Wage negotiations between SAS (SASDF) and its pilots collapsed on Monday, sparking a strike that is adding to travel chaos across Europe at the start of the peak summer holiday season.
That hastened the airline’s decision to file for Chapter 11 bankruptcy protection in the United States, the airline’s Chief Executive Anko van der Werff said at a news conference on Tuesday.
The company said in a statement it will continue to serve its customers during the bankruptcy proceedings, although the pilots’ strike is affecting its flight schedule.
The purpose of the filing in US federal court is to accelerate a restructuring plan announced in February.
“Through this process, SAS aims to reach agreements with key stakeholders, restructure the company’s debt obligations, reconfigure its aircraft fleet and emerge with a significant capital injection,” SAS said in a statement.
The Chapter 11 process is expected to be completed in nine to 12 months, it added. SAS shares fell as much as 6% after the filing was announced, trading 2% lower as of 0728 GMT (0228 ET).
During the pandemic, other non-US airlines, including Avianca (AVH), Aeromexico and Philippine Airlines, have used the Chapter 11 process to renegotiate contracts with key suppliers such as aircraft lessors while operations have continued.Competitor Norwegian Air emerged from bankruptcy protection in Dublin and Oslo courts last year.
“That means nothing for normal operations. They’re trying to fix the engine while driving,” Sydbank analyst Jacob Pedersen told R of the SAS filing.
“This is happening because SAS could not achieve the changes through negotiations.”
SAS needs to attract new investors and has said it will need to cut costs across the business, including on staff and leased aircraft, which are sitting idle due to closed Russian airspace and a slow recovery in Asia.
The airline said on Tuesday its assessment is that its 7.8 billion Swedish kroner ($756 million) in cash is sufficient to meet its short-term business commitments.
SAS said talks with lenders for an additional $700 million in funding to support operations during the restructuring are “well advanced.”
However, it added that the strike “is having an adverse impact on the company’s liquidity and financial position and, if prolonged, such impact could become significant”.
Nordnet analyst Per Hansen said the motion shows SAS needs a fresh start and that the strike will drag on.
“Chapter 11 protection comes early,” he said. “Management and the board want to make it absolutely clear to all stakeholders that the situation is very serious.”