Air Seychelles may enter administration – CEO

Responding to comments questioning the sustainability of Air Seychelles (HM, Mahé) made by President Wavel Ramkalawan during a state-of-the-nation address on January 22, the national carrier’s chief executive, Remco Althuis, has told the Seychelles Broadcasting Corporation that a number of options are on the table, including entering administration. As previously reported, Ramkalawan told the National Assembly that the government was finding it difficult to keep Air Seychelles operating and suggested it may be best for the company to focus only on domestic services and ground handling. Althuis acknowledged the scale of the debt problem, telling the broadcaster, as quoted by the Seychelles News Agency: “The debt falls in two categories. One is the debt to Etihad Airways, which is being renegotiated, the second is with the bondholders, which is debt that was taken on five years ago to fund loss-making long-haul operations to Paris CDG, Hong Kong Int’l, and European cities.” Air Seychelles is a 60/40 venture between the archipelago’s government and Etihad Aviation Group’s EAG Investment Holding Company Limited (EAGIHC). In negotiations with Etihad, it has been able to secure a USD61 million discount on its debt, Althuis said, but discussions with the group’s bondholders, to which it owes USD72 million, are ongoing. According to the country’s finance minister, Naadir Hassan, the carrier’s current debt total stands at around USD90 million. Althuis stressed that before the onset of the Covid-19 pandemic, work had already been done to cut costs so that during the first two months of 2020 it was “actually producing well above the budget because it was beating the budget by about USD500,000 for both of those months.” It halted long-haul operations in 2018 to concentrate on regional routes. The pandemic and its impact on tourism and aviation “impacted the timeline of the growing success of Air Seychelles,” the CEO said. “I believe that the fundamentals are there, because all the work we had to do to achieve these fundamentals was done in 2018 and 2019 and to an extent in 2020.” “Prior to Covid and in line with its five-year transformation plan, Air Seychelles was generating cash on the operations. Had 2020 been a normal year, the company would have beaten the transformation plan by two years. The initiatives that were taken, especially the economics of the A320-200neo, have tremendously changed the dynamics of the company,” Althuis said. The Seychellois airline currently operates a fleet of two new A320-200N, delivered in July 2019 and March 2020, according to the ch-aviation fleets advanced module, plus five DHC-6-400s with an average age of 5.4 years. Althuis said he believed the bondholders had threatened to take legal action against the airline in order to put pressure on the negotiations. The bondholders have rejected an offer to pay back just USD20 million of the USD72 million. “With such a loan come contracts, big documents of hundreds of pages. Obviously, there is also a route each party can take if there is disagreement and so it is not easy. With these things, it is likely to take years to go the legal route as we are talking about various jurisdictions,” the chief executive explained. Asked about the possibility of bankruptcy, Althuis commented that “bankruptcy or going down the route of a controlled administration, whereby the local company and bankruptcy laws provide opportunities to any company in trouble, that is clearly a route that we could take overall.”