SAS Group, the parent of SAS Scandinavian Airlines, has filed for Chapter 11 restructuring in the United States as a part of its SAS Forward transformation plan, with no apparent impact on its operations or current financial obligations, shortly after its pilot unions confirmed their intention to go ahead with a strike.

"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 ongoing 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," chief executive Anko van der Werff said.

However, during an impromptu investor call, group chairman Carsten Dilling stressed that the decision to file for Chapter 11 was not caused by the strike alone. The airline was considering such a restructuring anyway and knew that it might file for it, but the strike put additional pressure on the carrier and accelerated the filing.

"We expect to complete the Chapter 11 restructuring in nine to 12 months," van der Werff said. "A strike is the last thing the company needs right now, and we therefore urge the Scandinavian pilots union to end this strike."

He explained that SAS had considered other jurisdictions but ultimately chose the US procedure due to its benefits.

"One example is the stay order, which means that the [leased] aircraft stay with us until we decide what to do with them. In this procedure, you can restructure it with no impact on operations, in some other jurisdictions it would not be possible," van der Werff said.

The CEO's previous job was at Avianca Group, where he supervised a Chapter 11 restructuring as well.

SAS underlined that while Chapter 11 would have no impact on current operations, the strike would be heavily felt by passengers. The airline estimates that the protest by around 900 pilots will force it to cancel around 50% of its scheduled flights (excluding services operated by SAS Connect, SAS Link, and wet-lease providers), affecting some 30,000 passengers per day. The airline will continue to honour all of its obligations toward the customers, employees, vendors, and suppliers, it said.

SAS underlined that it had sufficient liquidity to meet its near-term obligations even as it undergoes the process. The airline had SEK7.8 billion Swedish kronor (USD755 million) in cash as of June 30, 2022. To support its long-term financial needs, it is in "advanced talks" to raise USD700 million through debtor-in-possession (DIP) financing. SAS Forward foresees raising at least SEK9.5 billion (USD920 million) in new equity capital as well as reducing or converting more than SEK20 billion (USD1.9 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.

"We need to raise SEK9.5 billion, and the Swedish and Norwegian governments said very clearly they would not participate, and the Danish government said it would only participate if we implement SAS Forward and if there are other investors, with the government playing the second violin, in my words. It is very clear to us that this SEK9.5 billion will come only if we do our part," van der Werff stressed.

The airline says it has already identified most of the planned SEK7.5 billion (USD725 million) in annual savings included in the SAS Forward plan. It has appointed Kroll Restructuring Administration LLC as its US claims agent and expects its "first day" hearing in court to happen "in the coming days".

SAS's largest shareholders are the government of Sweden and Denmark, with a 21.8% stake each. The biggest private shareholder, Wallenberg Investments, holds a 3.42% stake. The airline has yet to make its Chapter 11 filings public, wherein it is expected to disclose a list of its creditors.