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SAS Files For Chapter 11 Bankruptcy Protection In The US

Scandinavian Airlines System, known in short as SAS, has announced that it has filed for Chapter 11 bankruptcy protection in the US. The carrier, which has been in the news recently regarding matters such as debts and strike action, aims to continue its normal operations during the procedure, albeit impacted by the strike.

Part of a wider business transformation

As the airline, which serves as the flag carrier for Denmark, Norway, and Sweden, detailed in a corresponding statement published this morning, it considers the chapter 11 filing to be “the next step in the comprehensive business transformation plan SAS FORWARD.” Certain SAS subsidiaries have also filed for Chapter 11.

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SAS has cited material concerns regarding the impacts of its pilots’ recently-announced strike, which it says “has a negative impact on the liquidity and financial position of the Company.” The announcement came just hours after an analyst wanted that the strike could prompt bankruptcy. SAS has also faced financial struggles due to Sweden ceasing cash injections. The carrier explained:

The purpose of the filing is to accelerate SAS’ transformation by implementing key elements of its SAS FORWARD plan. These steps are consistent with SAS’ announcement on May 31, 2022, that SAS FORWARD involves complex multiparty negotiations and that the Company might seek to utilize one or more court restructuring proceedings designed to assist in the resolution of SAS’ financial difficulties and help accelerate the implementation of SAS FORWARD. “

With strikes announced yesterday and bankruptcy filed for today, it has been a busy start to the week for SAS. Photo: Getty Images

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What is SAS FORWARD?

To understand SAS’s decision to file for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York, it is important to establish the nature of its SAS FORWARD plan. As announced at the time of the publication of its Q1 results in February 2022, this program concerns the implementation of “measures aimed at securing long-term competitiveness.”

Key aspects of SAS FORWARD include a SEK 7.5 billion ($720 million) reduction in annual costs, alongside widespread transformation regarding the airline’s fleet and digital operations. While the program shows promise, recent events have jeopardized its potential. Carsten Dilling, SAS’s Chairman of the Board, stated that:

“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 ongoing 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”

SAS doesn’t expect that the filing alone will impact its flight operations. Photo: Getty Images

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Flights should continue as normal (but…)

In announcing its chapter 11 filing, SAS was keen to underline that the procedure won’t directly impact its day-to-day operations in terms of its flight schedule. It explained that its “operations and flight schedule are unaffected by the chapter 11 filing, and SAS will continue to serve its customers as normal,” adding that it “expects to meet its go-forward business obligations in the near term.”

SAS does still have its pilots’ planned strike action to contend with. Unlike the chapter 11 filing, this is set to impact flight schedules: some 30,000 passengers a day are expected to be affected. SAS “will continue to issue ticket refunds and honor travel coupons and payments or credits associated with baggage or service claims in adherence with its current policies.”

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