Air Seychelles (HM, Mahé) has announced it is being restructured within the confines of the Indian Ocean archipelago's bankruptcy protection laws, with an administrator having now been charged with drawing up a turnaround plan.

A statement issued jointly by Air Seychelles and the Seychelles Ministry of Transport and Civil Aviation on Monday, October 4, placed the blame for the airline's unsustainable debt burden on its former Etihad Airways-led administration. The Emirati carrier has since sold its 40% stake back to the Seychellois government, which now controls 100% of its shareholding.

"Air Seychelles has faced significant challenges over the past 18 months arising from the COVID pandemic and its impact on international travel and tourism. However, 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 USD72 million that were funded by the capital markets and are now controlled by bondholders of EA Partners," it said.

Although it is now the carrier's sole shareholder, the Seychelles government has warned that it would be unable to shore up its finances given capping arrangements recently agreed with the International Monetary Fund (IMF) whereby no further government subsidy to Air Seychelles is permitted. As such, the state warned creditors that liquidating the airline would yield little to no return on their original investments and as such, the filing for reorganisation was the only logical step left.

"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. It is to be contrasted with winding up, where a liquidator is appointed to take control of the company’s assets and sell them to repay all creditors," it said.

In the meantime, Bernard Pool, assisted by Suketu Patel, has been appointed administrator of Air Seychelles. Their task will be to consider the optimum ways of restructuring the company and settling its debts. During this period, the carrier will continue to operate normally with the same management and Board of Directors under the supervision of the administrators, who will prepare and present to the creditors - the main ones being the bondholders and the government - a rescue plan for the company. The process is expected to take three to six months, it added.