Scandinavian Airlines-SAS released this traffic report for July:

During July more than 3,700 flights were cancelled and 380 000 passengers were affected by the SAS’ Scandinavia pilots unions strike action that was concluded on July 19.

In July 1.3 million passengers traveled with SAS, an increase of approximately 23% compared to the same month last year. SAS’ capacity increased by approximately 8% compared with the same period last year. In comparison with last month, the total number of passengers decreased with 32% and capacity was decreased by 23%, which was a result from the 15-day pilot strike. The flown load factor for July was 82%, an improvement of 21 percentage points compared to July last year.

“We sincerely apologize to our customers who were affected by the July strike. We are happy operations returned to normality again allowing us to start regaining our customers’ trust. We also continue executing our restructuring plan, SAS FORWARD and filed for chapter 11 in the US on 5th of July to accelerate the transformation process that will lead to a financially stable airline, that will be able to deliver the service our customers are expecting”, says Anko van der Werff, President & CEO of SAS.

1 Change compared to same period last year, p p = percentage points

Definitions:

RPK – Revenue passenger kilometers

ASK – Available seat kilometers
Load factor – RPK/ASK
Yield – Passenger revenues/RPK (scheduled)

PASK – Passenger revenues/ASK (scheduled)

Change in CO2 emissions per available seat kilometers – SAS passenger related carbon emissions divided with total available seat kilometers (incl non-revenue and EuroBonus tickets), rolling 12 months vs rolling 12 months previous year

Carbon offsetting of passenger related emissions – Share of SAS passenger related carbon emissions compensated by SAS (EuroBonus members, youth tickets and SAS’ staff travel) during the month

From fiscal year 2020 we report change in CO2 emissions in total and per Available Seat Kilometers (ASK) to align with our overall goal to reduce our total CO2 emissions by 25% by 2025, compared to 2005.

SAS aircraft photo gallery:

Scandinavian Airlines-SAS made this announcement:

After 15 days of strike, SAS and SAS Scandinavia pilots’ unions have concluded mediation. The parties have agreed on new 5.5-year collective bargaining agreements and flights operated by SAS Scandinavia will resume according to their regular traffic program as soon as possible.

Following a 15-day strike action, SAS and SAS Scandinavia pilots’ unions* have reached an agreement on new collective bargaining agreements and the pilot strike has ended.

“I am pleased to report that we now have come to an agreement with all four pilot unions for SAS Scandinavia and the strike has ended. Finally, we can resume normal operations and fly our customers on their much longed-for summer holidays. I deeply regret that so many of our passengers have been impacted by this strike,” said Anko van der Werff, President & CEO.

The 5.5-year agreements between SAS and the SAS Scandinavia pilots’ unions are a key element of SAS’ comprehensive business transformation plan SAS FORWARD, as they provide the stability and predictability required by potential investors.

The agreements include cost savings in line with the set targets in the SAS FORWARD plan relating to the pilots’ terms and conditions, taking SAS one important step closer to achieving its SAS FORWARD target of SEK 7.5 billion in annual cost savings.

In short, the agreements imply increased productivity for the SAS Scandinavia pilots and increased flexibility in seasonal production. The terms and conditions of the agreements also yield a lowered unit cost for the SAS Scandinavia pilots.

Additionally, as part of the agreement between SAS and SAS Scandinavia pilots’ unions, a number of pending litigation previously initiated by the pilots’ unions and/or individual pilots against SAS will be withdrawn. In accordance with a restructuring support agreement to be entered into between the parties in the chapter 11 process, SAS has granted the unions a general unsecured pre-petition claim for the pilots in the amount of SEK 1.0 bn in SAS voluntary financial restructuring process. Distributions under that unsecured claim will be capped at SEK 100 million and made over 5.5 years, corresponding to the term of the agreements.

Finally, SAS has committed to the rehire, and subsequent full-time employment, of 450 pilots in tandem with the ramp-up of flight operations until 2024.

With these labor agreements in place, SAS will now be able to proceed with its process to secure funding to support the company’s on-going operations – which it expects to finalize within the next few weeks – throughout its voluntary financial restructuring process.

“With these agreements in place, the pilots are doing their part in this difficult situation. We now get on with the important work of progressing our transformation plan SAS FORWARD and building a strong and competitive SAS for generations to come, with the support of our pilots’ unions and all other stakeholders. The strike has been a tough situation for our customers, for our employees, and for our company as a whole. I would like to extend my sincere gratitude to all of my SAS colleagues who have worked tirelessly these past weeks to help our customers,” Anko van der Werff concludes.

