Following financial problems and uncertainty over the future of Belgian charter airline Air Belgium, company executives have succeeded in raising an additional €10 million to meet the immediate needs of the flailing company, L’Écho reports.
As previously reported, Air Belgium entered into talks with its shareholders in November to urgently secure fresh funding to keep the company afloat.
The company is partly controlled by the Walloon government, which owns a 35% stake. Chinese logistics group Hongyuan controls 49% stake in the company, the maximum possible foreign stake permitted for an airline to fly under a Belgian licence.
Poor financial results, largely a consequence of the Covid-19 pandemic, have led the company to accumulate a loss of €46 million since its launch. High fuel costs in its more distant destinations have also hit the airline's profitability.
A balance of investors
Air Belgium’s bleak financial situation put the airline’s management in a tough situation. The €19 million in capital raised by aviation veteran Niky Terzakis from Chinese investors ran out in March. If Air Belgium gave up a larger share to its Chinese investor, it risked losing its crucial majority of Belgian shareholders. The influence of the Chinese shareholders has become increasingly visible in recent years, with Hongyuan’s name and colours appearing on the airline’s new cargo aircraft.
Regional authorities were reportedly unwilling to bail out the airline once again after the Walloon government had already propped up the airline with several million euros in the years since its inception in 2016.
Fortunately for Air Belgium’s management, the airline has now secured emergency extra funding. This will not be a new investment but rather new loans and the adjustment of existing loan agreements.
Last-ditch funding
L’Écho reports that Air Belgium will receive an additional €6.5 million from Hongyuan and €500,000 from Belgian partner Sabena Aerospace Engineering. The remaining money will come from the airline's minor shareholders and loans.
The company’s public shareholders also intervened to keep the company afloat, but the prospect of new public money has been roundly rejected by the company’s management. Public shareholders have agreed to extend the repayment period of their convertible bonds to the company from 2023 to 2025.
Air Belgium’s economic woes are in stark contrast to other European airlines, who posted bumper profits last summer. Belgian flag carrier Brussels Airlines made record profits and has even paid off €290 million in loans received as part of the Federal Government’s Covid-19 stabilisation support programme.
Despite challenging finances, Air Belgium recently launched two new routes, linking Brussels (Zaventem) Airport to the South African cities of Johannesburg and Cape Town, as well as 38 other African countries through transit connections.
