SAS files for Chapter 11 protection

September 2022 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2022 Issue

In a filing that comes hot on the heels of a pilot strike, Scandinavian airline SAS AB has received approval from the US Bankruptcy Court for the Southern District of New York for all of its ‘first day’ motions as part of the company’s voluntary Chapter 11 process in the US.

SAS is placing the blame on striking pilots – a strike which grounded approximately half of the airline’s flights – for deepening its financial troubles, a level of debt that has sent the company’s shares down 10 percent.

The approvals granted by the bankruptcy court confirm that SAS is authorised to continue to operate its business in the ordinary course throughout the Chapter 11 process in accordance with the court’s orders.

The court specifically authorises SAS to, among other things, continue to: (i) pay all employee wages and benefits; (ii) operate the airline in the ordinary course; (iii) honour existing customer programmes, including the EuroBonus loyalty programme; (iv) honour various pre-petition obligations owed to certain of its critical travel agency partners, vendors and suppliers; (v) pay vendors and suppliers in full under normal terms for goods received and services provided on or after 5 July 2022; and (vi) pay all taxes, insurance and other regulatory fees in the ordinary course.

“These court approvals confirm that our operations will continue as usual as we begin our restructuring process in the US,” said Anko van der Werff, president and chief executive of SAS. “We remain focused on providing the service our customers are used to, while accelerating our efforts to implement key elements of our comprehensive business transformation plan, SAS Forward.”

SAS’ flight schedule is unaffected by the filing, and its reservations, customer service, SAS EuroBonus and all other customer services and systems will continue as normal. Separate from the Chapter 11 process, the strike undertaken by the SAS Scandinavia pilots’ unions will continue to impact flight schedules.

Serving as global legal counsel to SAS is Weil, Gotshal & Manges LLP, with Mannheimer Swartling Advokatbyrå AB serving as Swedish legal counsel. Seabury Securities LLC and Skandinaviska Enskilda Banken AB are serving as investment bankers, with Seabury also serving as restructuring adviser. FTI Consulting is serving as financial adviser.

Scandinavia’s leading airline with main hubs in Copenhagen, Oslo and Stockholm, SAS flies to destinations in Europe, the US and Asia. Spurred by a Scandinavian heritage and sustainable values, SAS aims to be the global leader in sustainable aviation.

To this end, the airline has pledged to reduce total carbon emissions by 25 percent by 2025, by using more sustainable aviation fuel and its modern fleet with fuel-efficient aircraft. In addition to flight operations, SAS offers ground handling services, technical maintenance and air cargo services. The airline is a founder member of the Star Alliance, and together with its partner airlines offers a wide network worldwide.

Mr van der Werff concluded: “Ultimately, our plan is about improving our financial position and continuing our more than 75-year legacy as Scandinavia’s leading airline.”

Fraser Tennant