Clash between SAS Airlines and striking pilots over US bankruptcy case

  • Aviation Files for Chapter 11 in the United States
  • The post follows a lawsuit that began Monday
  • The Strike firm says it is speeding up the bankruptcy application
  • Attempts to blame union workers for “contempt”
  • The strike closes almost half of the airline’s flights

STOCKHOLM, July 5 (Reuters) – Scandinavian airline SAS (SAS.ST) on Tuesday said it had filed for bankruptcy protection in the United States to help reduce debt, increase pressure on striking pilots it blames to deepen his financial problems and manage his debt. shares with 10 per cent.

Wage talks between SAS and its pilots collapsed on Monday, triggering a strike that has increased travel chaos across Europe while the high summer travel season is in full swing.

CEO Anko van der Werf said the strike hastened his decision to apply for Chapter 11 status. to activate it. “You are despised.”

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The airline, whose largest owners are Swedish and Danish taxpayers, said the strike would “have a negative impact on the company’s liquidity and financial position, and that this impact, if extended, could be significant”.

The company said in its lawsuit that the strike would cost it between $ 10 and $ 13 million a day. Analysts at Sydbank estimate that it can wipe out half of the cash flow in the worst case scenario in the first four to five weeks alone.

“Pilots may see themselves as a piece in the puzzle that legitimizes the government’s Chapter 11 request, and the question is 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, chairman of the Swedish Airline Pilots Association, said that its members saw it as inevitable that the airline would have to start a “reconstruction”.

“It will not affect the strike or our agreements,” he said.

The airline said the U.S. bankruptcy petition is intended to speed up its restructuring plan, which was announced in February.

“SAS is committed to entering into agreements with key stakeholders, restructuring the company’s debt obligations, reforming its fleet and leaving it with a significant capital injection,” the company said.

Talks with lenders

A picture of the SAS Airbus A321 and A320neo aircraft at Kastrup Airport standing on the asphalt, after the Scandinavian Airlines pilots’ strike, in Kastrup, Denmark, 4 July 2022. TT News Agency / Johan Nilsson via REUTERS

SAS said talks with lenders for an additional $ 700 million in financing “are going well.”

She added that the strike halted almost half of the airlines’ flights, affecting about 30,000 passengers a day.

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

She added that SAS expects to complete the Chapter 11 process in nine to 12 months. SAS shares can normally be traded during bankruptcy proceedings.

Wallenberg Investments, SAS’s third-largest shareholder with a 3.4% stake, said they supported the decision and would allow the negotiations to make the airline more 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, saying it needs to cut costs across the company, including non-operational charter flights due to closed Russian airspace and a slow recovery in Asia. Read more

The company’s CFO, Erno Helden, said the company was not yet able to renegotiate the terms of the leases, many of which were “significantly above” market prices.

SAS had three outstanding bonds with a total nominal value of SEK 5.4 billion ($ 519 million). They are now trading at very alarming levels of around a third of face value.

The airline expected that its liquidity of SEK 7.8 billion would be sufficient to meet its commercial obligations in the short term.

The Swedish government has said no to pumping more money into the airline, while Copenhagen has said it can if SAS can attract new investors.

NordNet analyst Per Hansen said that the implementation in the US showed that SAS needed a fresh start and that they believed that the strike would continue. “Management and the board want to make it clear to all stakeholders that the situation is very serious.”

(1 dollar = 10.3216 Swedish kronor)

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Additional coverage 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 Nicolas Pollard. Edited by Matt Skovham, Jean Harvey and Emilia Sithole Mataris

Our criteria: Thomson Reuters Trust Principles.

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