Airline SAS clashes with pilots on strike over US chapter submitting

  • Aviation records for Chapter 11 in the United States
  • The filing comes after the pilot strike began on Monday
  • Company says strike speeds up bankruptcy filing
  • Try to blame the employee “under contempt” -union
  • Strikes ground about half of all airline flights

STOCKHOLM, July 5 (Reuters) – Scandinavian Airlines SAS (SAS.ST) filed for bankruptcy protection in the United States to help cut debt, they said on Tuesday, putting pressure on strike pilots they say has exacerbated financial woes and causing their stock to drop 10%.

Wage negotiations between SAS and its pilots collapsed on Monday, triggering a strike that added to travel chaos across Europe as the peak summer travel season shifts in complete phase.

Chief Executive Officer Anko van der Werff said the strike hastened the decision to apply for Chapter 11 status, but SAS’s negotiator for Danish pilots said the scope of the filing showed much was lost. months into the implementation, and called efforts to blame employees for the strike triggered 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 company’s liquidity and financial position and, if prolonged, the impact that motion can become matter”.

The company said the strike would cost $10 to $13 million per day. Sydbank analysts estimate that, in a worst-case scenario, the bank could wipe out half of its cash flow in the first four to five weeks.

“Pilots may see themselves as pieces of the puzzle legitimating management’s Chapter 11 request and it’s unclear if that will bring them back to the negotiating table,” said Sydbank analyst Jacob Pedersen. .

“On the other hand, the Chapter 11 requirement also shows how dire the situation is for SAS.”

According to experts, entering Chapter 11 will make it easier for companies to fire employees.

The president of the Swedish Airline Pilots Association Martin Lindgren said his members considered it inevitable for the airline to embark on “reconstruction”.

“It doesn’t affect the strike or our agreements,” he said.

The airline said the filing for US bankruptcy protection was aimed at speeding up a restructuring plan announced in February.

“SAS aims to reach agreements with key stakeholders, restructure the company’s debt obligations, reconfigure its fleet, and emerge with substantial funding,” it said.

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

SAS said discussions with lenders regarding the other $700 million in funding “have improved well.”

The strike is disrupting about half of the airline’s flights, affecting about 30,000 passengers a day.

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

SAS expects to complete the Chapter 11 process in 9 to 12 months, SAS added. SAS shares can be traded normally during the bankruptcy process.

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

“For decades, SAS has had too high costs and too low productivity compared to its rivals,” it said.

SAS needs to attract new investors and has said that to do so, it has to cut costs throughout the company, including for leased planes that are being decommissioned due to the closure of Russian airspace and slow recovery in Asia. read more

The airline’s chief financial officer Erno Hilden said in the filing that the airline had been unable to renegotiate the terms of the lease, many of which were said to be “significantly higher” than market rates.

SAS has three bonds outstanding, with a total face value of 5.4 billion Swedish crowns ($519 million). Now, they trade at extremely distressed levels of about a third of face value.

The airline anticipates its cash balance of 7.8 billion Swedish crowns will be sufficient to meet its business obligations in the near term.

The Swedish government has said no to injecting more cash into the carrier, while Copenhagen has said it may do so if SAS can attract new investors.

Nordnet analyst Per Hansen said the US application showed the SAS needed a fresh start and they expected the strike to last. “The leadership and board want to make absolutely clear to all stakeholders that the situation is very serious.”

($1 = 10.3216 Swedish crown)

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Additional reporting by Johan Ahlander in Stockholm, Essi Lehto in Helsinki, Victoria Klesty in Oslo, Agata Rybska in Gdansk, Jamie Freed in Sydney and Karin Strohecker in London; Written by Niklas Pollard; Editing by Matt Scuffham, Jan Harvey and Emelia Sithole-Matarise

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