Scandinavian Airlines
Photograph ©2008 by Brian Cohen.

Scandinavian Airlines Declares Chapter 11 Bankruptcy in the United States

Pilots are on strike — adding to the woes of the airline.

Scandinavian Airlines — which is also known as SAS — and some of its subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code of the United States yesterday, Tuesday, July 5, 2022 in the United States Bankruptcy Court for the Southern District of New York in order to accelerate the transformation of the airline by implementing key elements of its SAS FORWARD plan towards building a sustainable future for the airline.

Scandinavian Airlines Declares Chapter 11 Bankruptcy in the United States

The following statement is an excerpt which was extracted from this official press release from the airline:

SAS AB (“SAS”) announces it is taking the next step in the comprehensive business transformation plan SAS FORWARD. To proceed with the implementation of key elements of the plan, SAS and certain of its subsidiaries have voluntarily filed for chapter 11 in the U.S., a legal process for financial restructuring conducted under U.S. federal court supervision. SAS’ operations and flight schedule are unaffected by the chapter 11 filing, and SAS will continue to serve its customers as normal, although the strike by SAS Scandinavia pilots’ unions will impact the flight schedule. The Company expects to meet its go forward business obligations in the near term. SAS’ cash-balance was SEK 7.8 billion as of June 30, 2022. The strike has a negative impact on the liquidity and financial position of the Company and, if prolonged, such impact could become material. The Company is in well 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 financial issues which the airline is experiencing is mainly as a result from the fallout of the current 2019 Novel Coronavirus pandemic — which led to the aforementioned six key elements of the SAS FORWARD plan towards building a sustainable future that includes …

…and the pilot unions of Scandinavian Airlines in Norway, Denmark, and Sweden have gone on strike, as they have been unable to reach an agreement which is considered acceptable for both parties — and that has only significantly exacerbated the dire financial situation for the airline by resulting in the forecast that approximately half of the flights that are operated by the airline will be canceled, which is expected to adversely affect up to 30,000 passengers every day.

“We deeply regret that our customers are affected by this strike, leading to delays and canceled flights. We know all our passengers have been longing for this summer holiday and have booked travels for themselves and their loved ones. SAS employees are working hard to help our customers that have been affected by this unfortunate situation”, Anko van der Werff — who is the current president and chief executive officer of Scandinavian Airlines — said in this official press release from the airline on Monday, July 4, 2022. “A strike at this point is devastating for SAS and puts the company’s future together with the jobs of thousands of colleagues at stake. The decision to go on strike now demonstrates reckless behavior from the pilots’ unions and a shockingly low understanding of the critical situation that SAS is in”.

Flights which are operated by SAS Link, SAS Connect, and external wet lease partners — such as Air Baltic, CityJet, and XFLY — are not affected by the impending industrial action of approximately 1,000 pilots.

The closure of the air space over Russia as a result of the hostile invasion of Ukraine by armed military forces of Russia has not helped, either, as Scandinavian Airlines cannot adequately serve many of its destinations in Asia without being able to fly its aircraft over Russia.

Final Boarding Call

The future is looking rather bleak for Scandinavian Airlines, as this labor dispute with the pilots is expected to cost the airline approximately $13 million per day — which the airline simply cannot afford.

The airline claims that the filing for Chapter 11 of the Bankruptcy Code of the United States will have no impact on customers — in fact, taking advantage of the generous bankruptcy system in the United States should better help the airline by prohibiting many creditors of Scandinavian Airlines from seizing assets during the proceedings while simultaneously allowing the airline to continue to operate without becoming insolvent; and emerging from the bankruptcy process in the United States is typically faster and easier to do than in other areas of the world…

…but the industrial action by the pilots will indeed adversely affect customers.

If you plan on traveling as a passenger aboard an airplane which is operated by Scandinavian Airlines, the airline offers advice and policies on what you should do if the pilot strike affects your travel plans or itinerary.

Otherwise, avoiding the airline during its turmoil is probably the best course of action — especially as many airlines around the world which are in better financial shape are currently experiencing significant operational difficulties and labor disputes themselves during this brutal summer of travel.

Hopefully, this is not the final boarding call for Scandinavian Airlines…

Photograph ©2008 by Brian Cohen.

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