Striking SAS SAS.ST pilots have only met about half of demands needed to fulfill the airline's comprehensive cost cutting plan, chief operating officer Simon Pauck Hansen told Reuters on Wednesday 6 July.
The airline is ready to resume negotiations with the pilot unions whenever, he said in an interview.
Pilot Strike Grounds More SAS Flights As Chapter 11 Court Date Nears
The above news followed news that Scandinavian airline SAS SAS.ST headed into the third day of a crippling pilot strike, cancelling well over half its flights on Wednesday 6 July, as it geared up for the first court date in its bankruptcy proceedings later in the week.
The carrier, whose biggest owners are the Swedish and the Danish states, filed for bankruptcy protection in the United States on Tuesday 5 July to help cut debt while warning a strike among its pilots had deepened its financial crisis.
Talks between SAS and pilots in its main SAS Scandinavia arm over new collective bargaining agreement collapsed on Monday 4 July, triggering a strike that adds to travel chaos across Europe and sparked heated trading of blame between management and unions.
SAS has said the strike will cost it $10 million to $13 million per day and had hastened its decision to file for Chapter 11 bankruptcy protection as it sought breathing space to restructure its loss-making business.
Data from flight tracking website FlightAware showed 196 SAS flights grounded on Wednesday 6 July, a cancellation rate of 63%. The airline has said the strike will affect about half its flights on a daily basis.
At Stockholm's Arlanda Airport, normally buzzing with SAS flights, ground-handling staff were doing their best to cope with the situation, said Martin Johansson, chairman of the local branch of the white-collar Unionen labour union.
"They are worried," he said. "Ground handling are the ones taking the first hit - we are always the first ones that the travellers meet here."
"There is little they can do but to send people home."
The airline has said the move to seek bankruptcy protection was aimed at accelerating a restructuring plan announced in February. The first hearing in the proceedings had been scheduled for Thursday 7 July in New York city, a court filing showed.
SAS expects to complete the Chapter 11 process in nine to 12 months.
Union leaders and management have negotiated since November and the collective agreement between the airline and the SAS Pilot Group union expired on April 1, with the terms for re-hiring pilots the main sticking point.
Pilots are angered by SAS' decision to hire new pilots through two new subsidiaries - Connect and Link - under what unions say are worse terms, instead of first re-hiring former employees dismissed during the pandemic, when almost half of the airline's pilots were let go.
The strike includes all pilots from parent company SAS Scandinavia, but not Link and Connect, which are under a different union. The strike also does not affect SAS' external partners Xfly, Cityjet and Airbaltic.
FACTBOX-Airline SAS Files For US Bankruptcy Protection
All of the above news followed news that Scandinavian airline SAS SAS.ST has filed for bankruptcy protection in the United States to help cut debt, after wage talks with its pilots collapsed, triggering a strike that adds to travel chaos across Europe.
Below is some data on SAS restructuring efforts so far, debt, and aircraft leases.
RESTRUCTURING PUSH
The airline, whose biggest owners are the Swedish and the Danish states, said the bankruptcy protection filing was aimed at accelerating a restructuring plan announced in February.
Under the plan, SAS aims to transform its business, including its network, fleet, labour agreements and other cost structures, eying savings of 7.5 billion Swedish crowns ($715 million) a year.
It is also seeking to raise 9.5 billion Swedish crowns in cash and converting 20 billion crowns of debt to equity.
Norway will support the plan to convert debt into equity under certain conditions, its industry minister said at the end of June.
Denmark, which has around 22% stake in SAS, agreed to write off some of SAS's debt and convert some more into equity, as well as to inject new cash. That could increase Copenhagen's stake in the airline to up to 30%. It has made it a condition of the cash injection that SAS gets private investors to participate too.
Sweden, which also has about 22% stake in SAS, said it would not provide new cash to SAS, though it approved the debt-for-equity plan.
If the airline does raise new equity, this will reduce Sweden's stake. The country has said it wants to exit SAS completely in the long term.
DEBT
SAS financial net debt amounted to 29.6 billion Swedish crowns ($2.8 billion) as of April 30.
The carrier said on Tuesday 5 July that its assessment was that its cash balance of 7.8 billion Swedish crowns was sufficient to meet its business obligations in the near term.
It said discussions with lenders regarding another $700 million of financing to support its operations during the restructuring were "well advanced".
