When a rumoured deal isn’t quite a rumoured deal

If you were to run a search in Google today looking for articles relating to a possible “Merger of Finnair and Scandinavian Airline Systems (SAS)”, then you would return a significant number of hits. What I find most interesting about this potential “rumour” is that if you read some of the articles they would imply there has been some misquoting.  Finnair’s CEO, Pekka Vauramo appears to have been answering a question in relation to the strategy of the business, and whilst he apparently gave pros and cons relating to a possible merger, only the pros ended up being quoted. Yet other articles seem most insistent that there is validity to the discussions around a possible merger.

On paper a merger would not be so surprising. Both airlines have significant state shareholders, the Government of Finland owning 55 per cent of Finnair, with the Governments of Denmark, Norway and Sweden owning a majority stake in SAS. The four countries already form a “Nordic” alliance (with the addition of Iceland) in many other areas of commerce and trade, so this wouldn’t be beyond the realms of possibility. As you can imagine, the speculation has resulted in both companies seeing upwards movement in their share prices today, so if nothing else the stories have proven to be good news for investors.

Airline mergers have been all the rage over the last few years, especially with rising fuel prices and the increasing options for passengers in terms of low cost airlines. However, few appear to have worked with unconditional success and BA’s takeover of Iberia remains fraught for IAG, the group formed as a result of the deal, with industrial action and profitability issues among the issues to have arisen.

So far, Finnair’s only comment has been to say that the interview was taken out of context, while SAS is remaining silent. There may be some turbulent air ahead!

Filed under: dealmaking, merger, nordic, airline