Faced with financial difficulties and a massive pilot strike, Scandinavian airline SAS said Tuesday it has filed for so-called Chapter 11 bankruptcy proceedings in the United States, as a part of restructuring plan.
“We simply need to do much more and do it much faster,” SAS chairman Carsten Dilling told a press conference where defended what he called “a well thought-through decision.”
In the US, Chapter 11 is a mechanism allowing a company to restructure its debts under court supervision while continuing to operate.
The move was made in order “to proceed with the implementation of key elements” of its business transformation plan, the troubled carrier, which employs nearly 7,000 people, said in a statement.
Asked why the company chose initiate the proceedings in the US, rather than Sweden where it is headquartered, Dilling said they had considered several countries where they could file, but “ended up concluding that the US framework is the right one for the company.”
Chief executive Anko van der Werff said they expected “to complete the Chapter 11 process in nine to 12 months.”
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 ongoing strike by Scandinavian pilot unions would continue to impact operations.
– ‘Last thing SAS needs’ –
“A strike is the last thing the company needs right now,” van der Werff told reporters.
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.
On Monday, SAS said that the strike “is estimated to lead to the cancellation of approximately 50 percent of all scheduled SAS flights,” impacting around 30,000 passengers a day.
SAS management announced in February the savings plan to cut costs by 7.5 billion Swedish kronor ($700 million), 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 percent. 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.
Suffering, like the rest of the sector, from the impact of Covid-19, SAS cut 5,000 jobs, or 40 percent of its workforce, in 2020. The carrier now had around 6,900 employees at the end of May, a number which fell below 5,000 at the height of the pandemic.
Shares in SAS, already at all-time lows, fell by more than 11 percent in the early hours of trading on the Stockholm Stock Exchange.
SAS’s troubles 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.
Natural disaster losses hit $72 bn in first half 2022: Swiss Re
Total economic losses caused by natural disasters hit an estimated $72 billion in the first half of 2022, fuelled by storms and floods, Swiss reinsurance giant Swiss Re estimated Tuesday.
Though the figure is lower than the $91 billion estimate for the first six months of 2021, it is close to the 10-year average of $74 billion, and the weight is shifting towards weather-induced catastrophes.
“The effects of climate change are evident in increasingly extreme weather events, such as the unprecedented floods in Australia and South Africa,” said Martin Bertogg, Swiss Re’s head of catastrophe perils.
The Zurich-based group, which acts as an insurer for insurers, said the losses were also propelled by winter storms in Europe as well as heavy thunderstorms on the continent and in the United States.
So-called secondary natural disasters like floods and storms — as opposed to major disasters such as earthquakes — are happening more frequently, the reinsurer said.
“This confirms the trend we have observed over the last five years: that secondary perils are driving insured losses in every corner of the world,” Bertogg said.
“Unlike hurricanes or earthquakes, these perils are ubiquitous and exacerbated by rapid urbanisation in particularly vulnerable areas,” he said.
“Given the scale of the devastation across the globe, secondary perils require the same disciplined risk assessment as primary perils such as hurricanes.”
Swiss Re said floods in India, China and Bangladesh confirm the growing loss potential from flooding in urban areas.
Man-made catastrophes such as industrial accidents added on a further $3 billion of economic losses to the $72 billion from natural disasters, taking the total to $75 billion — which is down on the $95 billion total for the first half of 2021.
– Insured losses at $38 bn –
Total insured losses stood at $38 billion: $3 billion worth of man-made disasters and $35 billion worth of natural catastrophes — up 22 percent on the 10-year average, said the Swiss reinsurer, warning of the effects of climate change.
February’s storms in Europe cost insurers $3.5 billion, according to Swiss Re estimates.
Australia’s floods in February and March set a new record for insured flood losses in the country at so far close to $3.5 billion — one of the costliest natural catastrophes ever in the country.
Severe weather and hailstorms in France in the first six months of the year have so far caused an estimated four billion euros ($4.1 billion) of insured market losses.
The Swiss group also mentioned the summer heatwaves in Europe, which resulted in fires and drought-related damage, without providing estimates at this stage.
A warming climate is likely to exacerbate droughts and thereby the likelihood of wildfires, causing greater damage where urban sprawl grows into the countryside, Swiss Re said.
“Climate change is one of the biggest risks our society and the global economy is facing,” said the group’s chief economist Jerome Jean Haegeli.
“With 75 percent of all natural catastrophes still uninsured, we see large protection gaps globally exacerbated by today’s cost-of-living crisis.”
Stock trading platform Robinhood axes staff
Robinhood on Tuesday said it is laying off nearly a quarter of its employees as inflation and a crypto market crash cripple activity on the stock trading platform.
Dismissal emails went out to 23 percent of workers, referred to internally as “Robinhoodies,” in a cost-cutting move that the Silicon Valley-based company said will leave it with about 2,600 employees.
Internet giants whose business boomed during the pandemic have taken a hit from inflation, the war in Ukraine, supply-line trouble and people returning to pre-Covid lifestyles.
Robinhood earlier this year cut nine percent of its staff, but that wasn’t enough, chief executive Vlad Tenev said in a blog post.
“Since that time, we have seen additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash,” Tenev said.
“This has further reduced customer trading activity and assets under custody.”
Meanwhile, financial services regulators in the state of New York on Tuesday announced that Robinhood’s cryptocurrency unit will pay a $30 million penalty for failing to meet mandatory standards for cyber-security and fighting money laundering.
The failure “resulted in significant violations” of state regulations, said state superintendent of financial services Adrienne Harris.
Flaws at Robinhood Crypto meanwhile stemmed from “significant shortcomings” in management that included failure to foster “an adequate culture of compliance” with banking rules, regulators said.
Robinhood associate general counsel Cheryl Crumpton said the company is “pleased” the matter is resolved in a settlement.
“We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers,” Crumpton said in response to an AFP inquiry.
Robinhood layoffs will be concentrated in operations, marketing, and program management, Tenev said.
“In the short seven years since Robinhood launched to the world, we have adapted to challenges and forced the financial industry to adapt to us,” Tenev said.
“We’ve overcome many obstacles and have emerged from each a stronger and more resilient company,” he said.
Uber posts quarterly loss, but revenue exceeds expectations
Uber on Tuesday reported better-than-expected revenue in the second quarter, fueled by strong demand for the San Francisco-based company’s ride-hailing and food delivery services.
Revenue more than doubled to $8.1 billion in the three months through June — a 105 percent increase. Though it still posted a net loss of $2.6 billion, investors reacted positively: shares shot up more than 12 percent, to $27.58, in pre-market trading.
The company posted $1.8 billion in revenue from its freight operations. It also said the boost in revenue was partially explained by a change in how it accounts for its rides business in Britain.
Uber notched gains in monthly active platform consumers, gross bookings and trips compared with a year ago, reflecting higher demand but also a higher number of drivers for its signature ride service and food delivery operations.
Uber CEO Dara Khosrowshahi said both consumers and earners were at “all-time highs.”
“Last quarter I challenged our team to meet our profitability commitments even faster than planned — and they delivered,” Khosrowshahi said in a statement.
Uber primarily attributed its loss to the falling value of its investments in financially strapped companies such as Singapore’s VTC Grab, US self-driving vehicle start-up Aurora and Indian food delivery service Zomato.
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