SAS airline files for US bankruptcy protection as grounds for strike

  • U.S. Chapter 11 Airline Records
  • The filing comes after the pilots’ strike began on Monday
  • Strike grounding around half of airline’s flights

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

Wage negotiations between SAS and its pilots collapsed on Monday, triggering a strike that adds to the chaos of travel across Europe as the peak summer holiday season kicks into high gear for the first time since the pandemic of COVID-19 hit.

That hastened the airline’s decision to file for Chapter 11 bankruptcy protection in the United States, its chief executive Anko van der Werff said, as it sought respite to complete its business. restructuring plans. Read more

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“SAS aims to reach agreements with key stakeholders, restructure the company’s debts, reconfigure its aircraft fleet and emerge with a significant capital injection,” he said.

The company told its court that filing the strike would cost it $10-13 million a day, while a Sydbank analyst estimated that in the 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 for another $700 million financing were “well advanced”.

It said it would continue to serve customers throughout the bankruptcy process, although the strike grounded around half of the airline’s flights, affecting some 30,000 passengers a day.

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

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

It expects to complete the Chapter 11 process in nine to 12 months, he added. SAS shares, which can be traded normally during bankruptcy proceedings, were down 14% at 10:19 GMT.

COSTS TOO HIGH

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

Wallenberg Investments, SAS’s third-largest shareholder with a 3.4% stake, said it supported the decision and would allow talks to continue to reach a level of costs and debt that made the airline competitive.

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

SAS needs to attract new investors and said it needs to cut costs across the business, including for leased planes that sit idle due to the closure of Russian airspace and a slow recovery in Asia. Read more

Its chief financial officer, Erno Hilden, said in the court filing that the airline had so far been unable to renegotiate lease terms, many of which it said were ‘significantly higher’ than the rates. of the market.

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

The airline predicted that its cash balance of 7.8 billion Swedish kronor was sufficient to meet its short-term business obligations.

He added, however, that the strike “is having a negative impact on the company’s liquidity and financial situation and, if prolonged, this impact could become significant”.

The Swedish government has said no to pumping more money into the carrier, while Copenhagen has said it may if SAS is able to attract new investors.

Nordnet analyst Per Hansen said the app showed SAS needed a fresh start and he believed the strike would drag on forever.

“Chapter 11 protection is coming 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 crowns)

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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; Written by Niklas Pollard; Editing by Kim Coghill and Jan Harvey

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