SAS has renegotiated leases on 36 aircraft, part of cost savings efforts under its Chapter 11 restructuring process.
The Scandinavian carrier said it has reached agreements with 10 lessors, for the aircraft, which include three widebodies and 33 narrow body aircraft. It is in talks with further lessors, the airline added in a press release on October 5, 2022.
“The amended lease agreements allow us to reconfigure our fleet and improve our cost structure, which is a key element of our SAS FORWARD plan,” chief executive Anko van der Werff commented.
“We are grateful to our lessors for working constructively with us, as we continue taking necessary actions to become a more competitive airline and a stronger business partner to them,” the CEO added. “We are continuing to pursue additional lease amendments so we can achieve our targets.”
The airline has 117 aircraft in its fleet and 17 in storage. Of these, 62, or 46%, are leased, according to fleets data from Cirium.
SAS filed for Chapter 11 bankruptcy protection in July 2022, seeking a way to make progress with its restructuring plan and cost cuts. One of the reasons it cited was difficulties in renegotiating aircraft lease deals.
How else is SAS restructuring?
The news on the aircraft leases comes after SAS provided further details of its restructuring plan and a financial outlook on September 30, 2022.
According to its latest guidance, it expects demand in terms of passenger numbers to recover to around 90% of pre-COVID levels by the end of the first half of its 2023 fiscal year. Short-haul leisure travel demand is expected to return to pre-pandemic levels in 2024, while business demand will flatten out at approximately 80% of prior levels, SAS predicted.
One of the reasons SAS is undergoing the cost-cutting plan is to adapt to changing travel trends, to try and better compete with lower-cost rivals for the leisure travel market. Under the new business plan, SAS therefore wants to pivot its short-haul network more towards European tourist destinations.
It also intends to replace some widebody aircraft with single-aisle aircraft on some long-haul routes and focus on having only three aircraft types to simplify operations and improve efficiency.
SAS said the amended leases mean it is “well on track” to achieving targeted annual cost savings of at least SEK850 million to 1.0 billion ($78-$92 million). Overall, the company wants to reduce annual costs by SEK7.5 billion ($686 million) by the fiscal year 2026.
The 10 lessors that SAS has reached agreement with are:
AerCap Holdings N.V., Aergo Capital Limited, Aircastle Limited, ALAFCO Aviation Lease and Finance Company, Avolon Aerospace Leasing Limited, CDB Aviation, Dubai Aerospace Enterprise (DAE) Ltd., ICBC Aviation Leasing Co., Ltd., ORIX Aviation Systems Limited and SDH Wings International Leasing Limited