The agreements between SAS and the SAS Scandinavia pilots’ unions are subject to approval by the members of all four unions and, as SAS is currently undergoing a voluntary financial restructuring in the U.S., the final agreements are also subject to approval by a U.S. federal court.  The company expects to receive the necessary approvals within the next few weeks.

As previously announced, the estimated effect of the strike is approximately SEK 100-130 million per day (US$9.5-$12.5 million) in lost revenue and costs. To date, the financial impact of the strike is expected to exceed SEK 1.5 billion (US$145 million). It is too early to provide more specific information about the total financial impact of the strike, but after 15 days of strike action approximately 380,000 passengers have been affected by approximately 3,700 canceled flights.

Some traffic disruptions will continue during the following days while normal traffic is resumed.

SAS aircraft photo gallery:

Scandinavian Airlines-SAS issued this statement:

The strikes undertaken by the SAS Scandinavia pilots’ unions, which began on July 4, 2022, already have severely impacted the liquidity and overall financial position of SAS AB and threatens the Company’s ability to ultimately successfully raise critically needed near-term and long-term capital to fund the Company’s successful reorganization.

As of today, the strike has so far caused over 2,550 flight cancellations which has affected over 270,000 passengers. The estimated effect of the strike is approximately SEK 100-130 million per day or roughly SEK 1.0-1.3 billion in costs so far.

As stated in SAS’ press release on July 5, 2022, the Company has had sufficient liquidity to meet its business obligations in the near term without accessing new forms of capital.  However, a prolonged strike means that the Company’s limited cash reserves, which naturally decline given that summer sales have already largely occurred, will erode very quickly in the face of a continuing pilot strike.

As further announced on July 5, 2022, SAS is in well advanced discussions with a number of potential lenders with respect to obtaining additional debtor-in-possession (DIP) financing, a specialized type of bridge financing for businesses that are restructuring through a chapter 11 process, for up to USD $700 million (the equivalent of approximately SEK 7.0 billion) to ensure the Company has sufficient funds to complete its restructuring.

The prospective DIP lenders have made it clear to the Company such financing is predicated on successfully demonstrating a road map to achieving the full SEK 7.5 billion in annual cost savings that is a cornerstone of the SAS FORWARD Plan.

Continuance of the pilot strike may jeopardize the Company’s access to such DIP financing.  In such an event, the Company will need to consider selling valuable strategic assets under duress while also radically downsizing SAS’s operations and fleet absent a breakthrough in negotiations with its pilot groups.  Once those actions are taken, it will be difficult for SAS to rebuild back the size and breadth of its current network and services.

Other key elements of the SAS FORWARD Plan include converting approximately SEK 20 billion of debt and hybrid notes into common equity and also that SAS will seek to raise not less than SEK 9.5 billion in new equity capital which would be used in substantial part to pay off the DIP Financing upon successful emergence from the US chapter 11 court process.

“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,”  says Anko van der Werff, President & CEO.

Erno Hildén, Executive Vice President and CFO, adds: “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”.

SAS aircraft photo gallery:

Scandinavian Airlines-SAS issued this traffic report:

During June more than 1.9 million passengers traveled with SAS, an increase of approximately 220% compared to the same month last year. SAS’ capacity increased at the same time by approximately 150% compared with the same period last year. In comparison with last month, the total number of passengers increased with 7% and capacity was increased by 6%. The flown load factor for June was 80%, an improvement of 33 percentage points compared to June last year.

“Overall ticket sales have been positive in June, even if the whole aviation ecosystem still faces challenges in the global ramp-up. The notice of strike from the SAS Scandinavia pilots’ unions started impacting our bookings toward the end of the month. Our customers who for a long time have been longing to travel, had their plans disrupted in the middle of summer peak season, when we were looking forward to flying passengers. We continue our SAS FORWARD restructuring plan in which all stakeholders need to participate in order to secure SAS’ financial stability. To successfully continue the transformation of SAS we filed for Chapter 11 in the US on July 5. Update on the progress will be published once available”, says Anko van der Werff, President & CEO of SAS.

Copyright Photo: Jay Selman.

