SAS Sales Grease Gears Of European Consolidation

The SAS Group, in a major strategic shift announced yesterday, wants to focus on its core business in Scandinavia in the future.

SAS CEO Mats Jansson said that the group plans to sell its airline holdings in BMI, Spanair and Air Greenland and is considering the disposal of further units such as ground-handling and maintenance to improve its profitability.

The decision could be a landmark event in the ongoing consolidation of the European air transport market and is likely to keep airline managements busy in negotiations for months. SAS's 20% stake in BMI is likely to end up in the hands of Lufthansa, while the fate of Spanair is less certain.

Founder Michael Bishop currently owns 50% plus one share in BMI, while Lufthansa has 30% minus one share. Bishop has a put option to sell a further 10% of BMI to Lufthansa from late 2008. This plus the 20% from SAS could give the Lufthansa majority control over BMI in 18 months, of Bishop decides to sell. BMI is of strategic interest because of its large slot portfolio at London Heathrow airport. Lufthansa has indicated that with open skies it could enter long-haul markets from places outside its hubs in Frankfurt and Munich that include not only German, but also European airports.

The Spanair sale could prove to drag on for a long time, at least until the sale of rival Iberia is complete. With both large Spanish carriers now up for sale, the Iberia case is likely to determine largely who will buy Spanair in the end.