UPDATE Sep 19 – SAS is seeking court approval to reject the lease of several aircraft and return them to their lessors. The aircraft involved include five widebodies. The Scandinavian airline filed a so-called omnibus motion with the Southern District of New York Bankruptcy Court on Saturday, September 3 in preparation for an upcoming hearing in the Chapter 11 bankruptcy protection later this week. SAS wants to reduce fleet by several aircraft.
During the recent investor’s call on its Q3 FY22 results on August 26, SAS CEO Anko van der Werff already said that the airline is seeking the collaboration of various lessors to reduce its fleet which includes 111 aircraft. Back then, Van der Werff said SAS has a surplus of widebody aircraft. It has six Airbus A350-900s, with two more on order for delivery in 2024, plus eight A330-300s.
The September 3 court filing identified two A350s for which SAS wishes to terminate the contract and return them to their owners. One is MSN378 (registration SE-RSB, seen on the main picture that was posted by SAS on Facebook in April 2020), which was delivered in February 2020 and has been financed through a Japanese operating lease with a call option (Jolco). The other A350 is MSN391 (SE-RSC), leased from Fuyo General Lease in Japan since March 2020 and available from October 4. The court approved the termination of MSN391 on September 20. In an amended filing on September 15, MSN378 was no longer listed.
The document also identifies three A330-300s, all leased from Jin Shan Ireland: MSN1665 (LN-RKS), delivered to SAS in September 2015, MSN1697 (LN-RKT), delivered in January 2016, and MSN1715 (LN-RKU), delivered in April 2016. The first is available since September 4, and the two others from November 1.
The original filing also included three A320neo’s leased from SMBC Aviation Capital: MSN7723 (SE-ROC), delivered in June 2017, MSN7755 (SE-ROD), delivered in July 2017, and MSN8109 (EI-SIF), delivered to SAS Ireland in April 2018, as well as A321ceo MSN1619 (OY-KBL). All these aircraft were deleted from the September 15 version. Boeing 737-700 MSN32734 (SE-RET) was retained, as were two CFM56 engines.
In two separate filings dated September 9, more lease restructurings were announced. One is an agreement for the termination of A321 (MSN1675) which was leased from IC Air Lease One Limited, another covers a request for the sale and leaseback of six A320neo aircraft to lessor Griffin Global Asset Management. In another filing, SAS requested approval for the collective labor agreement with its pilot unions that was agreed on July 19 after a 15-day strike that cost the airline some SEK 1.4 billion.
Fleet reduction is an essential part of FORWARD
In the September 3 filing, SAS says that the fleet reduction is an essential part of its FORWARD restructuring plan, which it wants to accelerate through the Chapter 11 procedure. “The cornerstone of the SAS FORWARD plan is a redesigned aircraft fleet. Specifically, the Debtors (SAS) are party to a number of aircraft lease agreements that are significantly above market or no longer fit their go-forward business plan. While the Debtors sought various concessions from aircraft lessors prior to the Commencement Date, including amending existing leases on mark-to-market terms and returning aircraft, the Debtors were unable to achieve the level of concessions needed to successfully implement SAS FORWARD.”
The airline has undertaken an extensive review of its fleet and concluded that “the Excess Leased Equipment does not provide value beneficial to the Debtors or their estates and is not necessary to the Debtors’ continued operations and a successful reorganization. The Excess Leased Equipment consists of aircraft and engines that are no longer part of the Debtors’ fleet and business plan. Furthermore, the terms of the Leases are above current prevailing market rates for comparable equipment. In light of the foregoing, the Excess Leased Equipment is of no benefit to the Debtors’ estates, and the rejection of the Leases will maximize value for the Debtors’ estates and economic stakeholders.”
Rejection will result in reduced costs to the airline while “the Lease Rejection and Return Procedures provide a reasonable framework for the return of the Excess Leased Equipment and fairly balance the interests of the Lessors and the Debtors.”
Court approves DIP financing
SAS announced on September 10 that the court approved the debtor-in-possession (DIP) funding of $700 million, which it request on August 14. With the DIP financing, the airline has bridge funding in place to continue the restructuring program. CEO Anko van der Werff said in a media statement: “With the Court’s approval of our DIP financing, we are making important progress in our chapter 11 process. The DIP financing agreement with Apollo followed an extensive and competitive process that we conducted to achieve the best financing outcome for SAS, and we are pleased that the Court has approved it. I’d like to thank our employees for their hard work and dedication, as well as our business partners for their support as we continue moving through this process. We continue to make progress with the SAS FORWARD plan, and our work to build a competitive and even better airline for our customers.”
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News and until July 1 2023 in a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.