The Scandinavian airline SAS filed for Chapter 11 bankruptcy on Tuesday. The step serves to accelerate the planned restructuring program and opens up new legal possibilities, according to SAS boss Anko van der Werff. Nevertheless, investors reacted clearly: The SAS share, which was already undervalued, lost more than 13 percent of its value and was only valued at 0.54 Swedish crowns on the Stockholm Stock Exchange.
SAS has been in a struggle for survival for many years. The airline has traditionally been plagued by high costs, but in recent years it has also faced stiff competition from low-cost airlines such as Ryanair, Norwegian and, more recently, Flyr. The new boss brought in in 2021, Dutchman van der Werff, wants to use a restructuring plan to reduce debt by around 1.9 billion and build up new equity of one billion dollars. Van der Werff was previously head of the Colombian airline Avianca, where he also initiated a “Chapter 11” procedure in the United States.
The last trigger for the bankruptcy application was the pilots’ strike that was decided on Monday and started immediately, which van der Werff wanted to prevent at all costs. Due to the walkout, almost 240 flights were canceled on Tuesday, which corresponds to three quarters of all planned SAS connections. Tens of thousands of passengers were affected. The company lamented what it saw as a catastrophic impact and emphasized that it was open to a mediation process. According to SAS, the bankruptcy proceedings have no impact on flight operations.
American bankruptcy law offers different options than is generally the case in Europe, because the focus is primarily on the preservation of the company and not so much on the interests of the creditors. For example, the airline can get out of expensive leasing agreements for aircraft more quickly or renegotiate contracts with suppliers. The only requirement for the application is that a company does business in the USA, which is the case with SAS due to the long-haul routes to New York, among other places.
SAS is not threatened with insolvency in the short term. The company currently has cash and cash equivalents of 700 million euros and, according to van der Werff, is in negotiations for a further 700 million euros. The restructuring could further shift the weightings of the shareholders. The Danish government has announced that it is willing to participate in a capital increase, but Sweden refuses. Both currently hold 21.8 percent of the shares. Norway is no longer involved in the airline anyway.