A multitude of carriers have been struggling lately to tackle the financial blow brought about by the COVID-19 crisis. Recently, Romania’s Low Cost Carrier (LCC), Blue Air, has known to be facing substantial financial issues. While Blue Air is making every effort to resume regular commercial flights so as to ensure a consistent cash flow to save itself from bankruptcy, the government’s promise to provide €65mn aid for the carrier has not yet materialised. The carrier has also submitted documents for ‘preventive agreement’, which is a mechanism to protect business entities financially affected in the current cataclysm, to the Bucharest Tribunal. Accordingly, the Tribunal’s decision was announced on 6 July, 2020, stating that:
‘Blue Air has entered a form similar to insolvency.’
Blue Air stated in a Press Release:
‘In order to be able to fulfil all its obligations to its passengers, employees and partners, and to be able to ensure the conduct of regular flights after 4 months of total or partial suspension of flights, Blue Air announces the entry into the preventive arrangement procedure.’
Blue Air is currently operating scheduled flights to over 29 destinations. It has plans to add at least 20 more after travel restrictions are eased by the authorities. The airline’s preventive agreement is said to be a restructuring strategy, bound necessary by the COVID-19 pandemic – the March-June quarter saw a revenue reduction of more than €100mn compared what was ideally speculated prior to the pandemic.
By entering the preventive arrangement, the airline will now be able to prioritise covering the costs for operation of regular flights, without worrying about debtors seizing assets. As Blue Air will be able to generate revenue in the next 18 months, procedures to pay the staggered debts that will be part of the settlement procedure, and the debts to passengers and agents will be initiated. Meanwhile, the losses caused by the COVID-19 pandemic will be covered through the government aid approved through the Memorandum adopted on April 23, 2020.
All in all, this procedure is framed to create a solid foundation that shall allow Blue Air to overcome this cataclysmic period.
Oana Petrescu, CEO of Blue Air stated:
‘At Blue Air, we are determined to honour all our commitments and pay all our debts. We rely on the support of our partners and on the trust and mutual respect developed over the years of collaboration and we will take all necessary steps to continue to act according to the highest standards in the field.’
We hope Blue Air stays afloat amidst these uncertain times, emerging stronger and debt-free in months to come! What are your thoughts about Blue Air’s situation? Do you think that most small and medium sized airlines will need state aids to get back on feet? Let us know in the comments!