Air Seychelles has placed itself in administration and has announced that it is to be restructured in accordance with Seychelles bankruptcy protection laws. A statement to this effect was issued jointly by the airline and the Seychelles Ministry of Transport and Civil Aviation on Monday, October 4.
Air Seychelles said in the statement that it had faced significant challenges over the prior 18 months arising from the COVID pandemic and its impact on international travel and tourism.
But it pointed a finger at its erstwhile partner, Etihad, saying: “Air Seychelles' financial difficulties arise mainly due to significant debt that was incurred during the stewardship of the airline by Etihad Airways, which was previously a 40% shareholder in the company. This debt comprises amounts that were owed directly to Etihad and also loans of almost $72 million (R1,08 billion) that were funded by the capital markets and are now controlled by bondholders of EA Partners.” EA Partners is a SPV owned by the Etihad Aviation Group. EA Partners filed a winding-up petition against Air Seychelles in August, pressing for the full repayment of the US$72 million debt.
The Seychellois Government, which owned the remaining 60% of the shares in Air Seychelles, in seeking a solution to the airline's financial problems, bought out Etihad's 40% shareholding and became the sole owner of the airline.
“Government also negotiated a substantial discount on debt of $70 million that was owed to Etihad. This transaction was the first step in a planned restructuring of the company, which, both the Government and Air Seychelles agree, is essential to ensure the viability of the company and to secure the components of its operation that are in the national interest.”
The Seychelles government has warned it will not be able to shore up the finances of Air Seychelles, due to capping arrangements recently agreed with the International Monetary Fund (IMF), in which no further government subsidy to Air Seychelles is permitted.
"Therefore, the only course of action is to enter company reorganisation, which is a process under the Insolvency Act that is designed to allow the company to continue its business while it determines whether a rescue plan should be presented to its creditors in order to provide a long-term solution for the company’s financial difficulties,” said the statement. The process is estimated to take three to six months.
Air Seychelles said that during the company reorganisation, the company would continue to operate normally with the same management and Board of Directors under the supervision of the administrators, who would prepare and present a rescue plan to the creditors. “In the meantime, all the employees of the company will remain in post and the operations of the company will continue as before.”
Air Seychelles owns the ground-handling services at Seychelles International Airport on Mahé.