DALLAS – SAS Scandinavian Airlines (SK) announced today that it has voluntarily filed for Chapter 11 in the United States (US) amid financial difficulties and a pilot strike. The airline’s operations should not be affected by this announcement.
The filing means the airline is now officially registered bankrupt in accordance with Chapter 11 of the US Bankruptcy Code and has to undergo restructuring under the authority of the US Bankruptcy Court for the Southern District of New York.
The airline said it filed this document in order to “accelerate SAS’ transformation by implementing key elements of its SAS FORWARD plan.” The SAS Forward plan involves complex negotiations, and the company said it may try to use one or more court proceedings to assist the airline to overcome its financial difficulties.
SAS says Chapter 11 is a flexible legal framework that “has been used by a number of large international airlines to restructure.” While it is true that many major US airlines filed for Chapter 11 after 2001 and 2008, SK is the first major European airline to go bankrupt due to the financial consequences of the COVID pandemic and other factors.
The airline has been riddled with financial difficulties multiplied by factors including the COVID-19 pandemic, the Russian airspace closure, and the recent pilot strikes.
As with most airlines, the pandemic hit SK very hard. Due to low passenger demand, SK was not moving its aircraft and had to spend a lot of money to keep them stored. The debt of the company has thusly increased since the beginning of 2020.
As the industry started to slowly recover at the start of 2022, the war in Ukraine impacted the airline due to the ensuing airspace closures. Indeed, the airline cannot fly over Russia to go to Asia, which was an important market because of the airline’s base in Northern Europe. The high fuel prices have also had a major impact on SK’s operations.
Lastly, talks between the airline and its pilot unions have broken down, causing the beginning of a major pilot strike at the airline, forcing SK to cut half of its flight schedule and worsening the airline’s financial problems.
The SAS FORWARD Plan
The airline explained its flight schedule will not be impacted by the bankruptcy filing, as it intends to “continue to serve its customers throughout the process.” For now, the airline declared it has enough liquidity to meet its obligations in the near future. However, the pilot strike will have a major impact on the airline’s flight schedules.
The airline is looking for new investors to help solve most of its financial problems; SK intends to cut its costs in order to attract them. This is the goal of the SAS Forward plan, which will be implemented under the supervision of the legal court. The first hearing will be held in the coming days.
With the airline’s restructuring process under Chapter 11, SK hopes to “reorganize [its] financial obligations and emerge as a stronger organization.”
Scandinavian Airlines, more commonly known and styled as SAS, is the flag carrier of Denmark, Norway, and Sweden. The airline was established on August 1, 1946, in Stockholm, Sweden.
This is a developing story.
Featured image: SAS operates its Airbus A350s on its long-haul network. Photo: Sean Brink/Airways