Airline SAS files for US bankruptcy protection as strike ground flights

  • Airline filings for Chapter 11 in the United States
  • The filing comes after the start of the pilots’ strike on Monday
  • Strike grounding about half of the airline’s flights

STOCKHOLM, July 5 (Reuters) – Scandinavian airline SAS (SAS.ST) has filed for bankruptcy protection in the United States to help reduce debt, it said on Tuesday warning strikes by pilots had deepened its financial crisis.

Wage negotiations between SAS and its pilots collapsed on Monday, sparking a strike that is fueling travel chaos across Europe as the peak summer holiday travel season hits full swing for the first time since the COVID-19 pandemic.

That hastened the airline’s decision to file for Chapter 11 bankruptcy protection in the United States, its CEO Anko van der Werff said as it gasped to carry out restructuring plans. Continue reading

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“SAS aims to secure agreements with key stakeholders, restructure the company’s debt obligations, reconfigure its aircraft fleet and emerge from the company with a significant capital injection,” it said.

The company said in court filing the strike would cost it $10-13m a day, while a Sydbank analyst estimated that in a worst-case scenario it could wipe out up to half of its cash flow in the first four to five weeks alone .

SAS said talks with lenders for an additional $700 million in funding were “well advanced.”

It said it will continue to serve its customers during the bankruptcy proceedings, although the strike is grounding about half of the airline’s flights and affecting about 30,000 passengers a day.

Data from flight-tracking website FlightAware showed that 232 SAS flights – 77% of those scheduled – had been canceled on Tuesday, while Oslo’s Gardermoen Airport, one of SAS’ hubs, had the world’s highest cancellation rate that day.

The airline, whose largest owners are the Swedish and Danish states, said the filing for bankruptcy protection was aimed at accelerating a restructuring plan announced in February.

The Chapter 11 process is expected to be completed in nine to 12 months, it added. SAS shares, which can trade normally during the bankruptcy proceedings, fell 14% by 1019 GMT.

COST TOO HIGH

View of SAS Airbus A321 and A320neo airplanes at Kastrup Airport parked on the tarmac after Scandinavian Airlines pilots went on strike July 4, 2022 in Kastrup, Denmark. TT News Agency/Johan Nilsson via REUTERS

Wallenberg Investments, SAS’s third-largest shareholder with a 3.4% stake, said it supports the decision and will allow further talks to reach cost and debt levels that make the airline competitive.

“For decades, SAS has had high costs and low productivity compared to its competitors,” it said.

Needing to attract new investors, SAS has said it will cut costs across the business, including on leased planes that are sitting idle due to closed Russian airspace and a slow recovery in Asia. Continue reading

Its chief financial officer, Erno Hilden, said in the court filing that the airline has so far been unable to renegotiate lease terms, many of which were “significantly above” market rates.

In terms of debt, SAS had three outstanding bonds with a total face value of 5.4 billion Swedish kronor (US$519 million). They are now trading at a very distressed level of about a third of their face value.

The airline forecast that its cash on hand of 7.8 billion Swedish kronor would be enough to meet its business obligations in the short term.

However, it added that the strike “is having a negative impact on the company’s liquidity and financial condition and, if prolonged, such impact could become significant”.

The Swedish government has said no to injecting more money into the airline, while Copenhagen has said it could do so if SAS is able to attract new investors.

Nordnet analyst Per Hansen said the motion shows SAS needs a fresh start and that the strike will drag on.

“Chapter 11 protection comes early,” he said. “Management and the board want to make it absolutely clear to all stakeholders that the situation is very serious.”

($1 = 10.3216 Swedish Krona)

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Additional reporting by Johan Ahlander in Stockholm, Essi Lehto in Helsinki, Victoria Klesty in Oslo, Agata Rybska in Gdansk, Jamie Freed in Sydney and Karin Strohecker in London; writing by Niklas Pollard; Edited by Kim Coghill and Jan Harvey

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