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BANKRUPTCY: Airline Restructures as Exhausted Pilots Demand Relief

July 6, 2022 By Richard C. Young

By photomatika @ Shutterstock.com

The Scandinavian airline, SAS AB, is going into a voluntary restructuring process that will see 50% of its flights cut each day. The restructuring will take about a year, and is a response to the increased debt and lower revenues caused by Covid, and to a plan by 1,000 of the airline’s pilots to walk off the job on strike. The Wall Street Journal reports:

Scandinavian airline SAS AB has filed for bankruptcy protection in the U.S., saying a move by about 1,000 of its pilots to go on strike would worsen its already fraught finances as the carrier becomes one of the first casualties of a difficult recovery in air travel.

The company said Tuesday that it would continue to operate during the voluntary restructuring process, but the staff walkout would lead it to cancel roughly 50% of its flights daily. SAS said it expects the Chapter 11 court process to last between nine and 12 months.

SAS has been pursuing a restructuring plan for months to shore up its finances after racking up large amounts of debt and experiencing a sharp drop in revenue during the Covid-19 pandemic. The airline said its decision to file for bankruptcy protection was designed to accelerate that transformation. Filing in the U.S. was favorable because it gave management more flexibility to negotiate with stakeholders while continuing to operate, it said.

While SAS is only Western Europe’s 14th-largest airline by capacity, according to aviation consulting firm OAG, the carrier is critical to Scandinavia’s connectivity, operating the highest capacity in and out of the region.

The company’s financial difficulties come as the broader aviation industry struggles to increase capacity to meet surging demand for air travel after more than two years of pandemic lockdowns and travel restrictions. Staff shortages and a tight labor market have led to long lines, mounds of lost luggage, delays and canceled flights while many unions have been pushing to recover salary cuts agreed to at the outset of the pandemic.

While scores of airlines have moved through bankruptcy proceedings since March 2020, fewer carriers failed than the industry had expected as government bailouts and furlough programs helped keep most afloat during the hiatus in flying. However, many of those airlines were left saddled with billions of dollars of repayable state aid.

This summer’s recovery had been foreshadowed as a critical resurgence in air travel that would help airlines with heavily indebted balance sheets to recover revenues and return to profitability. However, the at-times chaotic nature of the recovery has curtailed some of those hopes.

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Richard C. Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
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