SAS had three fixed income instruments outstanding with a total face value of 5.4 billion Swedish crowns ($519 million). SE0010520338=, SE0014957999=, SE0012193910=
Its debt is rated Caa3 by Moody's and CC by Standard & Poor's.
LEASE WOES
SAS chief financial officer Erno Hilden said in the court filing the carrier has not obtained concessions from aircraft lessors on renegotiated lease terms.
"Many of the Company's leases are significantly above market and several are on account of surplus aircraft that no longer fit SAS's streamlined network and route strategies," Hilden said.
The carrier has aimed to cut costs for leased planes that stand idle because of closed Russian airspace and a slow recovery in Asia.
Aviation data firm Cirium said SAS lessors with the highest exposure include CDB Aviation, Jackson Square Aviation and Air Lease AL.N.
According to Cirium, CDB Aviation's exposure is $486 million, Jackson Square Aviation $271 million and Air Lease $235 million.
SAS leased 59 aircraft as of 30 April and in addition wet-leased a further 33.
Airline SAS Clashes With Striking Pilots Over US Bankruptcy Filing
All of the above news followed news that Scandinavian airline SAS SAS.ST has filed for bankruptcy protection in the United States to help cut debt, it said on Tuesday 5 July, piling pressure on striking pilots it blames for deepening its financial woes and sending its shares down 10%.
Wage talks between SAS and its pilots collapsed on Monday 4 July, triggering a strike that adds to travel chaos across Europe as the peak summer travel season shifts into full gear.
Chief executive Anko van der Werff said the strike had accelerated its decision to file for Chapter 11 status. But the negotiator for SAS' Danish pilots said the scope of the filing showed it had been months in the making and called attempts to blame striking staff for triggering it "beneath contempt".
The airline, whose biggest owners are Swedish and Danish taxpayers, said that the strike would have "a negative impact on the liquidity and financial position of the company and, if prolonged, such impact could become material".
The strike will cost it $10 million to $13 million per day, the company said in its court filing. Sydbank analysts estimated, in a worst-case scenario, it could erase up to half of its cash flow in the initial four to five weeks alone.
"The pilots may well consider themselves pieces in the puzzle that legalizes the management's Chapter 11 request, and it's doubtful whether it will bring them back to the negotiating table," Sydbank analyst Jacob Pedersen said.
"On the other hand, the Chapter 11 request also shows how serious the situation is for SAS."
Entering Chapter 11 would make it easier for the company to lay off employees, experts say.
Swedish Airline Pilots Association Chairman Martin Lindgren said his members had seen it as inevitable the airline would need to embark on a "reconstruction".
"It does not affect the strike or our agreements," he said.
The airline said the U.S. bankruptcy protection filing was aimed at accelerating a restructuring plan announced in February.
"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," it said.
TALKS WITH LENDERS
SAS said discussions with lenders regarding another $700 million of financing were "well advanced".
The strike is grounding roughly half the airline's flights, affecting some 30,000 passengers per day, it said.
Data from flight tracking website FlightAware showed 232 SAS flights - 77% of those scheduled - had been cancelled on Tuesday 5 July, while Oslo's Gardermoen airport, one of SAS' hubs, had the world’s highest cancellation rate on the day.
SAS expects to complete the Chapter 11 process in nine to 12 months, it added. SAS shares can be traded as normal during the bankruptcy proceedings.
Wallenberg Investments, SAS's third biggest shareholder with a 3.4% stake, said it supported the decision and would allow for talks 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 to do that it must slash costs across the company, including for leased planes that stand idle because of closed Russian airspace and a slow recovery in Asia.
Its finance chief Erno Hilden said in the court filing the airline had so far been unable to renegotiate lease terms, many of which it said were "significantly above" market rates.
SAS had three bonds outstanding SE0010520338=, SE0014957999=, SE0012193910= with a total face value of 5.4 billion Swedish crowns ($519 million). They now trade at deeply distressed levels of around one-third of face value.
The airline predicted its cash balance of 7.8 billion Swedish crowns was sufficient to meet its business obligations in the near term.
Sweden's government has said no to injecting more cash into the carrier, while Copenhagen has said that it may do so if SAS is able attract new investors.
Nordnet analyst Per Hansen said the US application showed SAS needs a fresh start and that it thinks the strike will drag on. "Management and the board want to make it absolutely clear for all stakeholders that the situation is very serious."
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