Scandinavian Flag carrier SAS has officially secured the funding necessary to continue operations as it seeks to return to profitability. Scandinavian Airlines System, known as SAS, was approved by the US Bankruptcy Court for the Southern District of New York for USD 700 million (7.0 billion Swedish Krones) of financing.

The terms of the debtor-in-possession (DIP) agreement are substantially similar to the terms previously announced by SAS on August 14, 2022, with the financing credit agreement managed by Apollo Global Management. The airline filed for Chapter 11 bankruptcy protection in the US earlier this year in a move to continue its operations while restructuring its debt obligation.

The DIP financing, which the courts have now approved, is a specialized type of bridge financing used in conjunction with the revenue generated from SAS's ongoing operations to enable the carrier to continue meeting its obligations throughout the Chapter 11 process. Anko van der Werff, President and Chief Executive Officer of SAS, explained how the new influx of cash would help the airline move forward:

“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."

The airline also recently announced that it carried almost two million passengers over the month of August.

The backstory and bankruptcy process

The Star Alliance carrier predicts that the bankruptcy process will take between nine and twelve months. Since the court has now approved the financing agreement, an initial $350 million will soon become available for SAS to use for continued operations. The court indicated Friday in the ruling that it will enter an order approving the DIP financing shortly.

SAS announced in July that it had voluntarily filed for Chapter 11 bankruptcy protection in the United States. The well-established and flexible legal framework allows for restructuring businesses with operations in multiple jurisdictions. As SAS has substantial operations in the US, it was eligible for the process, designed to reach agreements with critical stakeholders, restructure the company's debt obligations, and receive a capital injection.

The legal move comprises part of the carrier's "SAS FORWARD" plan to raise new capital, reduce or convert more than SEK 20 billion ($1.87 billion) of debt into common equity, and streamline its fleet. The airline has already begun the restructuring process after being informed that both the Swedish and Norwegian Governments would convert existing debt to equity instead of injecting more cash into the airline.

SAS filed this past week to return ten aircraft to lessors to help reduce costs. The planes in question comprise three Airbus A320neos, three Airbus A330-300s, two Airbus A350-900s, one Airbus A321, and a Boeing 737-700.

Other international carriers with operations in the US, including Avianca, LATAM, Aeromexico, and Philippine Airlines, have similarly used the Chapter 11 bankruptcy process to restructure debt and raise capital for continued operations. SAS expects to complete its court-supervised process within the year. Avianca took a year and a half, while Aeromexico took almost two years to emerge from the process.