Sweden and Norway cut their holdings in Nordic carrier SAS AB through a public share sale and said they ultimately plan to exit their stakes entirely, a move that could pave the way for the company’s consolidation into one of Europe’s bigger airline groups.

Sweden’s shareholding in the Scandinavian Airlines parent was reduced to 17.2 percent from 21.3 percent and Norway’s to 11.5 percent from 14.2 percent, according to a statement Thursday. Denmark, which owns 14.2 percent of SAS, didn’t participate in the book-building process.

“The sale is the first step in a gradual and responsible disposal of the Swedish and Norwegian states’ ownership,” Sweden’s government said in a statement, adding that the move will include a new ownership structure and is intended to strengthen the Stockholm-based company.

A glut in airline seats as European economies stutter and a wave of terrorist attacks puts people off travel has led to a slump in fares and pushed carriers such as Air Berlin Plc to consider merger options. SAS faces a squeeze both from discount specialists such as Norwegian Air Shuttle ASA and network giants Air France-KLM Group, IAG SA and Deutsche Lufthansa AG, as well as Gulf carriers such as Dubai-based Emirates on inter-continental routes.

SAS stock was trading down 5.5 percent at the 15.5 kronor as of 9:01 a.m. in Stockholm, the price at which Sweden and Norway sold a total of 23 million shares after raising the offering from 19 million to meet investor demand. That takes the decline this year to 36 percent and values the company at 5.12 billion kronor ($578 million).

Closer Partnership

Lufthansa has long been regarded as a likely buyer for SAS, its longstanding partner in the Star Alliance grouping, though the German carrier’s Chief Executive Officer Carsten Spohr said last month that it had evaluated a takeover bid and decided a closer partnership was a wiser option.

Lufthansa is also working on plans to lease 40 aircraft from Air Berlin in what would amount to a takeover of about one-third of its rival’s fleet, and has said it will exercise an option to buy the 55 percent of Brussels Airlines, the biggest Belgian carrier, it doesn’t yet own. While the moves are intended to swell the Eurowings discount arm, full-service specialist SAS might not fit so well.

Sweden, Norway and Denmark increased their commitment to SAS by buying stock in 2010 as part of a capital injection to rescue the then unprofitable company, though they’ve said all along that they don’t intend to be long-term stakeholders. SAS returned to full-year profit in 2015 after cutting costs and sharpening its focus on business travel with investment in premium lounges, fast-track check-in facilities and new cabins on wide-body jets.

Citigroup was hired as global coordinator and book runner for the share sale, while Nordea and Swedbank were also joint book runners.

This article was written by Jonas Bergman and Christopher Jasper from Bloomberg and was legally licensed through the NewsCred publisher network.

Photo Credit: Sweden’s shareholding in SAS was reduced to 17.2 percent from 21.3 percent and Norway’s to 11.5 percent from 14.2 percent. Pictured is an SAS jet at Düsseldorf Airport in Germany. Daniel Mennerich / Flickr