SAS airline faces striking pilots over US bankruptcy filing

STOCKHOLM, July 5 (Reuters) – Scandinavian airline SAS (SAS.ST) has filed for bankruptcy protection in the United States to help reduce its debt, it said on Tuesday, putting pressure on pilots on strike which she accuses of having aggravated her financial difficulties and sent her shares down 10%.

Wage negotiations between SAS and its pilots collapsed on Monday, triggering a strike that is adding to travel chaos across Europe as the peak summer travel season kicks into full gear.

Chief executive Anko van der Werff said the strike had accelerated his decision to seek Chapter 11 status. But SAS’s Danish pilots negotiator said the scope of the case showed it had been months and called the attempts to blame striking staff for initiating it “in contempt”.

The airline, whose main owners are Swedish and Danish taxpayers, said the strike would have “a negative impact on the liquidity and financial position of the company and, if prolonged, this impact could become significant”.

The strike will cost it between $10 million and $13 million a day, the company said in its court filing. Sydbank analysts have estimated, in a worst-case scenario, it could wipe out up to half of its cash flow in the first four to five weeks alone.

“The pilots may well see themselves as pieces of the jigsaw that legalizes management’s Chapter 11 request, and that is unlikely to bring them back to the negotiating table,” said Sydbank analyst Jacob Pedersen.

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

Experts say entering Chapter 11 would make it easier for the company to lay off employees.

The president of the Swedish Airline Pilots Association, Martin Lindgren, said its members considered it inevitable that the airline would have to embark on a “reconstruction”.

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

The airline said the filing of the U.S. bankruptcy petition was aimed at accelerating a restructuring plan announced in February.

“SAS aims to reach agreements with key stakeholders, restructure the company’s debts, reconfigure its aircraft fleet and emerge with a significant capital injection,” he said.

NEGOTIATIONS WITH LENDERS

SAS said discussions with lenders for another $700 million financing were “well advanced”.

The strike grounded around half of the airline’s flights, affecting some 30,000 passengers a day, he said.

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

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

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

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

SAS needs to attract new investors and said it needs to cut costs across the business, including for leased planes that sit idle due to the closure of Russian airspace and a slow recovery in Asia. Read more

Its chief financial officer, Erno Hilden, said in the court filing that the airline had so far been unable to renegotiate lease terms, many of which it said were ‘significantly higher’ than the rates. of the market.

SAS had three bonds outstanding, , with a total face value of 5.4 billion Swedish krona ($519 million). They are now trading at deeply distressed levels of around a third of their face value.

The airline predicted that its cash balance of 7.8 billion Swedish kronor was sufficient to meet its short-term business obligations.

The Swedish government has said no to pumping more money into the carrier, while Copenhagen has said it may if SAS is able to attract new investors.

Nordnet analyst Per Hansen said the US application showed SAS needed a fresh start and he believed the strike would drag on forever. “Management and the board want to make it absolutely clear to all stakeholders that the situation is very serious.”

($1 = 10.3216 Swedish crowns)

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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