Tuesday, 5 July 2022

SAS files for bankruptcy protection in the US.......

The Scandinavian airline, SAS has made the drastic step of filing for chapter 11 in the U.S., a legal process for financial restructuring conducted under U.S. federal court supervision. The airline says its current operating schedule will not be affected by the move, which will allow it to implement key elements of its reorganisation programme that it has called SAS Forward. This involves complex multiparty negotiations, court restructuring proceedings designed to assist in the resolution of SAS’ financial difficulties and help accelerate the implementation of the plan.

SAS has assured partners and creditors that it has enough money to meet its obligations, with a cash-balance was SEK 7.8 billion as of June 30, 2022.  SAS is also in advanced discussions with a number of potential lenders with respect to obtaining additional debtor-in-possession financing for up to USD 700 million (the equivalent of approximately SEK 7.0 billion), to support its operations throughout this court-supervised process. Debtor-in-possession financing is a specialized type of bridge financing for businesses that are restructuring through a chapter 11 process.

The airline has said the current strike by Scandinavia pilots’ unions will impact the flight schedule and is having a negative financial position on the company and, if prolonged, such impact could become material. However,  at the moment, SAS expects to meet its business obligations in the near term. S

“We have been working closely with the SAS management team to progress SAS FORWARD. As part of that process, SAS has also been preparing for the option to utilize court restructuring proceedings in order to address the Company’s financial situation. The on-going strike poses significant challenges to our ability to succeed with our transformation. The Board has concluded that legal tools are required to make progress in our ongoing negotiations with key stakeholders, and ultimately to succeed in making SAS a competitive and financially strong business. The process we have commenced will enable SAS to continue our more than 75-year legacy of being integral to Scandinavian infrastructure and societies. We are confident that the actions we are taking will strengthen SAS’ ability to capture the significant opportunities ahead as the industry continues to recover from the pandemic” said Carsten Dilling, Chairman of the Board of SAS. 

Anko van der Werff, President and Chief Executive Officer of SAS, said, “Over the last several months, we’ve been working hard to improve our cost structure and improve our financial position. We are making progress, but a lot of work remains and the on-going strike has made an already challenging situation even tougher. The chapter 11 process gives us legal tools to accelerate our transformation, while being able to continue to operate the business as usual. We will continue to build back the network connectivity, products and service our customers expect, and we will continue to do so throughout this process and beyond. I am convinced that this process will enable us to become an even better airline for our customers and a stronger business partner in the years to come. Becoming a more competitive airline will require the full team’s effort and burden-sharing from all stakeholders. We urge SAS Scandinavia pilots’ unions to end their strike and engage constructively as part of this process.”

What does this mean for customers?  Well,  in the short-term, very little, SAS’ operations and flight schedules are unaffected by going in to chapter 11, its management and its Board of Directors continue to be in charge of the firm. Reservations, customer service, SAS EuroBonus and all other customer services and systems will continue as normal. SAS will continue to issue ticket refunds and honour travel coupons and payments or credits associated with baggage or service claims in adherence with its current policies. In the long-term, customers may see some routes being dropped,  there will be a few fewer aircraft in the fleet and it might be an idea to use those vouchers sooner rather than later!.

The Danish and Swedish governments have been approached,  but as yet no more funding will be forthcoming and it would seem that there is a possibility of the airline going into a similar voluntary bankruptcy protection administration in another European country soon.

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