In an effort to protect itself from a crippling pilots strike that it warned would worsen its preexisting financial problems, Scandinavian Airlines filed for bankruptcy.
On Tuesday, SAS submitted a petition for protection in the US, which will permit it to keep flying while restructuring its finances.
By late morning in Stockholm, shares in the company had fallen nearly 15% to SKr0.53, nearly doubling its losses for the year.
The airline’s CEO, Anko van der Werff, claimed that a pilots’ strike that started this week hastened the decision to file for bankruptcy because it caused a large number of flight cancellations.
The company’s liquidity and financial position have been negatively impacted by the strike, and if it continues, this impact could become significant, according to a statement from SAS.
A day earlier, Van der Werff had warned the pilots that the strike was “reckless” and would jeopardize “the future of the company, together with the jobs of thousands of colleagues.”
According to Mark Simpson, an aviation analyst at Goodbody, the strike was anticipated to affect 30,000 passengers.
The “peak summer season,” he said, “means the airline has warned it would struggle to rebook all customers on similar flights.”
The board came to the conclusion that “legal tools are required to make progress in our ongoing negotiations with key stakeholders,” according to SAS chair Carsten Dilling.
As SAS announced it needed to cut costs as part of a significant restructuring after the pandemic, relations with pilots on the job began to deteriorate.
The warnings regarding the strike’s financial consequences also represented the first indications of the harm being done to company balance sheets this summer by the disruption to flying across Europe.
One of the few airlines to declare bankruptcy in the wake of the pandemic is SAS.
As part of a comprehensive downsizing that resulted in the termination of its long-haul operations in late 2020, Norwegian Air Shuttle filed for protection from creditors under the Irish version of Chapter 11.
The biggest airline in Latin America, Latam, also requested bankruptcy protection in New York earlier that year as air travel declined.
The decision by SAS to begin the up to a year-long bankruptcy process is the most recent phase of a protracted restructuring intended to bring fresh capital into the company and restructure its debt.
The company has laid out plans to reduce expenses by SKr7.5 billion ($716 million), raise SKr9.5 billion in new capital, and convert more than SKr20 billion in debt into equity.
The airline stated that it was in “well advanced discussions” with potential lenders for up to $700mn of bridge financing to support it through the process and that it would continue to provide customers with normal service in the interim when the strike permitted.
The governments of Sweden and Denmark each own 21.8% of SAS, but Stockholm’s administration last month declined to save the airline.