Air Seychelles has entered administration, as its debt burden of more than $70 million has become too much for the small airline to manage. Today, the government of Seychelles has appointed two administrators to scrutinize the books of the national carrier and advise on the next course of action.
The debt burden becomes too much
Air Seychelles has announced it will enter into an administration process under the archipelago’s bankruptcy protection laws. A statement issued on Monday, as reported in ch-aviation, laid the blame for the carrier’s financial situation on debt accrued while it was part of Etihad’s ‘equity alliance.’
Etihad sold back its 40% stake in Air Seychelles to the government earlier this year, reportedly for a nominal fee of just one dollar. However, this left the carrier with debts owing to Etihad itself, as well as loans of almost $72 million that were funded by the capital markets.
EA Partners, the bondholders for the debts, were reportedly turning up the heat on Air Seychelles at the end of August. The bondholders had petitioned the airline to be wound down in order to repay its debts. Now, the Seychellois government has reached breaking point. In a statement, it said,
“Air Seychelles has faced significant challenges over the past 18 months arising from the COVID pandemic and its impact on international travel and tourism. However, Air Seychelles’ financial difficulties arise mainly due to significant debt that was incurred during the stewardship of the airline by Etihad Airways, which was previously a 40% shareholder in the company.”
Air Seychelles has had two administrators appointed by the government – Suketu Patel and Bernard Pool. These individuals are now tasked with finding a route out of the situation.
Three options available
For Air Seychelles, the jury is out on whether it will survive this latest turmoil. Transport Minister Anthony Derjacques was noted in local press as saying there were three likely outcomes for the carrier. Seychelles News Agency quotes the minister saying,
“The administrators will able to do one of three things after they have gone through the company’s books, which is either to come up with a rescue plan to get Air Seychelles out of its current state, or re-structure the company, or they can recommend the winding up of the company.”
A winding up of the company will affect not only those working directly for the airline itself, but also its ground handling company at Seychelles’ international airport, Pointe Larue. The SCAA runs the airport, but Air Seychelles provides the ground handling. Should the carrier fold, the SCAA will need to take steps to ensure other airlines operating to the archipelago are able to continue to fly.
In regards to the airline’s staff, Derjacques said,
“It is in the government’s plans to ensure that we minimise the impact of anything that happens at Air Seychelles. I can assure the current staff of Air Seychelles that while I am not saying anything bad will happen, but if it ever happens, the government will support all staff and look to assist them in seeking alternative employment.”
Air Seychelles is the national carrier of Seychelles and has been in operation since 1978. It began flying long-haul in 1983 and currently has a fleet of seven airplanes – two A320neos and four Dash 6-400s.