SAS files for bankruptcy protection as pilot strike grounds flights

Scandinavian Airlines has filed for bankruptcy protection as it warned a crippling pilots’ strike was deepening its long-running financial troubles.

SAS filed for protection in the US on Tuesday, a process that will allow it to continue flying while it restructures its finances.

Shares in the group tumbled nearly 15 per cent to SKr0.53 by late morning in Stockholm to take its losses for the year to about 60 per cent.

Anko van der Werff, the airline’s chief executive, said a strike by pilots that began this week had accelerated the decision to enter the bankruptcy process after it led to a wave of flight cancellations.

“The strike has a negative impact on the liquidity and financial position of the company and, if prolonged, such impact could become material,” SAS said in a statement.

Van der Werff had warned pilots a day earlier that the strike was “reckless” and would put “the company’s future, together with the jobs of thousands of colleagues, at stake”.

Mark Simpson, an aviation analyst at Goodbody, said about 30,000 customers were expected to be caught up in the strike.

“The airline has warned it would struggle to rebook all customers on similar flights due it being peak summer season,” he said.

Carsten Dilling, SAS’s chair, said the board had concluded “legal tools are required to make progress in our ongoing negotiations with key stakeholders”.

The souring industrial relations with pilots came as SAS said it needed to slash costs as part of a significant restructuring following the pandemic.

The warnings over the financial impact of the strike also represented the first signs of the damage the disruption to flying across Europe this summer is having on companies’ balance sheets.

SAS is one of a handful of airlines to enter bankruptcy following the pandemic.

Norwegian Air Shuttle filed for protection from creditors under the Irish equivalent of Chapter 11 as part of a wide-ranging downsizing that led to it abandoning its long-haul business in late 2020.

Latin America’s largest carrier Latam also filed for bankruptcy protection in New York earlier that year as the number of people flying collapsed.

For SAS, the decision to enter the bankruptcy process, which is expected to take up to a year, is the latest part of a long-running restructuring that is designed to inject new capital into the business and restructure its debt.

The business has outlined plans to cut SKr7.5bn ($716mn) in costs, raise SKr9.5bn in new capital and convert more than SKr20bn of debt into equity.

The airline said it would continue to serve customers as normal in the meantime when the strike allowed and was in “well advanced discussions” with potential lenders for up to $700mn of bridge financing to support it through the process.

The Swedish and Danish governments each own 21.8 per cent of SAS, but the government in Stockholm last month refused to bail out the airline.