In a press conference on Tuesday, Scandinavian airline SAS filed for Chapter 11 in the united states – a form of bankruptcy which involves the company restructuring rather than liquidating. The airline said that the recent pilot strike action was a contributing factor to the company’s financial woes.

Strikes Contribute to Bankruptcy

Wage talks between SAS and its pilots fell apart on Monday, triggering a strike that will hit the carrier just as they enter their busiest season. Reuters estimated that the strike could cost the airline as much as $10 million per day, a significant blow to the struggling airline.

SAS A319 taxiing Chapter 11 bankruptcy. @ Marco Macca / Travel Radar
SAS A319 taxiing | @ Marco Macca / Travel Radar

The strikes accelerated the carrier’s decision to file for Chapter 11 bankruptcy protection, said Chief Executive Anko van der Werf in Tuesday’s press conference. SAS had already announced a restructuring plan back in February, and yesterday’s decision will only speed up the process.

What is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy generally involves a company reorganising so that it can continue business. It differs from the type of bankruptcy we usually see (what’s known as ‘Chapter 7’ bankruptcy), where a company’s assets are sold off in order to pay off the company’s debts.

Svalbard as seen from the air
The Scandinavian airline will try to restructure the company in the coming months | @ Life in Norway

Also, unlike Chapter 7 bankruptcy, there is no debt forgiveness; the company is still obliged to repay all of its outstanding loans. When a company files for Chapter 11 bankruptcy, they usually propose a debt restructuring plan alongside it.  SAS released a statement about the bankruptcy process, saying:

“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,”

It is likely that we will see the airline shed some of its staff and leased planes as it slashes costs across the company.

What will this mean for SAS flights?

The airline said it would continue to serve customers throughout the bankruptcy period, although the pilot strikes will affect flight schedules. SAS expect that the Chapter 11 process will take between nine and 12 months to complete, during which time they are hoping to secure some new investors. In the meantime, the strikes will continue to impact the company significantly.

What do you think about SAS filing for bankruptcy protection? Let us know your thoughts in the comments below!

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