Scandinavian airline SAS has struck a deal to sell most of its money-losing Spanair unit to a Spanish consortium for one euro, leaving it with a SEK2.2 billion kroner (USD$266 million) charge in the fourth quarter.
SAS, which has been struggling in recent years to turn itself around and become more profitable, had abandoned an earlier effort to sell Spanair in June of last year after it was unable to secure a deal on acceptable terms.
SAS said it sold 80.1 percent of Spanair to a public-private consortium from the Spanish region of Catalonia but the Scandinavian firm will still be responsible for Spanair debts following the deal.
"In summary, the financial effects from Spanair's 2008 result and this transaction on the SAS Group in 2008 will be a negative effect of SEK4.895 billion reported as discontinued operations in the 2008 financial statements," SAS said.
Of that total, SEK2.72 billion was booked in the first three quarters of last year while SEK2.18 billion will be accounted for in the fourth-quarter results.
The fourth-quarter charge consists of a SEK712 million capital loss, SEK907 million for one-off restructuring costs and an additional SEK560 million for Spanair losses in the quarter.
The consortium groups Catalana d'Iniciatives -- a private equity group including some of Spain's biggest banks and builders -- with regional tourist authorities, a Barcelona exhibition center and businessmen in local tourism.
SAS, half-owned by Sweden, Norway and Denmark, will own the remaining 19.9 percent of the Barcelona-based airline and retain Spanair's debt, which SAS said last March was around EUR260 million euros (USD$334 million).
UNPRECEDENTED CONDITIONS
SAS will also continue to manage the firm on an operational basis, Iniciatives said.
"Due to unprecedented market conditions, the transaction will have a significant negative impact on the Q4 earnings of the SAS Group," said SAS chief executive Mats Jansson in a statement.
Iniciatives Empresarials Aeronautiques said the new Spanair would boost capital to raise EUR100 million and would launch a three-year plan to swing the airline back into profit.
Spanair lost SEK515 million (USD$62.35 million) in the first half of 2008.
"Following the transaction, EUR99 million of existing interest bearing indebtedness to SAS will remain outstanding and be amortized in line with Spanair's future cash flow generation," SAS said.
"In addition SAS will convert EUR20 million of existing loans to Spanair into equity in Spanair, and repay Spanair's external loans of EUR18 million."
SAS said it will continue to lease 18 aircraft to Spanair on market terms and remain as guarantor of EUR36 million for some operational undertakings of Spanair for a limited period.
SAS put the carrier up for sale in 2007 but potential buyers shied away from a purchase, deterred by high fuel costs, falling demand and overcapacity in the Spanish market.
Two months after SAS abandoned its attempt to sell Spanair, one of the airline's planes crashed on takeoff from Madrid, resulting in more than 150 deaths.
