Trustee: Only recovery of required certificate can save Avies from bankruptcy

All Avies flights were canceled effective immediately upon the suspension of the Estonian carrier's Air Operator Certificate on April 1, 2016. (Liis Treimann/Postimees/Scanpix)
5/15/2016 11:48 AM
Source: BNS, ERR
Category: Business

The court handling the bankruptcy proceeding of Estonian carrier Avies has approved a compromise proposal put forward by creditors, but according to bankruptcy trustee Veli Kraavi, the company’s ability to stay in business depends first and foremost on the restoration of its Air Operator Certificate (AOC), the chances of which should become clear next week.

“Right now, attempts to restore the certificate are being made; respective actions are being taken,” Kraavi told BNS.

Regarding the company’s future outlook, the bankruptcy trustee added that f the airline managed to have its AOC reinstated, it could continue operating by offering flights other than those to the islands of Saaremaa and Hiiumaa, or by providing other services.

Regarding the bankruptcy proceeding, the court has approved the creditors’ compromise proposal, said Kraavi. “It has not yet taken effect, but after the order enters into force and if the compromise is implemented, this would mean that the owners will invest more money into the company and part of the debts will be paid back in some reduced degree,” he explained. “In this case, the bankruptcy will end.”

According to the trustee, most debts will be written off in any case. But as for Avies’ continuing operations, much currently depends on whether or not it can recover its AOC — this is the decisive factor, he said.

According to Kraavi, the upcoming week should bring clarity to the situation surrounding the carrier’s certificate, and thus the fate of the company in turn.

The Estonian Civil Aviation Administration (ECAA) is currently examining whether the shortcomings that led to the suspension of Avies’ AOC have been eliminated. If they have, the certificate will be restored and the future of the company will become clearer; if not, there would be nothing more to discuss, said Kraavi.

Avies’ problematic year

Harju County Court declared Estonian carrier Avies bankrupt and appointed Kraavi the trustee in bankruptcy on June 2016, 2015.

The bankruptcy petition against the airline was filed by Swedish companies Swedewings and Bromma Air Maintenance. Creditors, however, decided at their first meeting not to liquidate the company, which had debts totaling 8.3 million euros as of mid-July 2015, and let it remain in business.

On April 1, 2016, the Estonian Civil Aviation Administration (ECAA) suspended the airline Avies’ air operator’s certificate (AOC) for six months, forcing the latter to cease all flight operations effective immediately.

The ECAA stated that Avies had partially failed to meet requirements guaranteeing compliance with aviation safety standards and suspended its AOC for six months or until they were able to rectify all cited violations. While its AOC is suspended, Avies is prohibited from operating any flights whatsoever.

ECAA Director General Kristjan Telve explained that Avies had been sent a warning in late February citing a number of violations and was asked to resolve them by March 24. According to Telve, a number of documents from the airline arrived by March 24, however, it turned out that a number of violations remained either unaddressed or undocumented.

The ECAA had cited Avies for a total of 90 violations, of which 47 remained unresolved by the March 24 deadline.

Avies had served routes to Kuressaare, Kärdla, as well as the Swedish capital of Stockholm, serving a total of 12,000 on its Tallinn-Kuressaare route alone in summer 2015.

Air service may be restored by Midsummer holiday

Hoping to restore air service by the two-day Midsummer's Day national holiday on June 24, the Ministry of Economic Affairs and Communications declared a procurement tender for the contract to restore service to the capitals of the islands of Saaremaa and Hiiumaa on April 8.

As of May 2, tenders submitted by Estonian airlines Nordica and Airest as well as Lithuanian airline Transaviabaltika had all qualified for the procurement tender.

The Ministry of Econmic Affairs and Communication will sign a contract to tender approximately three years in length with the winning bid of its current airline procurement, the more exact details of which will be discussed with the contractor and the winning bidder.

 

Editor: Aili Sarapik

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