EU regulators open state aid investigation of SAS rescue

BRUSSELS (Reuters) - European regulators are investigating whether a 400-million-euro (S$668.32 million) credit facility granted to Scandinavian airline SAS by Sweden, Denmark and Norway breached EU state aid rules.

The loan was part of a rescue package last year for SAS, which is half owned by the governments of the three countries, to save it from bankruptcy. If the governments lose the case, SAS could be made to pay back the money it has borrowed.

Unions also agreed to wage cuts as part of cost-reduction measures for the airline, which has faced years of tough competition from low-cost carriers.

Sweden, Denmark and Norway provided half of the credit facility and the remaining half was provided by most of the banks that took part in a previous aid measure and minority shareholders the Knut and Alice Wallenberg Foundation (KAW).

EU rules ban any state aid which distorts competition and says that any support for a company has to be made on the same terms as a private player operating under market conditions.

The European Commission opened an investigation on Wednesday into whether the loan breached those rules.

"The Commission doubts that the new RCF (revolving credit facility) was carried out on market conditions, as the public shareholders on the one hand and the banks and KAW on the other hand were not in a comparable situation," it said in a statement.

The EU executive said that while the public shareholders increased their exposure to SAS through taking part in the new loans, the banks roughly halved their contribution to the loan when compared to the previous one.

Such investigations usually take several months, sometimes even years.

The competition regulator of trade body EFTA, which has close ties to the EU and of which Norway is a member, has also launched an investigation.

The Scandinavian nations stood by the legality of the rescue.

"Our point of view has always been that the state's participation in the credit facility was not state aid. This is a view we share with the Swedish and Danish states," Norwegian Economy and Trade Minister Trond Giske said in a statement.

Swedish Financial Markets Minister Peter Norman said: "It is owner responsibility, this is not a subsidy, but to make sure that our asset, the SAS share, does not deteriorate."

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