SAS priced (19-Mar-2010) a five-year, SEK1.6 billion (EUR165 million) offering of convertible bonds, upsizing the initial size of the offering from SEK1.42 billion (EUR146 million) and meeting a hurdle set by key shareholders for their support in an upcoming share issue. The senior unsecured bonds will have an annual coupon of 7.5% payable quarterly in arrear and will be convertible at a conversion price of SEK3.5913 equal to a conversion premium of 30% of the volume weighted average price of the company's shares on NASDAQ OMX Stockholm between launch and pricing on 19-Mar-2010. The Bonds are expected to be settled on or around 01-Apr-2010, with proceeds to be used to repay other borrowing. [more - Updated Offer] [more - Previous Offer]
SAS prices SEK1.6 billion convertible bond issue
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SAS eyes lower labour cost bases outside Scandinavia as the airline's margin starts to fall again
A harsh truth for SAS is that improvements to its network and product, and its focus on Scandinavia's frequent travellers, have not isolated it from unit revenue weakness. Moreover, in spite of very creditable progress with unit cost reduction, it still has a high cost base. In FY2016 its operating margin started to turn down again. In addition to further targeted cost savings SAS is now considering further, more radical, changes to its production model.
In particular, it is assessing whether or not to establish operations outside Scandinavia for some of its European traffic. The European airline market includes a fast-growing and price-sensitive leisure segment, where SAS tries to compete against much lower cost operators that are not weighed down by Scandinavia's very high labour costs.
Even Scandinavia's most significant LCC, Norwegian, has established bases in the UK and Spain, and many other LCC competitors have bases across the continent. Indeed, it would seem that SAS, once an opponent of Norwegian's plans to use Ireland as a trans-Atlantic base in search of lower labour costs, has borrowed a page from its rival's book on how to re-write airline strategy.
Ryanair's 117million pax in 2016 tops European airline groups. The first time an LCC topped rankings
For the first time ever in Europe, in 2016 a low cost airline carried more passengers than any other airline or airline group, as Ryanair's 117 million passengers pushed Lufthansa Group's 110 million into second place. Ryanair had beaten Lufthansa itself, but not the whole Lufthansa Group. IAG's first full year of including Aer Lingus helped it to take third place from Air France-KLM. Europe's number two LCC, easyJet, was ranked fifth.
The big five can be expanded into a big seven to include Turkish Airlines and the Aeroflot Group, although these two had contrasting growth rates in 2016. A chasing pack of middle sized airline groups includes three LCCs (Norwegian, Pegasus and Wizz Air) and three legacy airlines with varying challenges to establishing sustainable profitability (SAS, Air Berlin Group and Alitalia).
Most of the faster growing airline groups in the top 20 are LCCs and the main growth drivers for Europe's big three legacy groups are their LCC subsidiaries. Just outside the top 20 are some fast growing legacy airlines in Eastern Europe, demonstrating the potential there. Nevertheless, unless there is a big merger or acquisition, Ryanair looks set to remain at number one for some time.