1 Change compared to same period last year, p p = percentage points

Definitions:

RPK – Revenue passenger kilometers

ASK – Available seat kilometers
Load factor – RPK/ASK
Yield – Passenger revenues/RPK (scheduled)

PASK – Passenger revenues/ASK (scheduled)

Change in CO2 emissions per available seat kilometers – SAS passenger related carbon emissions divided with total available seat kilometers (incl non-revenue and EuroBonus tickets), rolling 12 months vs rolling 12 months previous year

Carbon offsetting of passenger related emissions – Share of SAS passenger related carbon emissions compensated by SAS (EuroBonus members, youth tickets and SAS’ staff travel) during the month

From fiscal year 2020 we report change in CO2 emissions in total and per Available Seat Kilometers (ASK) to align with our overall goal to reduce our total CO2 emissions by 25% by 2025, compared to 2005.

SAS aircraft photo gallery:

Scandinavian Airlines-SAS has made this announcement:

SAS AB has announced it is taking the next step in the comprehensive business transformation plan SAS FORWARD. To proceed with the implementation of key elements of the plan, SAS and certain of its subsidiaries have voluntarily filed for chapter 11 in the U.S., a legal process for financial restructuring conducted under U.S. federal court supervision. SAS’ operations and flight schedule are unaffected by the chapter 11 filing, and SAS will continue to serve its customers as normal, although the strike by SAS Scandinavia pilots’ unions will impact the flight schedule. The Company expects to meet its go forward business obligations in the near term. SAS’ cash-balance was SEK 7.8 billion as of June 30, 2022. The strike has a negative impact on the liquidity and financial position of the Company and, if prolonged, such impact could become material. The Company is in well advanced discussions with a number of potential lenders with respect to obtaining additional debtor-in-possession financing for up to USD 700 million (the equivalent of approximately SEK 7.0 billion), to support its operations throughout this court-supervised process. Debtor-in possession financing is a specialized type of bridge financing for businesses that are restructuring through a chapter 11 process.

SAS and certain of its subsidiaries today filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York, in the United States. The purpose of the filing is to accelerate SAS’ transformation by implementing key elements of its SAS FORWARD plan. These steps are consistent with SAS’ announcement on May 31, 2022, that SAS FORWARD involves complex multiparty negotiations and that the Company might seek to utilize one or more court restructuring proceedings designed to assist in the resolution of SAS’ financial difficulties and help accelerate the implementation of SAS FORWARD.

Chapter 11 is a well-established and flexible legal framework for restructuring businesses with operations in multiple jurisdictions, and has been used by a number of large international airlines to restructure. Through this process, SAS aims to reach agreements with key stakeholders, restructure the Company’s debt obligations, reconfigure its aircraft fleet, and emerge with a significant capital injection. SAS expects to complete its court-supervised process in the U.S. in 9-12 months.

“We have been working closely with the SAS management team to progress SAS FORWARD. As part of that process, SAS has also been preparing for the option to utilize court restructuring proceedings in order to address the Company’s financial situation. The on-going strike poses significant challenges to our ability to succeed with our transformation. The Board has concluded that legal tools are required to make progress in our ongoing negotiations with key stakeholders, and ultimately to succeed in making SAS a competitive and financially strong business. The process we have commenced will enable SAS to continue our more than 75-year legacy of being integral to Scandinavian infrastructure and societies. We are confident that the actions we are taking will strengthen SAS’ ability to capture the significant opportunities ahead as the industry continues to recover from the pandemic” said Carsten Dilling, Chairman of the Board of SAS.

Anko van der Werff, President and Chief Executive Officer of SAS, said, “Over the last several months, we’ve been working hard to improve our cost structure and improve our financial position. We are making progress, but a lot of work remains and the on-going strike has made an already challenging situation even tougher. The chapter 11 process gives us legal tools to accelerate our transformation, while being able to continue to operate the business as usual. We will continue to build back the network connectivity, products and service our customers expect, and we will continue to do so throughout this process and beyond. I am convinced that this process will enable us to become an even better airline for our customers and a stronger business partner in the years to come. Becoming a more competitive airline will require the full team’s effort and burden-sharing from all stakeholders. We urge SAS Scandinavia pilots’ unions to end their strike and engage constructively as part of this process.”

Strengthening SAS’ Ability to Deliver on SAS FORWARD

SAS FORWARD was launched to secure long-term competitiveness for SAS in the global aviation industry through a full transformation of its business. The plan aims to strengthen SAS’ financial position, and to achieve a sustainable cost structure with an annual cost reduction of approximately SEK 7.5 billion. The plan also encompasses raising at least SEK 9.5 billion in new equity capital as well as reducing or converting more than SEK 20 billion of debt into common equity (of which a majority is on-balance sheet debt), including state hybrid notes, commercial hybrid notes, Swiss bonds, term loans from states, aircraft lease liabilities and maintenance contract obligations and other executory contract obligations.

