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Criticism of Government Money to SAS

Published onsdag 10 februari 2010 kl 15.33

The Swedish Government's decision to pump another 1 billion Swedish kronor, the equivalent of 137 million US dollars of Swedish tax payers money, into the loss-making Scandinavian Airlines System (SAS) has come up against criticism.

The last three months of 2009 were bad for SAS. In fact, worse than expected, as it turned out when the quarterly report was published on Tuesday. In order to keep flying, the company needs another 650 million US dollars from its shareholders.

The biggest of these is the Swedish government, which owns just over one-fifth of SAS. The Norwegian and Danish governments come second, with just under 15% of the shares each.

On Tuesday afternoon, the Swedish government announced that it would contribute 137 million dollars, a fifth of the requested funding. This is just one year after pumping in a similar amount, and only months after the Minister for Trade and Enterprise herself stressed that SAS could not count on any more of the taxpayers' money.

So why is the government contributing more to a company that has made a loss seven out of the last ten years?

Ola Alterå, political advisor at the Ministry of Trade and Enterprise, says that "Based on history one would not want to invest in this company" but he maintains the situation is different now: SAS has cut 20 percent of its costs, and has all the trade unions and creditors on board for its plan for further cut costs.

The conditions for it to actually work are there now, Ola Alterå says. They were not before because SAS has had higher costs than everybody else. And he expects "businesslike returns" on the investment. And just as the government wanted the American car giant General Motors to be a responsible owner in the Saab deal, he says, so should the Swedish government when it comes to SAS.

But objections are coming from the low cost airlines, who plan to file complaints with the European commission for illegal government support which will distort competition.

And the Swedish Green party thinks this is a terrible idea. Green MP Karin Svensson-Smith says it is the fourth time since she became a member of parliament in 1998 that the owners have to contribute money.

"There is not one expert in the industry who thinks SAS is going to make it," says Karin Svensson-Smith. And just as there was no point in supporting the dying shipbuilding industry, the same applies to an extensive air industry heavily reliant on fossil fuels. Instead, Karin Svensson-Smith says, the money should be invested in more rails and trains.

According to Ola Alterå the government also wants to sell SAS, but that "you do not safeguard the value of taxpayers' money already invested in the company if you try to sell when the airline industry is at rock bottom and before you have found a good and stabile new owner".

"I have heard this all before - three times," says Karin Svensson Smith.

"There is no reason to think that it will be easier to sell SAS, after you've used taxpayers' money," says Svensson-Smith who wants the Government to "stop throwing good money after bad"

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