BRUSSELS- Flag carrier Air Belgium (KF) is taking a significant step by discontinuing all its scheduled flights starting in October. Instead, the airline will shift its focus toward other activities and initiate a court-authorized restructuring process to alleviate its financial burdens.
Air Belgium has stated that its passenger services have consistently incurred losses, making them unsustainable. Consequently, the airline will shift its sole focus towards wet-lease and freight services.
Air Belgium to Cancels Passenger Flights
The airline attributes its decision to a combination of adverse factors, including the impact of the COVID-19 pandemic, the Ukrainian conflict, escalating fuel prices, and inflation. These challenges have severely affected its profitability and cash flow.
Despite prior projections of achieving profitability by January of the following year, the ongoing challenging environment and continued financial strains have prompted the company to reevaluate its approach.
The airline’s board has chosen to revamp its development strategy, centering its efforts on its business’s growth-driven wet-lease and cargo segments.
Air Belgium is taking decisive actions to address its financial challenges. The airline has made the decision to terminate its passenger business, which has been grappling with heightened competition, effective October 3rd.
Previously, Air Belgium had already suspended its flights to the Caribbean due to its inability to match the significantly lower fares offered by French carriers. The airline had been focusing its efforts on serving routes to South Africa and Mauritius.
Financial Crunch
After conducting thorough assessments, Air Belgium’s board concluded that achieving profitability in its passenger operations would necessitate substantial additional investments beyond what has already been expended in recent years. Unfortunately, these required investments have not been feasible.
Air Belgium has formally requested the business court to initiate judicial restructuring proceedings as part of its restructuring efforts. The court will assess this application in the coming days, and if approved, the airline will engage in negotiations with its creditors to alleviate its debt burden.
Air Belgium aims to secure more favorable terms and defer interest payments as part of this process. The airline, which employs 500 staff members, also plans to discontinue or divest unprofitable businesses that lack prospects for viability. It intends to reassign its employees from the passenger airline segment to other activities within the company.
Previously, Air Belgium had indicated that it was in discussions with a potential investor to bolster its financial position, particularly after reporting full-year losses amounting to €44.6 million ($49 million). The airline’s auditor had expressed concerns about its ability to continue operations.
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