SAS has made progress in these efforts, having identified the vast majority of the SEK 7.5 billion in reduced annual costs, continued to invest in its digital capacities and sustainability efforts, and received support from the Swedish, Danish and Norwegian governments. The Company has also met with potential investors and engaged actively with multiple stakeholders to improve its overall financial strength. The chapter 11 process is intended to accelerate the transformation process.

Reduction or conversion of state-owned debt is subject to approval by the EU Commission and EFTA Surveillance Authority, respectively, under applicable state aid rules. As previously announced, a major part of the new equity capital is expected to be sought from new investors. The intended reductions or conversions of debt to equity and issuance of new shares are expected to result in substantial dilution to existing shareholders. Any issuance of new shares will be subject to approval by the general meeting as well as regulatory approvals.

Business Operations Unaffected – Continuing to Serve Customers

SAS’ operations and flight schedule are unaffected by the chapter 11 filing, and its Board of Directors and management continue to be in charge of the Company’s affairs. SAS’ 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 impact the flight schedule.

SAS will continue to issue ticket refunds and honor travel coupons and payments or credits associated with baggage or service claims in adherence with its current policies.

Meeting Business Obligations

SAS’ assessment is that it has sufficient liquidity, including SEK 7.8 billion in cash as of June 30, 2022, to meet its business obligations in the near term. The strike has a negative impact on the liquidity and financial position of the Company and, if prolonged, such impact could become material. To ensure the Company has sufficient funds to complete its restructuring, the Company is in well advanced discussions with a number of potential lenders with respect to obtaining additional debtor-in-possession (“DIP”) financing for up to USD 700 million (the equivalent of approximately SEK 7.0 billion) to support its operations. DIP financing is a specialized type of bridge financing for businesses that are restructuring through a chapter 11 process, subject to certain conditions precedent for accessing all of such commitments.

As is typical in chapter 11 proceedings, the Company has filed a number of routine motions seeking court authorization to continue to support its business operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption. As part of these motions, the Company has requested authority from the Court to continue honoring its customer programs in the ordinary course. SAS has also requested authority to honor various prepetition obligations owed to certain of its critical travel agency partners, vendors and suppliers from before the filing date. The Company will pay vendors and suppliers in full under normal terms for goods and services provided on or after the filing date.

The Company expects these motions to be heard at a “First Day” hearing, which is expected to be held in the coming days. SAS expects to receive Court approval for all of its requests.

Information about the Chapter 11 Process and Additional Resources

The chapter 11 restructuring process in the U.S. is different than a bankruptcy or administration proceeding in other parts of the world. The process provides the Company time and flexibility to reorganize its capital structure, reduce costs, and complete a financial restructuring under the supervision of the U.S. court system. The board of directors and management continue to run the Company and the restructuring process is overseen by a U.S. federal court. Many companies, including a number of large international airlines based outside of the U.S., have used the chapter 11 process to reorganize their financial obligations and emerge as stronger organizations.

Additional information about this process is available at the Company’s dedicated restructuring website, https://sasgroup.net/transformation. Court filings and other documents related to the chapter 11 process in the U.S. are available on a separate website administered by SAS’ claims agent, Kroll Restructuring Administration LLC, at https://cases.ra.kroll.com/SAS. Information is also available by calling (844) 242-7491 (U.S./Canada) or +1 (347) 338-6450 (International), as well as by email at SASInfo@ra.kroll.com.

SAS aircraft photo gallery:

Scandinavian Airlines-SAS has mader this announcement:

After weeks of mediation, the mediators have, together with SAS and the SAS Scandinavia pilots’ unions, decided to further postpone the strike announced by the pilots’ unions until  July 4, 2022 12.01 PM CET.

Copyright Photo: SAS Airbus A320 SE-ROB pushes back from the gate at Oslo Airport (Jay Selman).

SAS welcomes the mediators’ decision as it continues to be the company’s firm ambition to reach an agreement and avoid a strike.

SAS aircraft photo gallery:

Scandinavian Airlines-SAS issued this statement:

After weeks of mediation, the mediators have, together with SAS and the SAS Scandinavia pilots’ unions, decided to extend the deadline of the mediation until July 2, 2022 00.01 CET.

SAS welcomes the mediators’ decision as it continues to be the company’s firm ambition to reach an agreement and avoid a strike.

SAS aircraft photo gallery: