In order to go on with cost-cutting measures and quicken its SAS Forward restructuring plan, Scandinavian Airlines (SAS) voluntarily filed for Chapter 11 bankruptcy protection in the United States.
“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.
For up to $700 million more, SAS anticipates obtaining further debtor-in-possession finance to sustain its business activities during the restructuring process.
The decision to file for Chapter 11 was made on the morning of July 5, 2022, but the firm had been considering it as part of the SAS Forward initiative, according to Carsten Dilling, chairman of the board of SAS.
Van der Werff emphasized that the business had previously warned that if the restructuring did not move forward, legal action might be required during the presentation of its second-quarter results in May.
“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.”
The Chapter 11 procedures won’t affect flight schedules, but the SAS pilots’ strike, which began on July 4, 2022, “will make an already difficult position much more difficult,” 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.
On July 4, the airline issued a warning, claiming that the “reckless” behavior of SAS pilots was endangering the company’s future. The continued strikes will likely result in additional flight cancellations, according to the airline.
The SAS Forward program, which was unveiled in February 2022, intends to save SEK7.5 billion ($765 million) a year in expenses. The business also intends to convert about SEK 20 billion ($2.04 billion) of debt and hybrid notes into common equity as part of the strategy, raising SEK 9.5 billion ($968 million) in new shares to increase liquidity.
The company claims that by putting this plan into action, it will be better able to compete on the market, as well as adapt to changing travel habits and handle debts brought on by the COVID-19 pandemic.
SAS has SEK 7.8 billion ($756 million) in cash as of June 30, 2022.