Pay talks between the SAS (SASDF) and its pilots broke down on Monday, sparking a strike that adds to travel chaos across Europe as the peak summer holiday begins.
That hastened the airline’s decision to file for Chapter 11 bankruptcy protection in the United States, the airline’s chief executive Anko van der Werf said at a press conference on Tuesday.
The company said in a statement that it will continue to serve its customers throughout the bankruptcy process, even though the pilot strike is affecting flight schedules.
It said the purpose of the filing in US federal court was to speed up the restructuring plan announced in February.
“Through this process, 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,” SAS said in a statement.
He is expected to complete the Chapter 11 process in nine to 12 months, he added. SAS shares fell as much as 6% after the filing was announced and were trading 2% lower at 0728 GMT (0228 AM ET)
During the pandemic, other non-U.S. airlines, including Avianca ( AVH ), Aeromexico and Philippine Airlines, used the Chapter 11 process to renegotiate contracts with key suppliers such as aircraft lessors while continuing to operate. Competitor Norwegian Air emerged from bankruptcy protection involving courts in Dublin and Oslo last year.
“It means nothing for normal operations. They are trying to fix the engine while driving,” Sydbank analyst Jacob Pedersen told Reuters of the SAS filing.
“This is happening because SAS has failed to bring about the negotiated changes.”
SAS needs to attract new investors and has said that to do so it needs to cut costs across the company, including on staff and on leased planes sitting idle because of closed Russian airspace and a slow recovery in Asia.
The airline said on Tuesday that it estimates its cash balance of 7.8 billion Swedish kronor ($756 million) is sufficient to meet its business obligations in the near term.
SAS said discussions with creditors about a further $700 million in funding to support its operations during the restructuring were “well advanced”.
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”.
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.
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