SAS files for bankruptcy to better reorganize itself

If most of the European airlines came out of the COVID crisis relatively unscathed, mainly thanks to state aid, SAS Scandinavian Airlines is in rather bad shape.

SAS in trouble

As we revealed several weeks ago, the Scandinavian airline, with its back to the wall, has launched an ambitious financial restructuring plan and a transformation program called SAS Forward.

At this point what we knew was that :

– Although the Swedish government supports this restructuring, it does not intend to provide any new money.

– The airline is in contact with investors, whose only known fact about them is that they are “non-Scandinavian”.

Since then the case has evolved and not always in the right direction.

Denmark supports SAS

On the positive side, and in contrast to Sweden,Denmark has announced that it has agreed to increase its shareholding from 21.8% to 30% in the context of the arrival of new investors in order to continue to influence and defend minority Scandinavian interests.

In terms of governance, this may raise questions of balance, since until now Denmark and Sweden have had the same weight in the airline, but if the Swedes do not want to bring in new money, that is their problem.

We can expect this matter to be managed smoothly, Scandinavian style, far from the cowboy-like behavior we saw in the Air France-KLM case with the Dutch state’s wild rise in capital.

In any case, Denmark seems to see SAS as a much more strategic instrument of sovereignty than Sweden.

Norway to the rescue

Contrary to what was written in a French online media supposedly specialized in aviation, Norway has no stake in SAS, as it is playing the Norwegian card (which has not been easy). So it was useless to believe that the state or the powerful Norwegian sovereign fund could come to the rescue.

But Norway seems to have decided not to put all its eggs in one basket because it has surprisingly announced that it has agreedto take a stake in SAS by converting the airline’s debt into equity. It’s not fresh money, it would “only” represent $153M but it’s still less debt and the guarantee of a strong Scandinavian presence in the capital (and voting rights) compared to new shareholders who would not be.

This is again bad news for Sweden’s weight in the airline, which would decrease again in a relative way, but again, it is their decision.

SAS at war with its pilots

It is important to know that the situation of SAS pilots is very comfortable considering the performance of the airline (the Scandinavian model and social peace have a price) and that the airline expects sacrifices from them. Sacrifices they are not willing to make.

We have an airline that is not doing well, a privileged category of personnel that refuses to make the efforts asked of them and blames the airline. For us French, this reminds us of a well-known situation.

Sothe pilots left the negotiating table, the airline was indignant about this behavior which led to massive flight cancellations and penalized customers, to which the unions responded:

“Wefinally realized that SAS does not want an agreement. SAS wants a strike. We are hopeful that we can get back to the negotiating table and meet, but that requires the employer to make a move.

Any resemblance with existing or former characters and airlines is coincidental.

At this stage, the pilots have exceptionally accepted to bring back passengers stranded in risky areas, but no more. And to date there are no plans for the pilots, who feel they have been cheated, to return to the negotiating table.

SAS under Chapter 11 protection

SAS has filed for Chapter 11 bankruptcy protection in the United States. Chapter 11 is a legal framework for business restructuring and has been used by a number of major international airlines to restructure. It allows the airline to continue to operate while protecting itself from its creditors while it reorganizes and restructures its debt.

In doing so, the airline is creating an air bubble for itself to move forward on SAS Forward.

The method has already proven itself: when they are in bad shape, airlines all over the world try to obtain state aid (and often succeed), while American airlines use the magic wand of Chapter 11 and hit the jackpot every time. You take an exsanguinated airline with an old fleet and an outdated product and at the end you have a new fleet and a modern product.It borders on unfair competition but it works. So much for creditors waiting years to see the money owed before entering Chapter 11.

Bottom line

The SAS situation is serious but there are many positive signs. Among them the support of Denmark and Norway as well as the passage under the Chapter 11 regime which will allow it to restructure serenely.

On the other hand, the conflict with the pilots is a real problem as it affects the operations and can damage the image of the airline towards its customers.

Last grey area, no news from the “non Scandinavian investors” who are essential in the rescue of the airline.

For the moment our prognosis is positive, but the issue of the pilots is not solved and the airline could quickly fall on the wrong side.

Photo : SAS Scandinavian Airlines offices by Roberto Rizzi via Shutterstock

Bertrand Duperrin
Bertrand Duperrin
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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