- Airlines files for Chapter 11 in the United States
- The presentation comes after the pilot strike began on Monday
- Strike landing about half of the airlines’ flights
STOCKHOLM, July 5 (Reuters) – Scandinavian airline SAS (SAS.ST) has applied for bankruptcy protection in the United States to help reduce debt, it said on Tuesday, warning pilots’ strike action he had deepened his financial crisis.
Wage talks between SAS and its pilots collapsed on Monday, triggering a strike that adds to the chaos of travel around Europe as the peak season of summer holiday travel changes at full speed for the first time since which erupted the COVID-19 pandemic.
This accelerated the airline’s decision to apply for Chapter 11 bankruptcy protection in the United States, its chief executive Anko van der Werff said as he sought respite to carry out 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 exit with a major capital injection,” he said.
The company said in court filing that the strike would cost it between $ 10 million and $ 13 million a day, while a Sydbank analyst estimated that in the worst case it could wipe out half of its cash flow. only in the initial four or five weeks.
SAS said discussions with lenders about another $ 700 million in financing were “very advanced.”
He said he would continue to serve his customers throughout the bankruptcy process, even though the strike is landing about half of the airline’s flights, affecting about 30,000 passengers a day.
Data from the FlightAware flight tracking website showed that 232 SAS flights – 77% of those scheduled – had been canceled on Tuesday, while Oslo’s Gardermoen Airport, one of SAS’s centers, had the highest cancellation rate in the world.
The airline, whose main owners are the Swedish and Danish states, said the bankruptcy declaration was aimed at speeding up a restructuring plan announced in February.
It is expected 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.
VERY HIGH COSTS
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 on 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 the talks to continue to reach a level of costs and debt that would make the airline competitive.
“For decades, SAS has had too high costs and too low productivity compared to its rivals,” he said.
SAS has to attract new investors and has said it has to cut costs across the company, including leased aircraft that are idle due to closed Russian airspace and a slow recovery in Asia. Read more
His chief financial officer, Erno Hilden, told the court that the airline had so far failed to renegotiate the lease terms, many of which he said were “significantly above” market prices.
In terms of debt, SAS had three bonds outstanding, with a total face value of SEK 5.4 billion ($ 519 million). They now trade at deeply distressed levels of about a third of face value.
The airline predicted that its cash balance of SEK 7.8 billion was sufficient to meet its short-term trade obligations.
However, he added that the strike “has a negative impact on the liquidity and financial situation of the company and, if prolonged, this impact could become material.”
The Swedish government has said no to injecting more cash into the company, while Copenhagen has said it can do so if SAS is able to attract new investors.
Nordnet analyst Per Hansen said the app showed that SAS needs a fresh start and believes the strike will be prolonged.
“Chapter 11 protection is coming soon,” he said. “Management and council want to make it absolutely clear to all stakeholders that the situation is very serious.”
(1 $ = 10.3216 Swedish kronor)
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Additional reports 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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