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SAS applies for Chapter 11 in the US

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SAS applies for Chapter 11 in the US

Old 5th Jul 2022, 09:01
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SAS applies for Chapter 11 in the US

https://www.reuters.com/business/aer...es-2022-07-05/

Is that a scare tactic against the striking pilots or is it a diversionary tactic to divert from failed management strategies?

I fail to grasp the applicability of US bancruptcy law to a Scandinavian company. Or am I missing something?
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Old 5th Jul 2022, 12:24
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Originally Posted by 1201alarm View Post
I fail to grasp the applicability of US bancruptcy law to a Scandinavian company. Or am I missing something?
Very good point ...

Maybe trying to get protection against US Leasing firms retreiving their airframes if not able to pay ?
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Old 5th Jul 2022, 13:33
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Originally Posted by 1201alarm View Post
https://www.reuters.com/business/aer...es-2022-07-05/

Is that a scare tactic against the striking pilots or is it a diversionary tactic to divert from failed management strategies?

I fail to grasp the applicability of US bancruptcy law to a Scandinavian company. Or am I missing something?
Bankruptcy processes in the US are open to foreign companies that have assets or operations in the country.

The US bankruptcy Chapter 11 allows restructuring of the company without dissolution of the company. Chapter 11 bankruptcy in the US would probably not even be considered bankruptcy in Europe. Many foreign carriers have used American bankruptcy laws to their benefit... AeroMexico, LATAM and Avianca have all filed for reorganization under US bankruptcy laws.
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Old 5th Jul 2022, 16:08
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U.S. bankruptcy court

Correct.
"Filing in the U.S. was favorable because it gave management more flexibility to negotiate with stakeholders while continuing to operate", the airline said. (Wall Street Journal reporting, website today).
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Old 5th Jul 2022, 17:00
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Does that apply to all activities and contractual obligations of SAS or only to the ones signed with US counterparts and mutually agreed US jurisdiction?

So far all that I found by googling was SAS's own press statements, so hardly an enlighting piece of information what is really done here.

It sounds really weird to me that a Scandinavian company could get rid of their obligations in Scandinavia (or Europe) with the help of a US court. That would render any European contract law meaningless.
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Old 5th Jul 2022, 17:06
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Originally Posted by 1201alarm View Post
Does that apply to all activities and contractual obligations of SAS or only to the ones signed with US counterparts and mutually agreed US jurisdiction?

So far all that I found by googling was SAS's own press statements, so hardly an enlighting piece of information what is really done here.

It sounds really weird to me that a Scandinavian company could get rid of their obligations in Scandinavia (or Europe) with the help of a US court. That would render any European contract law meaningless.
Read this: https://www.davispolk.com/sites/defa...apter%20II.pdf
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Old 5th Jul 2022, 17:25
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Oh lord, I thought it was the Hereford gun club!
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Old 5th Jul 2022, 18:11
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Originally Posted by 1201alarm View Post

It sounds really weird to me that a Scandinavian company could get rid of their obligations in Scandinavia (or Europe) with the help of a US court. That would render any European contract law meaningless.
Chapter 11 doesn't get rid of any financial obligations - at least not directly. What it does is give the filer time to get things in order without the immediate threat of creditors seizing their assets and preventing them from continuing operation. Chapter 11 is particularly useful when a business is still viable, but has been caught out by cash flow issues that are preventing them from paying their obligations in a timely manner. This time is generally used to renegotiate various obligations to allow the filers cash flow to improve.
Chapter 11 means assets are still more than obligations so the business is still theoretically viable. Chapter 9 is when there are insufficient assets to meet obligations and usually leads to liquidation of the business.
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Old 5th Jul 2022, 19:36
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Thanks for the clarification, tdracer. That still describes a situation in which a company is not fulfilling its contractual obligations. Because only when you don't fulfill these you need protection from "immediate threat of creditors seizing their assets".

Lake1952, thanks for the link. Read it, but not digested. Guess need to read it several times as a layman in law.
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Old 6th Jul 2022, 17:57
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Seems that SAS CEO has done the same thing before when at Avianca.
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Old 6th Jul 2022, 19:44
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SAS pilots make around 7K UKP a month gross on average. Senior skippers end at around 10K and junior SO start at around 4K. The offer from the pilots was to reduce that by 13%, plus other concessions on e.g. maximum weekly working hours.
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Old 6th Jul 2022, 23:11
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Originally Posted by 1201alarm View Post
https://www.reuters.com/business/aer...es-2022-07-05/

Is that a scare tactic against the striking pilots or is it a diversionary tactic to divert from failed management strategies?

