The SAS has filed for bankruptcy in the United States, the Scandinavian airline announced on Tuesday, as part of a restructuring plan, warning strike action by pilots had impacted its financial position and liquidity.
Wage talks between SAS and its pilots collapsed on Monday, triggering a strike that adds to travel chaos across Europe as the peak summer vacation period begins.
The company said in a statement on Tuesday it would continue to serve its customers throughout the bankruptcy process, although the pilot strike is impacting its flight schedule.
It said the purpose of the filing was to accelerate a restructuring plan announced in February.
“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,” it said.
In the U.S., chapter 11 is a mechanism allowing a company to restructure its debts under court supervision.
SAS needs to attract new investors and has said that in order to do that it must slash costs across the company, including for staff and for leased planes that stand idle because of closed Russian airspace and a slow recovery in Asia.
The airline said on Tuesday its assessment was that it has sufficient liquidity to meet its business obligations in the near term.
It added however that the strike “has a negative impact on the liquidity and financial position of the company and, if prolonged, such impact could become material.”
The strike “is estimated to lead to the cancellation of approximately 50% of all scheduled SAS flights,” impacting around 30,000 passengers a day, the company said on Monday.
SAS management announced in February the savings plan, dubbed “SAS Forward,” which was supplemented in June by a plan to increase capital by nearly 1 billion euros ($1.04 billion).
Denmark and Sweden are the biggest shareholders with 21.8% each.
Denmark said in June it was ready to increase its stake to 30%. Sweden has refused to provide fresh funds but is willing to turn debt into capital.
Norway, which left SAS in 2018, has said it is ready to return to the airline, but only by converting debt into equity.
Nordnet analyst Per Hansen said the application showed SAS needs a fresh start and that it thinks the strike will drag on.
“Chapter 11 protection comes early,” he said. “Management and the board want to make it absolutely clear for all stakeholders that the situation is very serious.”
During the pandemic, several airlines such as LATAM and Philippine Airlines have also filed for Chapter 11 protection in the United States. Philippine Airlines has exited, while LATAM expects to exit in the second half of this year.
The strike at SAS comes as the summer is shaping up to be difficult for European airlines and airports, faced with staff shortages affecting traffic.
After widespread job losses linked to COVID-19, airlines and airports are struggling to recruit new staff in many countries.