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Pilot Strike Takes Financial Toll on SAS as Airline Seeks DIP Financing

The strikes undertaken by SAS Scandinavia pilots’ unions, which commenced on July 4th, have severely impacted SAS’ liquidity and financial position, with over 2,550 flight cancellations impacting over 270,000 customers to date.

SAS Airbus A321LR - Courtesy Airbus

On Thursday (July 14, 2022), SAS provided an update on the impact of strikes undertaken by the SAS Scandinavia pilots’ unions which started on July 4, 2022. To date, the strikes have resulted in the cancellation of over 2,550 flights impacting over 270,000 customers, severely impacting the airlines liquidity and overall financial condition. The estimated daily cost of the unions’ actions are approximately SEK 100-130 million (US $9.5-$12.3 million), or around SEK 1.0-1.3 billion (US $95-$123 million) thus far. SAS has sufficient liquidity to meet near-term financial obligations, without accessing new forms of capital, but a prolonged strike will deplete the carrier’s cash reserves.

In Thursday’s announcment, SAS’ President & CEO, Anko van der Werff, said,

“We deeply regret that our customers are affected by the strike, leading to delays and canceled flights. The strike also has a severe impact on our possibilities to succeed with SAS FORWARD. We must reach an agreement and end the strike as soon as possible. That will require us to find us a solution that is acceptable to all stakeholders that have expressed their intention to support SAS, conditioned on the Company succeeding with SAS FORWARD. The strike is putting the success of the chapter 11 process and, ultimately, the survival of the Company at stake.”

SAS’ Executive Vice President and Chief Financial Officer, Erno Hildén, added,

“Since February 1, 2020 (the quarter when the pandemic started) through April 30, 2022, losses amounted to a total of SEK 19.7 billion (earnings before tax). The current pilot strike, with the consequential liquidity drain, amplifies the already dire situation. Progressing SAS FORWARD is essential in order for SAS to survive and to make the Company strong and investable again.”

As previously announced, SAS is in advanced discussions with a number of lenders with respect to obtaining debtor-in-possession (DIP) financing. DIP financing is a special type of bridge financing for businesses that are restructuring under Chapter 11 of the U.S. Bankruptcy Code. SAS plans on raising up to SEK 7.0 billion, around US $700 million to ensure the company has sufficient funds to complete the restructuring process. Various potential DIP lenders have made it clear that such financing will be dependent on the airline’s ability to demonstrate a roadmap to achieve SEK 7.5 billion in annual cost savings as part of the SAS FORWARD Plan. According to SAS, the continuing pilot strike may jeopardize the airline’s ability to access the aforementioned DIP financing.

SAS is the leading airline in Scandinavia, normally carrying over 30 million passengers annually from its main hubs in Copenhagen, Oslo and Stockholm to 125 destinations in Europe, the US and Asia (pre-pandemic figures). The company has targeted a reduction in carbon emissions by 25 percent by 2025, compared to 2005 levels, and hopes to transition to 100% biofuel for domestic flights by 2030. SAS also offers ground handling services, technical maintenance and cargo services. The carrier is a founding member of the Star Alliance, which is celebrating their 25th anniversary in 2022.

Source: SAS / Cision

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