Scandinavian Airlines (SAS) has voluntarily filed for Chapter 11 bankruptcy protection in the United States in order to make progress with cost-cutting measures and accelerate its SAS Forward restructuring plan.
“The Chapter 11 process gives us legal tools to accelerate our transformation, while being able to continue to operate the business as usual,” Anko van der Werff, President and CEO of SAS, said in a statement dated July 5, 2022.
SAS expects to secure additional debtor-in-possession financing for up to $700 million to support its operations through the restructuring process.
Carsten Dilling, Chairman of the Board of SAS, said during a press conference that while the decision to file for Chapter 11 had been taken on the morning of July 5, 2022, it had been an option that the company had been looking at as part of the SAS Forward program.
Van der Werff highlighted that the company had warned during its second-quarter results in May that legal action might become necessary if progress was not made with the restructuring.
“I think we have been very transparent and very open to people in saying this is what may happen, this is something we are considering. For instance, with our fleet deals, the fleet restructuring component. If people still don’t come to the table, then at some point you do have to take the decision to take it, unfortunately to a court process. We were not planning on doing it today, tomorrow or next week but the strike accelerates that, and we have to protect the company.”
Flight schedules will not be affected by the Chapter 11 proceedings, although, the strike by SAS pilots, which started on July 4, 2022, “will make an already challenging situation even tougher”, according to SAS.
“A strike is the last thing the company needs right now. We urge the SAS Scandanavian pilots’ union to end the strike and engage constructively as part of this process,” van der Werff added.
The airline warned on July 4 that SAS pilots’ behavior is ‘reckless’ and threatens the survival of the company. The airline expects more flight cancellations as a result of the ongoing strikes.
The SAS Forward program, which was presented in February 2022, aims to reduce annual costs by SEK7.5 billion ($765 million). As part of the plan, the company also wants to raise SEK9.5 billion ($968 million) in fresh equity to boost its liquidity and convert approximately SEK 20 billion ($2.04 billion) of debt and hybrid notes into common equity.
According to the company, the implementation of this plan is necessary to improve its financial strength and ability to compete, as it needs to adapt to new travel trends and deal with debts incurred resulting from the COVID-19 pandemic.
As of June 30, 2022, SAS has SEK 7.8 billion ($756 million) in cash.