UPDATE: 2022/07/05 12:27 EST BY JOANNA BAILEY

SAS files for Chapter 11 bankruptcy protection in the US

In the hours after this article was published, SAS filed for bankruptcy protection in the United States, known as Chapter 11. You can read more here.

Pilots at SAS Scandinavian Airlines voted to go on strike on Monday after long-running pay negotiations between the airline and pilots' union broke down. The strike is expected to see half the airline's daily flights canceled, impacting around 30,000 passengers daily. One analyst is warning that if the strike drags out, SAS could see its daily cash flow halve and risk bankruptcy.

Finger-pointing begins at SAS

Around 1,000 SAS pilots based in Denmark, Sweden, and Norway have walked out in what is the first big airline strike of the post-pandemic era and the most significant pilot since British Airways pilots' strikes in 2019. Tensions between pilots and SAS Scandinavian Airlines' management have run high recently as pay negotiations have failed to get traction.

In the wake of Monday's snap strike, the finger-pointing has begun, with SAS management and SAS Pilot Group each blaming the other for the strike. "We have finally realized that SAS doesn't want an agreement," says union boss Martin Lindgren. "SAS wants a strike."

"A strike at this point is devastating for SAS and puts the company's future together with the jobs of thousands of colleagues at stake," said SAS President and CEO Anko van der Werff.

"The decision to go on strike now demonstrates reckless behavior from the pilots' unions and a shockingly low understanding of the critical situation that SAS is in."

SAS-Scandinavian-Airlines--Anko-Van-der-Werff-2
Under pressure SAS Scandinavian Airlines CEO Anko Van der Werff. Photo: SAS Scandinavian Airlines

Analyst warns of massive cash drain and possible bankruptcy

Jacob Petersen, the Vice President of Equity Research at the Danish investment bank Sydbank, says in a worst-case scenario, the strike could cost SAS US$10 million a day, or half of the airline's cash flow from operations.

"SAS has too much debt and too high costs and is thus not competitive. SAS is, in other words, a company flying toward bankruptcy," Mr Petersen said in a research note that SAS watchers have quickly picked up. The airline is attempting to restructure and is in no mood to agree to big pay increases. SAS Scandinavian Airlines is partially owned by the governments of Sweden and Denmark with around 70% in private hands.

The financial difficulties SAS Scandinavian Airlines faces are not new. The airline has battled tough competition, high debt levels, and rising costs for some time. The pandemic was the icing on the cake. But all airline employees, including pilots, are increasingly stretched as labor shortages and strong passenger demand push airlines to the brink of their operational capabilities. Living costs are rising fast in Europe, and SAS pilots, already working harder than ever, are also not in a mood to back down.

Airport passengers including children in departure gate area
The pilot strike will impact around 30,000 SAS Scandinavian Airlines passengers a day. Photo: SAS Scandinavian Airlines

Instead of showcasing the airline, the SAS CEO is dealing with disgruntled stakeholders

SAS Scandinavian Airlines was eyeing its busiest week since the start of the pandemic this week. The strike, perhaps deliberately timed, puts paid to that. Anko van der Werff wanted to use this week's traffic to showcase to potential investors what SAS could do on a good day. Instead, he's dealing with a strike and tens of thousands of inconvenienced passengers.

Airlines strikes, like the flu, seem to be contagious. Last month, British Airways Heathrow-based employees voted in favor of strike action after the airline failed to unwind a pay cut imposed during the pandemic. Employees at low-cost carrier easyJet also plan to strike this month, while airport workers are also putting pressure on airport operators to improve pay and conditions. In the midst of the pandemic, airline CEOs like Anko van der Werff dreamed of better days ahead but probably never anticipated a summer like this.