I fail to grasp the applicability of US bancruptcy law to a Scandinavian company. Or am I missing something?
I think this form of restructuring/examinership was coming anyway. SAS has been a disaster from a financial point of view for decades.

The bankruptcy protection and restructuring was going to happen, the strike has just brought it forward. There are some small issues with SAS Connect/Link and wet lease accessing some services at outstations due to the financial situation. This has since been rectified, however.

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Old 7th Jul 2022, 06:30
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A sad day for a prestigious brand and a proud, loyal workforce. I worked on the commercial side from '85-'94. At one point in the late-'eighties, in world airline terms, they were around 22 in passenger numbers, and number 3 in profitability, behind AA and SQ. Most UK-Scandi. routes ran with the curtain around five rows from the back, making economy class a exclusive section (!)

Jan Carlzon repeatedly warned about their cost base as far back as 1988. He also predicted the current European alliances (KL/AF, BA/IB, etc), and when he suggested that the rise and rise of lo-cos would threaten the traffic base of premier legacy carriers, we hardly believed him.. He was absolutely right. I'd love to know his thoughts today.
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Old 7th Jul 2022, 15:01
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Originally Posted by Midland 331 View Post
A sad day for a prestigious brand and a proud, loyal workforce. I worked on the commercial side from '85-'94. At one point in the late-'eighties, in world airline terms, they were around 22 in passenger numbers, and number 3 in profitability, behind AA and SQ. Most UK-Scandi. routes ran with the curtain around five rows from the back, making economy class a exclusive section (!)

Jan Carlzon repeatedly warned about their cost base as far back as 1988. He also predicted the current European alliances (KL/AF, BA/IB, etc), and when he suggested that the rise and rise of lo-cos would threaten the traffic base of premier legacy carriers, we hardly believed him.. He was absolutely right. I'd love to know his thoughts today.
Far as I remember Carlzon predicted SAS would be “one of five in 95”. That did not age well. But SAS was the gold standard at that time.
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Old 7th Jul 2022, 15:28
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Ah! Yes indeed - I remember that one!

However, that was based on forming more than just a marketing alliance with another carrier. BCal and Sabena fell through, and the Alcazar project stalled (Wikipedia makes interesting reading on this). Carlzon departed, vision thwarted. After that, apart from becoming a feeder service to one of the big alliances, there were not a lot of options.

What has surprised me is that SAS have endured so long with high costs and declining yields.

Last edited by Midland 331; 8th Jul 2022 at 08:53.
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Old 7th Jul 2022, 15:45
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Agreed. A good number of years ago, I along with others studied SAS’s average revenue. It was a multiple of what my carrier had. But so were their costs.
I remember sitting in the back of a DC9 or MD80 on a intra European flight (BRU-CPH IIRC) where the Y section was 3 rows…
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Old 7th Jul 2022, 15:54
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I was on the corporate/business travel agency sales side, and the big, big shock was GW1 and the following recession circa 1991. Traffic was never the same after that. Additionally, Sweden was specifically threatened by terrorist organisations as I recall.

On my final day with the company in 1994, I sat on a jump seat right at the back of the MD80, and the curtain was 2/3rds up the cabin, a sign of changing times.

London-Stockholm was in the top three of the best-performing routes. Another was possibly Copenhagen-Milan.

LHR-ARN "C" was £500.00 return. If 120 of the 133 seats on an MD80 were filled with point-to-point "C" returns, that would give a gross ticket value per sector of £30,000.

Last edited by Midland 331; 7th Jul 2022 at 17:08.
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Old 8th Jul 2022, 12:00
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Haven't flown SAS probably for 20 years. My last and current company flew and fly low cost. Privately, SAS is out of the question, prices are 2 - 3 times higher than competition.

I am still remember fondly boarding a SAS machine in Bangkok after a strenous trip around the Far East, having spent months in Dhaka or other lovely places, felt like being already half-way home. And I still have a small collection of cognac glasses that somehow dropped off the tray table right down into my briefcase.
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