Azores Airlines is suspending its flights to Boston and Toronto from Lajes Field (TER). Blaming low passenger loads caused by COVID-19, the Portuguese airline based at João Paulo II Airport in the Azores will stop flying to the two North American destinations from September 1, although it will maintain connectivity from Ponta Delgada. After temporarily grounding its international flying, Azores Airlines only resumed flying to North America in July.
“In July, the average occupancy rate on this (Boston) route was 21%, and, in August, to date, it has fallen even further to 17%,” said an Azores Airlines spokesperson in a statement published by the Portuguese American Journal.
“It would be a show of irresponsible management if SATA ignored this unfortunate reality. Thus, the Azores Airlines is forced to suspend this connection temporarily.”
Azores Airlines was previously known as SATA Internacional and now operates as a subsidiary of SATA Air Açores.
Azores Airlines blames COVID-19 for suspending flights
The airline was sending one of its Airbus A321neos to Boston and Toronto once a week from Terceira. The Azores Airlines spokesperson says these flights do reasonably well in normal times. However, demand had collapsed following the outbreak of COVID-19.
This announcement from the airline follows news that US$157 million in government funding is heading SATA’s way. The European Commission okayed funding last week via the Portuguese Government. The funds are to help the airline restructure after losses caused by the COVID-19 crisis.
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“It is with satisfaction that the SATA Group Board has received news that following a process of notification to the European Union, state support to SATA via the Region (Azores) was today approved,” said SATA in a statement on Monday.
The European Commission is at pains to point out the funding is not a bailout or state aid. Instead, because Azores Airlines is a state-owned airline, they’d prefer to style it as a private investment from the existing owners.
The funds are to cover critical short to medium-term operational expenses. While happy with the funding, the US$157 million shot in the arm falls short of the US$193 million SATA first asked for.
Fears of bankruptcy drive funding decision
Fears Azores Airlines is verging on bankruptcy brought the European Commission’s decision-makers onboard. Given the Azores’ isolation and dependency on air links, bankruptcy would cause acute difficulties for the Portuguese territory and its residents.
“A SATA bankruptcy would lead to serious social problems and economic difficulties for the region and significantly negative side effects on important segments of the economy,” said the European Commission when it announced funding for the airline.
There are some provisos. Azores Airlines cannot use the money for anything other than day to day operational costs. Cutting those operational costs is now a priority at Azores Airlines. That’s doubtless also behind the decision to temporarily abandon its North American markets.
The funding bailout puts the spotlight on the Azores Airlines. The airline had faced a series of financial years for years, long before the COVID-19 fueled travel downturn. As with many other airlines, COVID-19 brought these problems to the foreground.
SATA, along with the Azores regional government and the European Commission, will spend the next six months working on a business plan to plot Azores Airlines’ future. Whether destinations in North America play a role in that future remains up in the air.