STOCKHOLM, July 5 (Reuters) – Scandinavian airline SAS (SAS.ST) On Tuesday, it said it has filed for bankruptcy protection in the United States to help reduce debt, adding to the pressure on striking pilots it blames for deepening its financial problems and sending its shares down 10%.
Wage talks between SAS and its pilots collapsed on Monday, triggering a strike that has added to travel chaos across Europe as the peak summer travel season turns into full throttle.
The chief executive, Anko van der Werf, said the strike accelerated his decision to apply for Chapter 11 status. But the negotiator for SAS’s Danish pilots said the scope of the application showed the filing took months to prepare and called attempts to blame the striking employees for triggering it. “Under contempt.”
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The airline, whose largest owners are Swedish and Danish taxpayers, said the strike would have “a negative impact on the liquidity and financial position of the company and, if prolonged, this impact could become material”.
The company said in its court filing that the strike would cost it between $10 and $13 million a day. Sydbank analysts estimated that, in a worst-case scenario, it could wipe out as much as half of its cash flow in the first four to five weeks alone.
“Pilots may consider themselves a piece in the puzzle that legitimizes the administration’s Chapter 11 request, and it is questionable whether he will bring them back to the negotiating table,” said Jacob Pedersen, an analyst at Seidbank.
“On the other hand, the Chapter 11 application also shows how serious the situation is for SAS.”
Experts say entering Chapter 11 will make it easier for the company to lay off employees.
Martin Lindgren, president of the Swedish Airline Pilots Association, said its members saw it as inevitable that the airline would need to embark on a “reconstruction”.
“It does not affect the strike or our agreements,” he said.
The airline said the US bankruptcy filing is aimed at accelerating the restructuring plan announced in February.
“SAS aims to reach agreements with key stakeholders, restructure the company’s debt obligations, reshape its aircraft fleet, and exit with a significant capital injection,” the company said.
Conversations with Lenders
SAS said discussions with lenders for another $700 million in funding “progress well.”
She added that the strike halted nearly half of airline flights, affecting about 30,000 passengers a day.
Data from flight-tracking website FlightAware showed that 232 SAS flights – 77% of scheduled flights – were canceled on Tuesday, while Oslo’s Gardermoen Airport, one of SAS’ hubs, recorded the highest cancellation rate in the world on that day.
She added that SAS expects to complete the Chapter 11 process within nine to 12 months. SAS shares can be traded as normal during bankruptcy proceedings.
Wallenberg Investments, the third largest shareholder in SAS with a 3.4% stake, said it supported the decision and would allow talks to continue making the airline competitive.
“For decades, SAS has had exorbitant costs and very low productivity compared to its competitors,” the company said.
SAS needs to attract new investors and said to do so it must cut costs across the company, including non-operating charter planes due to closed Russian airspace and a slow recovery in Asia. Read more
The company’s chief financial officer, Erno Helden, said the company had not yet been able to renegotiate the terms of the leases, many of which she said were “significantly above” market rates.
SAS had three bonds outstanding, with a total nominal value of 5.4 billion Swedish kronor ($519 million). They are now trading at very distressing levels of about a third of the face value.
The airline expected that its cash balance of SEK 7.8 billion was sufficient to meet its commercial commitments in the near term.
The Swedish government has said no to pumping more money into the carrier, while Copenhagen has said it may do so if SAS can attract new investors.
NordNet analyst Per Hansen said the US implementation showed that SAS needed a fresh start and that it believed the strike would continue. “The management and the board want to make it clear to all stakeholders that the situation is very serious.”
(1 dollar = 10.3216 Swedish krona)
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Additional reporting by Johan Allander in Stockholm, Essie Leto in Helsinki, Victoria Kleste in Oslo, Agata Rypska in Gdansk, Jamie Fried in Sydney and Karen Stroecker in London. Written by Niclas Pollard. Editing by Matt Skovham, Jean Harvey and Emilia Sithole Mataris
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