
The General Court considered that the recapitalisation measure granted to SAS did not meet one of the conditions set out in the COVID Temporary Framework.
In particular, it ruled that the Commission failed to require the inclusion of a step-up mechanism (or an alternative mechanism with the same effect as a step-up mechanism) to ensure that Denmark and Sweden would receive a sufficient remuneration for their investment and that SAS would have incentives to buy back the shares acquired by Denmark and Sweden as soon as possible.
Following the General Court's judgment, the Commission will now carry out a more in-depth investigation in order to assess further the recapitalisation measure. The Commission aims at adopting a final decision on this case in the coming months. ■