Stockholm The badly hit airline SAS has applied for bankruptcy protection in the USA. Just one day after the pilots of the Scandinavian airline went on strike, the filing for bankruptcy under US law, the so-called Chapter 11 proceedings, is a further deterioration in the financial situation.
The airline has been struggling for months and only three weeks ago asked its two largest shareholders, the governments of Denmark and Sweden, for a capital increase. Both states each hold 21.8 percent of the airline and agreed to convert debt into shares. However, the two governments rejected renewed financial injections.
The bankruptcy proceedings that have now been initiated under Chapter 11 of US bankruptcy law protect the airline from access by its creditors, at least temporarily. “We are certain that this process will make us a stronger and better airline,” said SAS boss Anko van der Werff, explaining the Chapter 11 restructuring process.
US airlines often used this rule to shake off debt or expensive leases. Non-American airlines such as Aeromexico and Philippine Airlines also used US law to renegotiate supplier contracts during the Corona crisis. American law primarily protects the ailing company, while German insolvency law, for example, primarily protects creditors. Van der Werff emphasized that flight operations were not endangered by the bankruptcy application.
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On the other hand, the strike by SAS pilots for higher wages is having a massive impact on flight operations. A large number of flights have already been suspended. The airline expects the strike to affect around 30,000 travelers a day. A quick repayment of booked and already paid trips is planned, says a SAS spokesman.
It’s not the first time the Scandinavian airline has encountered severe turbulence. The airline has been struggling with excessive costs for years and has already implemented several savings programs without much success.
Strike, bankruptcy filing and complicated ownership structure
The pilots’ strike, the bankruptcy filing and the complicated ownership structure have so far prevented a radical restructuring course. Before Norway left the SAS, management fought with 39 unions in Denmark, Sweden and Norway. After Norway sold its shares in SAS in 2018, the situation has improved somewhat.
However, the current strike by the pilots shows that the “SAS Forward” restructuring plan presented at the beginning of the year is difficult to implement. This recovery plan envisages an annual reduction in costs of 7.5 billion kroner (695 million euros). Negotiations have been initiated with the lenders, leasing companies and staff. But again and again parts of the workforce go on strike against feared cuts.
According to the SAS, the Chapter 11 bankruptcy proceedings that have now been initiated should last nine to twelve months. During this time, the airline wants to negotiate a debt restructuring with the creditors. The airline is also aiming for a capital increase. While the two state owners have rejected direct financial injections, some private investors have signaled their willingness to put further capital into the airline.
While the bankruptcy filing under US law gives SAS breathing space, the pilots’ strike is threatening the airline’s existence. “I’m surprised the strike happened,” aviation analyst Espen Andersen told Norwegian radio station NRK. “When you invest in the SAS, you have to have other intentions than making money,” he said. The SAS share has meanwhile fallen by more than 13 percent.
More: Pilots’ strike at SAS – tens of thousands of passengers affected every day