Blue Air is facing major financial problems arising from the COVID-19 crisis. The current government’s promise to allocate 65 million euros for Blue Air has remained at the promise stage, and Blue Air is making every effort to resume commercial flights and ensure the turnover of cash flow to save itself from bankruptcy.
In order to save itself, Blue Air submitted to the Bucharest Tribunal the documents for the “preventive agreement” – a mechanism to safeguard the companies financially affected by Covid-19.
The decision of the Tribunal was pronounced on 6 July 2020. Blue Air has entered a form similar to insolvency called a preventive arrangement.
Blue Air press release (translated from Romanian)
In order to be able to fulfil all its obligations to its passengers, employees and partners and to be able to ensure the regular conduct of regular flights after 4 months of total or partial suspension of flights, Blue Air announces the entry into the preventive arrangement procedure.
In the context created by the COVID-19 pandemic, the entire aviation industry suffered greatly due to the measures to suspend flights taken by the Romanian and European authorities during the state of emergency and the remaining travel restrictions during the alert period.
As of 1 July, Blue Air has resumed scheduled flights to 29 destinations and plans to return to at least 47 destinations once the alert ceases and all restrictions are suspended by the authorities of the states in which it operates.
In order to ensure the smooth resumption of scheduled flights and the fulfilment of all obligations to its passengers, employees and partners, Blue Air Aviation S.A. resorted to the preventive concordat procedure.
“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 are confident in the support of our partners, colleagues and collaborators – together we will overcome this difficult situation for Blue Air and for the entire aviation and tourism industry, continuing to offer our passengers better and better travel solutions, both in terms of services, as well as that price“, says Oana Petrescu, CEO of Blue Air.
This procedure is part of Blue Air’s restructuring strategy as a result of the context created by the COVID-19 pandemic, which in March-June 2020 led to a reduction of more than EUR 100 million in revenues compared to the estimated level and planned for this period.
By entering the preventive arrangement procedure, Blue Air will be able to ensure that priority is given to covering the costs related to the operation of regular flights starting with July 16, once the alert status is completed.
With the resumption of the normal flight schedule, Blue Air will be able to generate, in the next 18 months, the revenues necessary to pay both the staggered debts that will be part of the settlement procedure and the debts to passengers and agents. The direct effects generated by the pandemic will be covered by the state aid approved by the Romanian Government through the Memorandum adopted on April 23, 2020.
The preventive settlement procedure, as defined in Romanian law, is a safeguard procedure by which debtors in financial difficulty (not insolvency!) can reach a formal agreement with their creditors on the payment of debts and by which they can ensure the continuity and viability of the company, so that it is able to pay off its debts and continue its activity.
The judge today accepted Blue Air Aviation’s request to enter the settlement procedure.
This procedure aims to create a solid ground that will allow the company to overcome this period. During this procedure, Blue Air will benefit from the assistance of KPMG Restructuring SPRL (restructuring department of KPMG Romania) as a formal contracting administrator and restructuring consultant. The decision to access and implement this procedure was made on the basis of constant communication with the main partners, who understood the complexity of the economic situation triggered by the pandemic.