Air Belgium’s board of directors has announced it has reviewed the company’s development strategy and going forward it will focus “exclusively on cargo and ACMI”.
The airline has filed for judicial reorganisation by way of amicable agreement to ensure its long-term viability and growth.
In a press release dated September 18, the airline said the decision follows “a series of external events that have weakened the company in recent years (Covid-19, the war in Ukraine, soaring fuel prices, inflation, and falling consumer purchasing power), and in view of the current instability of the socio-economic and geopolitical environment”.
The press release continues to state that Air Belgium wishes to “concentrate henceforth on its two growth-generating B-to-B activities, namely cargo and ACMI (leasing between airlines) for passenger and cargo flights, and to discontinue its own Passenger business, which in the face of increased competition is proving to be chronically unprofitable to date”.
According to the press release, flights scheduled before October 3, 2023, will be operated and return flights would be handled by Air Belgium, either directly or through other airlines. Flights scheduled after October 3, 2023 and already paid for by passengers, are to be cancelled and reimbursed as a matter of priority.
In 2020, Air Belgium was forced to ground its fleet on account of Covid-19 which resulted in a sudden and drastic drop in revenues, while its fixed expenditures remained unchanged. This led to a weakening of the company’s financial situation.
Then in 2022, just as the post-Covid-19 recovery was getting underway, the war in Ukraine led to a precipitous increase in fuel prices coupled with a negative trend in the euro/dollar exchange rate.
Moreover, the inflation that followed the drastic rise in energy costs reduced the purchasing power of consumers.
Air Belgium says that given the impossibility of passing the rise in fixed costs to passenger fares, it decided in March to cancel flights to unprofitable and highly price-sensitive destinations such as the Caribbean and the French West Indies.
The airline states that all these factors have had a very severe impact on the profitability and cashflow of the business.
As of April 2023, the company has concentrated its activities on two main destinations: South Africa and Mauritius.
The capacity of the released aircraft has been allocated to Charter and ACMI (cargo and passenger) activities.
Whereas Air Belgium’s budget forecasts expected a return to profitability in autumn 2023, its says the financial difficulties of the past, coupled with the current uncertain and challenging environment, are forcing it to change its strategy.
The airline has stated that, faced with a more than unstable socio-economic and geopolitical environment and in view of the fact that it has to plan for cycles of three t0 five years, its board of directors has taken a number of decisions to ensure the long-term viability and growth of the company which has a staff of 500 people.
These decisions, as outlined on the company’s press release are, 1) to concentrate on the two profitable lines of business that offer growth prospects (cargo and ACMI); 2) to discontinue the Passenger business; and 3) to initiate judicial reorganisation proceedings by way of amicable agreement to ensure the company’s long-term viability and growth and to give it time to reorganise internally around these two segments.
The press release explains that Air Belgium has asked the business court to initiate judicial reorganisation proceedings. The court will examine the application in the coming days.
If it concurs to open such proceedings, the company will be able to negotiate agreements with its creditors so as to reduce its debt. These agreements may include the negotiation of more favourable terms, the partial reduction of the existing debt and the deferral of interest.
The proceedings are also intended to reorganise the company’s lines of business by disposing of or, where appropriate, discontinuing unprofitable activities which would have no prospect of viability if continued.
The purpose of said proceedings is to ensure the company’s long-term viability, with no impact on the legal entity under any circumstances.
According to the press release, judicial reorganisation proceedings do not directly concern employment but do concern creditors. Employees in the Passenger segment will continue to work during the proceedings and beyond, as management intends to reassign them gradually to other activities operated by the company.
The airline states that cargo and ACMI (passenger and cargo) activities will continue as a going concern through the duration of the proceedings and beyond, with the aim being to be able to strengthen these two lines of business in the future.
In the statement, Air Belgium said it is “deeply sorry to announce the discontinuation of its Passenger business at such short notice. All options for maintaining this activity or continuing flights after October3, 2023 were examined, but the financial situation did not allow this.”