Scandinavian airline SAS has filed for Chapter 11 bankruptcy proceedings in the United States, warning strike action by pilots had impacted its financial position and liquidity.
It said the move was a part of a “restructuring plan”.
Pilots walked out on Monday after negotiations between the unions and the company broke down.
The pilots are protesting against salary cuts demanded by management as part of a restructuring plan aimed at ensuring the survival of the company, which has suffered a string of losses since the start of the coronavirus pandemic in early 2020.
The strike that adds to travel chaos across Europe as the peak summer vacation period begins. Staff at British Airways, Ryanair and Easyjet have also voted to strike.
On Monday, SAS said that the strike "is estimated to lead to the cancellation of approximately 50 per cent of all scheduled SAS flights," impacting around 30,000 passengers a day.
SAS needs to attract new investors and has said that in order to do that it must slash costs across the company, including for staff and for leased planes that stand idle because of closed Russian airspace and a slow recovery in Asia.
In order "to proceed with the implementation of key elements of (its business transformation plan), SAS and certain of its subsidiaries have voluntarily filed for Chapter 11" in the US, the troubled carrier said in a statement. Its recovery from the disruption caused by the coronavirus pandemic has been slower than expected.
In the US, chapter 11 is a mechanism allowing a company to restructure its debts under court supervision.
SAS said its "operations and flight schedule are unaffected by the Chapter 11 filing, and SAS will continue to serve its customers as normal," while noting that the strike launched on Monday by Scandinavian pilot unions would continue to impact operations.
"The ongoing strike has made an already challenging situation even tougher. The Chapter 11 process gives us legal tools to accelerate our transformation, while being able to continue to operate the business as usual," chief executive Anko van der Werff said in a statement.
SAS management announced in February the savings plan, dubbed "SAS Forward", which was supplemented in June by a plan to increase capital by nearly one billion euros ($1.04 billion).
Denmark and Sweden are the biggest shareholders with 21.8 percent each.
Denmark said in June it was ready to increase its stake to 30 per cent. Sweden has refused to provide fresh funds, but is willing to turn debt into capital.
Norway, which left SAS in 2018, has said it is ready to return to the airline, but only by converting debt into equity.
The strike at SAS comes as the summer is shaping up to be difficult for European airlines and airports, faced with staff shortages affecting traffic.
After widespread job losses linked to Covid-19, airlines and airports are struggling to recruit new staff in many countries.
Nordnet analyst Per Hansen said the application showed SAS needs a fresh start and that it thinks the strike will drag on.
"Chapter 11 protection comes early," he said. "Management and the board want to make it absolutely clear for all stakeholders that the situation is very serious."