Stockholm-Scandinavian airline SAS has filed for bankruptcy protection in the United States to accelerate its restructuring program, said a pilot warning strike had affected its financial position and liquidity on Tuesday.
Wage negotiations between SAS and its pilots collapsed on Monday, causing a strike that increased travel turmoil across Europe as the peak summer vacation began.
This has accelerated the airline’s decision to file for Chapter 11 Bankruptcy Protection in the United States, said Anko van der Werff, the airline’s chief executive officer.
“We are confident that this process will make us a stronger and better airline for our customers and a much healthier business partner in the coming years,” he said at a press conference. ..
Due to the strike, “the date has been moved forward as the company needs to prepare for further liquidity losses,” he said.
According to Sydbank analysts, outages can cost around SEK 100 million ($ 10 million) per day, and in the worst-case scenario, airline cash in just the first 4-5 weeks. Up to half of the flow can be erased.
The company said in a statement that it would continue to serve customers throughout the bankruptcy process, but pilot strikes grounded about half of airline flights, affecting about 30,000 passengers per day. There is.
According to data from the flight tracking website FlightAware, 232 SAS flights (77% of scheduled flights) were canceled on Tuesday, but Gardermoen Airport in Oslo, one of the hubs of SAS, was on this day. The cancellation rate was the highest in the world.
SAS, whose largest owners are the states of Sweden and Denmark, said the purpose of filing in US federal court was to accelerate the restructuring program announced in February.
“Through this process, SAS aims to reach agreements with key stakeholders, rebuild company debt, restructure aircraft and make significant capital injections,” SAS said in a statement. It states.
He added that the process in Chapter 11 is expected to be completed in 9-12 months. SAS stocks that can be traded normally during bankruptcy proceedings fell 9.4% at 0832 GMT.
During the pandemic, other non-US airlines such as Avianca, Aeromexico and Philippine Airlines used the process in Chapter 11 to renegotiate contracts with major suppliers such as aircraft lenders while continuing to operate. Did.
Rival Norwegian Air Shut emerged last year from bankruptcy protection involving Dublin and Oslo courts.
“Normal operation doesn’t mean anything. They’re trying to repair the motor while driving,” Sidbank analyst Jacob Pedersen told Reuters about SAS filing.
“This is because SAS was unable to achieve the change through negotiations.”
SAS needs to attract new investors, which requires reducing company-wide costs, including staff and leasing machines that are idle due to Russia’s airspace closure and slow recovery in Asia. It states that there is.
The airline said on Tuesday that its valuation was sufficient to meet its business obligations in the short term with a cash balance of SEK 7.8 billion.
Talks with lenders about raising another $ 700 million to support the business during the restructuring were “extremely advanced,” he said.
However, the strike added, “It has a negative impact on the company’s liquidity and financial position, and over time, such effects can be significant.”
The Swedish government has refused to inject more cash into carriers, but Copenhagen said it may do so provided that SAS can attract new investors.
Danish Finance Minister Nicolai Wammen said he had noted SAS’s decision to apply for bankruptcy protection, but did not elaborate further.
Per Hansen, an analyst at Nordnet, said the application shows that SAS needs to make a fresh start and believes the strike will be prolonged.
“Chapter 11 protection is early,” he said. “Management and the board absolutely want to make it clear to all stakeholders that the situation is very serious.”
($ 1 = 10.3216 Swedish krona)
Anna Ringstrom and Stein Jacobsen