- Airline Companies File for Chapter 11 in the United States
- The filing comes after a pilot strike began on Monday
- Strike grounds about half of airline 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 that pilot strike action had deepened its financial crisis.
Pay talks between SAS and its pilots broke down on Monday, sparking a strike that is adding to travel chaos across Europe as the peak summer holiday season moves into full swing for the first time since the COVID-19 pandemic hit.
That hastened the airline’s decision to file for Chapter 11 bankruptcy protection in the United States, its chief executive Anko van der Werf said, as it sought breathing room to execute restructuring plans. Read more
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“SAS aims to reach agreements with key stakeholders, restructure the company’s debt obligations, reconfigure its aircraft fleet and come up with a significant capital injection,” it said.
The company said in court that the strike would cost it $10 million to $13 million 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 just the first four to five weeks.
SAS said discussions with lenders about another $700 million in financing were “well advanced.”
It said it would continue to serve customers throughout the bankruptcy process, even though the strike is grounding roughly half of the airline’s flights, affecting about 30,000 passengers a day.
Data from flight-tracking website FlightAware showed that 232 SAS flights – 77% of those scheduled – were canceled on Tuesday, while Oslo’s Gardermoen Airport, one of SAS’ hubs, had the highest rate of cancellations in the world during the day.
The airline, whose largest owners are the Swedish and Danish states, said the filing for bankruptcy protection was aimed at speeding up a restructuring plan announced in February.
He is expected to complete the Chapter 11 process in nine to 12 months, he added. Shares in SAS, which can trade normally during the bankruptcy proceedings, fell 14% at 10:19 GMT.
COSTS TOO HIGH
A view of SAS Airbus A321 and A320neo aircraft at Kastrup Airport parked on the tarmac after Scandinavian Airlines pilots went on strike, in Kastrup, Denmark, July 4, 2022. TT News Agency/Johann Nilsson via REUTERS
Wallenberg Investments, SAS’s third-largest shareholder with a 3.4 percent stake, said it supported the decision and would allow negotiations to continue to reach a cost and debt level that makes the airline competitive.
“For decades, SAS had costs that were too high and performance that was too low compared to its competitors,” it said.
SAS needs to attract new investors and has said to do so it needs to cut costs across the company, including on leased planes idled by closed Russian airspace and a slow recovery in Asia. Read more
Its finance chief, Erno Hilden, said in a court filing that the airline had so far failed to renegotiate the lease terms, many of which it said were “significantly above” market rates.
In terms of debt, SAS had three bonds outstanding, , with a total face value of SEK 5.4 billion ($519 million). They are now trading at deeply distressed levels of about a third of par.
The airline predicts that its cash balance of SEK 7.8 billion is sufficient to meet its business obligations in the near term.
However, he added that the strike “has a negative impact on the company’s liquidity and financial position and, if prolonged, this impact could become material”.
Sweden’s government has said no to injecting more money into the carrier, while Copenhagen has said it may do so if SAS can attract new investors.
Nordnet analyst Per Hansen said the application showed SAS needed a fresh start and thought the strike would drag on.
“Chapter 11 protection comes early,” he said. “Management and the board want to make it abundantly clear to all stakeholders that the situation is very serious.
($1 = SEK 10.3216)
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Additional reporting by Johan Alander in Stockholm, Essie Lehto in Helsinki, Viktoria Klesti in Oslo, Agata Rybska in Gdansk, Jamie Freed in Sydney and Karin Strohecker in London; Written by Niklas Pollard; Editing by Kim Coghill and Ian Harvey
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