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SAS Faces EU Competition Probe Over Aid by Sweden, Denmark

June 19 (Bloomberg) -- SAS Group, the Nordic region’s largest airline, faces an in-depth investigation by European Union regulators into whether a government support may have violated EU state-aid rules.

The European Commission said it “doubts” that a revolving credit facility of 3.5 billion Swedish kronor ($546 million) granted last year as part of a plan to restore the carrier’s profitability “was carried out on market conditions,” according to a statement on its website today.

The commission “has concerns regarding the reliability of the business plan, on the basis of which the public shareholders decided to participate,” the Brussels-based regulator said.

The European Low Fares Airline Association, whose members include Ryanair Holdings Plc and EasyJet Plc, said in February SAS’s credit line was illegal state aid because it is “effectively” guaranteed by the Swedish, Danish and Norwegian governments that own stakes in the carrier.

SAS reduced the facility to 2 billion kronor on June 14 after the Norwegian Competition Authority approved the sale of Wideroe Flyveselskap AS.

The facility remains untapped, SAS spokeswoman Malin Selander, said after today’s decision. She declined to comment further, saying the company won’t discuss an open investigation.

SAS narrowed its first-half loss and said on June 12 that restructuring efforts including job cuts, new pay agreements and asset disposals are showing “tangible effects.”

SAS is targeting earnings before interest and tax equal to more than 3 percent of sales, assuming a stable fuel price and no external shocks. The carrier cut about 300 jobs in the second quarter and aims to reduce headcount by about 1,000 positions by the end of the financial year.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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