Adria Airways Files for Bankruptcy, All Flights Cancelled

By , 30 Sep 2019, 16:55 PM Business
Adria Airways Files for Bankruptcy, All Flights Cancelled Wikimedia - Konstantin von Wedelstaedt CC-by-0

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Updated: 18:55, 30 Sept. 2019

STA, 30 September - The management of the struggling air carrier Adria Airways filed for receivership on Monday. The Kranj District Court is to decide on the proposal within three days. All Adria flights scheduled have been cancelled.

The flag carrier, which was sold by the state to the German turnaround fund 4K Invest in 2016, wrote that the proposal had been filed due to insolvency and in line with legal provisions applying in such a situation.

On news of the proposal, the Civil Aviation Agency revoked Adria's operating license, which is an automatic measure when a carrier files for receivership.

The government also said earlier in the day that receivership was the only option, noting the state was not ready to invest in or enter Adria under the current owner and in its current financial state.

In recent days, the Bank Asset Management Company (BAMC) and Slovenian Sovereign Holding (SSH) conducted a detailed analysis of Adria's situation on the basis of available data.

The state asset custodians established the shortfall to be much higher than expected, with the company's very poor state also indicative of very poor corporate management, Economy Minister Zdravko Počivalšek said, suggesting Adria would need EUR 28 million to start operating at least remotely normally again.

"This would entail us taking over a large debt and enabling the owner to avoid any accountability. This would be irresponsible to the citizens and the budget," he said.

Thus the only possible option is receivership, which could be followed by two scenarios.

Under one of them, the situation would be left to the market and the supply-demand principle, but it could take several few months and there is no guarantee the flight connections established would benefit Slovenia's economy, Počivalšek said.

He assessed that given the talks held with Germany's Lufthansa and Ljubljana airport operator Fraport, it would be possible to revive about half of Adria's routes.

The second option would see the state establish a new company. The government is examining this scenario, as it would make it easier to secure needed flight connections. A decision is expected soon, but such an operation would also take a few months to execute, the minister warned.

That a new company could be up and running quite fast was indicated by the director of the Civil Aviation Agency, Rok Marolt, who said a new company could get an operating licence quite quickly if the state was behind it.

"If we're dealing with a partner who knows their business, knows what they want, what planes they will have, knows the maintenance programme and all EU regulations", then this could happen quickly, he told the newspaper Večer.

It would, however, take a bit longer for a new carrier to obtain its air operator's certificate (AOC), said Marolt, indicating it could take a month or two.

However, the government believes such a project would only be possible in a firm agreement with Lufthansa. A business plan would need to be drawn up first and then coordinated with Lufthansa, Europe's largest carrier and Adria's main partner so far.

Lufthansa responded by saying they would "not comment on media speculations".

A political consensus on a new company would also have to be reached at home. It would also need to be examined how much the sate would have to invest annually in such a company. The Economy Ministry estimates the figure would range between 4 and 5 million euro.

Meanwhile, Adria employees are rather critical of the government's handling of the situation.

The group of employees pushing for a viable solution for Adria believe the government has not chosen the best scenario for the company or Slovenia, so they demand it presents a financial analysis on the basis of which it decided there was no point in saving Adria.

The group also wonders why the employees have not been invited to talks on a solution, and expect the government to resign if it turns out Adria's restructuring is the best solution.

Fraport Slovenija meanwhile regretted that Adria, its biggest business partner, ended up in receivership. The company said it would focus on ensuring that the airport is well-connected.

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