Sweden and Denmark plough billions into SAS rescue

Scandinavian airline SAS on Tuesday unveiled a plan to raise around 12 billion Swedish kronor ($1.3 billion or 1.1 billion euros) in new funds to deal with the impact of coronavirus.

Sweden and Denmark plough billions into SAS rescue
Flight technicians prepare the last of 25 SAS aircraft for long-term parking at Oslo Airport in Gardermoen, amid the new coronavirus pandemic. Photo: Håkon Mosvold Larsen/NTB Scanpix / AFP
The plan will see the Danish and Swedish state, two of the three largest shareholders, increase their ownership from about 14 percent to 20 percent, and will result in a 14.25 billion Swedish kronor boost to the airline's equity. 
In mid-June, SAS said it needed 12.5 billion in new funding as part of its recapitalisation plan, and the government of Sweden said it was ready to inject five billion kronor into the company. The Danish government also announced it was willing to support the ailing airline but did not give a figure.
Carsten Dilling, chair of the SAS Board of Directors, said in a press release that the plan was “a balanced way forward given the magnitude of the recapitalisation and the conditional burden sharing measures”. 
Along with planned cost-cutting, he said the funding would enable the company to “withstand this crisis and return as a profitable and sustainable Scandinavian infrastructure provider”.

SAS said it does not expect demand for travel to return to pre-coronavirus levels before 2022.
“We expect demand to remain low both in 2020 and 2021. It won't be before 2022 that it is back again,” the airline's chief executive Rickard Gustafson told Sweden's TT newswire. “That's why we need this money.” 
Like many airlines, SAS has been hit hard by the Covid-19 pandemic and announced in mid-March it was temporarily laying off 90 percent of its workforce.
Since then, the company has announced it will be cutting 1,900 full-time positions in Sweden, 1,300 in Norway, and 1,600 in Denmark, accounting for some 40 percent of the company's staff.
Shares in SAS were down more than 10 percent on the Stockholm stock exchange following the plan's unveiling.

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Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.