SAS risks edging closer to bankruptcy unless it can restructure its elevated debt pile, according to a research note produced by Norway’s DNB Bank. DNB analyst Ole Martin Westgaard estimates in a research note published on 16 February that the Scandinavian carrier has available liquidity reserves of SKr5.6 billion ($600 million) consisting of SKr2.6 billion of cash and undrawn government guarantees of SKr3 billion. This compares with total debt of SKr40.5 billion at the end of the fourth quarter, which includes hybrid loans booked as equity. “The high debt seems unsustainable, and with SKr3.8 billion (excludes SKr2.8 billion of lease payments) of maturities due in the next 12 months, restructuring will surely be needed. In our view, this would need to address the too-high debt and uncompetitive cost position versus peers,” he states. The bank forecasts that SAS will report a SKr1.9 billion first-quarter loss on 22 February as a result of “low demand due to Covid, limited ability to adapt capacity, rising fuel prices and high financing costs due to elevated debt”. The bank reiterates its “sell” advice to investors and has cut its target price to reflect “reduced estimates and increased financial risk”. DNB says that while there is likely to be “significant pent-up demand” for travel as restrictions ease, it believes SAS’s “weak competitive position” makes it a target for low-cost carriers such as Ryanair. At the same time, the bank notes that fuel prices are up appreciably and SAS has no hedges in place. In a separate 16 February note, Sydbank analyst Jacob Pedersen says the Omicron variant has “derailed” traffic recovery and, together with stiff exchange-rate headwinds of some SKr800 million against the US dollar in the first quarter, will create a “massive” SAS deficit that reinforces the need for more strategic initiatives and an overhaul of the airline’s capital structure. He says SAS has unveiled some initiatives for its survival, including the establishment of new low-cost units. Pedersen adds that he looks forward to more concrete objectives for cost-saving initiatives. He warns that the Stockholm-based carrier’s book equity now consisting only of hybrid bonds, but says the company is not pressured for liquidity “here and now”. Pedersen suggests that new SAS chief executive Anko Van der Werff could be contemplating a rescue plan that may be accompanied by a capital increase. SAS’s share price has fallen more than 20% since the publication of the research notes.

Passenger stigma about flying on the Boeing 737 Max, which was involved in two fatal accidents in 2018 and 2019, has now “largely dissipated” and pilots are also confident in the aircraft, the executive chairman of Air Lease Corporation has said. “We have… been pleased with developments of the 737 Max in terms of performance and reliability since resumption of deliveries,” says Steven Udvar-Hazy during a 17 February earnings call. "Our airline customers have been giving us good reports. As such, it should be no surprise that lease rates on 737s are recovering, and the forward demand profile is robust. We believe that any passenger stigma has largely dissipated, and confidence has returned to the pilot community." Udvar-Hazy notes that ALC's deliveries of new Max orders span 2024 to 2026, a period during which he says Airbus is "virtually sold out on the single-aisle Neo programme". "So we believe that Air Lease is in an excellent position to be able to offer both Boeing and Airbus single-aisle solutions from our orderbook in those critical years ahead as the airline industry recovery accelerates strongly," he says. ALC recently announced it had secured long-term leases for 25 new 737 Max 8 jets with Malaysia Aircraft Group, parent of Malaysia Airlines Berhad. An additional benefit, Udvar-Hazy goes on to say in the earnings call, is that ALC’s forward Max lease programmes are not dependent on placement in Russia or China, which have yet to recertify the Max. Udvar-Hazy's comments came as the lessor reported net income available to common stockholders for the fourth quarter of 2021 of $142 million, up 32.7% on 2020’s fourth quarter. This was on fourth-quarter revenues of $597 million, up 22.1% on 2020’s corresponding quarter. For the full year ended 31 December 2021, ALC reported net income available to common stockholders of $408 million, down 18.6% on the year prior. Revenues rose 3% in 2021 to $2.09 billion.

The US Federal Aviation Administration intends to issue airworthiness certificates for each new Boeing 787 prior to delivery, thereby retaining powers to conduct final inspections of newly built jets that were previously delegated to the airframer. “This will allow the agency to confirm the effectiveness of measures Boeing has undertaken to improve the 787 manufacturing process,” the FAA says. Boeing halted deliveries of 787s for most of 2021. The airframer continues to co-ordinate with the FAA both on quality inspections and re-work necessary to resolve manufacturing issues. No update has been provided when deliveries could resume. Once 787 deliveries begin again, the regulator says it will retain power to grant airworthiness certificates for new aircraft until “Boeing’s quality control and manufacturing processes consistently produce 787s that meet FAA design standards”. For Boeing to resume final inspections prior to 787 deliveries, the FAA adds that the airframer must prove it has “a robust plan for the re-work that it must perform on a large volume of new 787s in storage” and that its “delivery processes are stable”. Boeing tells Cirium “we respect the FAA’s role as our regulator and we will continue to work transparently through their detailed and rigorous processes. “Safety is the top priority for everyone in our industry,” Boeing adds. “To that end, we will continue to engage with the FAA to ensure we meet their expectations and all applicable requirements.” The FAA says it additionally conducts final inspections for newly built 737 Max aircraft prior to granting approval for them to be delivered to customers. Boeing delivered 245 Max aircraft during 2021. During the fourth quarter 2021, Boeing took a pre-tax charge of $3.5 billion related to the 787 programme amid required re-work on aircraft and delivery delays. Boeing predicts an additional $2 billion in costs related to the 787 programme by the end of 2023. In January, Boeing chief executive David Calhoun said: “The work we’re putting in now will build stability and predictability going forward.