Business

Airline files SAS for bankruptcy protection as strike ground flight

Airline files SAS for bankruptcy protection as strike ground flight
Written by admin

  • Airline file for Chapter 11 in the United States
  • The filing comes after the pilot strike began on Monday
  • About half of the airline’s flight strikes are grounding

STOCKHOLM, July 5 (Reuters) – Scandinavian airline SAS (SAS.ST) The United States has filed for bankruptcy protection to help reduce debt, it said on Tuesday, warning of a strike by pilots to deepen its financial crisis.

Wage talks between SAS and its pilots broke down Monday, launching a strike that increased travel chaos across Europe as the summer vacation travel season shifted into full gear for the first time since the COVID-19 epidemic hit.

This hastened the airline’s decision to file Chapter 11 bankruptcy protection in the United States, its chief executive, Enko van der Werf, said, adding that it wanted a breathing space to implement the restructuring plan. Read more

Register now for free unlimited access to Reuters.com

“The goal of SAS is to reach agreements with key stakeholders, restructure the company’s debt obligations, restructure its fleet and emerge with a significant capital injection,” it says.

The company told its court it would cost $ 10 million to $ 13 million a day to file a strike, while an analyst at Seedbank estimated it could wipe out half of its cash flow in the initial four to five weeks in the worst case scenario.

SAS said talks with lenders on a further $ 700 million in financing had “progressed well”.

It said it would continue to serve its customers throughout the bankruptcy process, although the strike is grounding about half the airline’s flights, affecting about 30,000 passengers per day.

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

The airline, whose largest owners are the Swedish and Danish states, said the bankruptcy protection filing was aimed at speeding up the restructuring plan announced in February.

It expects Chapter 11 to complete the process in nine to 12 months, it added. SAS shares, which can be traded as normal during the bankruptcy process, were down 14% at 1019 GMT.

The cost is too high

SAS Airbus A321 and A320neo aircraft at Kastrup Airport after Scandinavian Airlines pilots went on strike in Castrop, Denmark on July 4, 2022. Via REUTERS

Wallenberg Investments, SAS’s third-largest shareholder with a 3.4% stake, said it supported the decision and would allow negotiations to continue to raise costs and debt levels that would make the airline competitive.

“For decades, SAS has had a much higher cost and a much lower productivity than its competitors,” it said.

SAS needs to attract new investors and to do so it must reduce costs across the company, including for leased plans that have remained dormant due to closed Russian airspace and slow recovery in Asia. Read more

That means Chief Erno Hilden told the court that the airline has not yet reconsidered the terms of the lease, with many saying the market rate is “significantly above”.

In terms of debt, SAS had three outstanding bonds, with a total face value of 5.4 billion Swedish kronor ($ 519 million). They now trade at about one-third of the face value at a deeply depressed level.

The airline predicts that its cash balance of 7.8 billion Swedish kronor will be enough to meet its business obligations in the near term.

However, he added that the strike “has a negative impact on the liquidity and financial position of the company and if extended, such an impact could become a factor”.

The Swedish government has said it will not inject more cash into the carrier, while Copenhagen has said it could do so if SAS is able to attract new investors.

Nordnet analyst Par Hansen said the application showed that SAS needed to make a fresh start and that it thought the strike would drag on.

“Chapter 11 protection comes 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 crown)

Register now for free unlimited access to Reuters.com

Additional reports by Johan Ahlander in Stockholm, SC Lehto in Helsinki, Victoria Klesti in Oslo, Agata Rybska in Godansk, Jamie Fried in Sydney, and Karin Strohecker in London; Written by Nicholas Pollard; Edited by Kim Kagil and John Harvey

Our value: Thomson Reuters Trust Policy.

About the author

admin

Leave a Comment