Air Belgium (KF, Brussels Charleroi) has cancelled all of its passenger flights from October 3 with the intention of continuing beyond that date with its cargo and leasing activities only, and is seeking protection from creditors, it announced on September 18.

A series of “external events that have weakened the company in recent years” including the pandemic, the war in Ukraine, soaring fuel prices, inflation, and declining consumer purchasing power, and these “coupled with the current uncertain and challenging environment” have “forced” the board of directors into metamorphosing its business model, it said.

It will now focus “exclusively on cargo and ACMI and file for judicial restructuring by way of amicable agreement to ensure its long-term viability and growth.” These two “growth-generating B-to-B activities” for passenger and cargo flights are more profitable than continuing its own “chronically unprofitable” passenger business.

Air Belgium lamented that it was “deeply sorry to announce the discontinuation of its passenger business at such short notice. All options for maintaining this activity or continuing flights after October 3 were examined but the financial situation did not allow this.”

It recounted that “given the impossibility of passing on the rise in fixed costs to passenger fares, Air Belgium decided in March to cancel flights to unprofitable and highly price-sensitive destinations such as the Caribbean and the French West Indies.” Since then, the focus of passenger activities has been on South Africa and Mauritius, while the released aircraft were used for freight and leasing.

However, “the passenger business is still unprofitable. After numerous studies, Air Belgium’s board of directors reached the conclusion that turning a profit on this front would require substantial investments in addition to those already made in recent years.”

In order to give it time to reorganise the company around the two remaining - and, according to the board, profitable - segments and get its debts under control, it has turned to the courts for protection from creditors.

A court will examine the application in the coming days, the carrier said. If it agrees to open proceedings, the company will be able to negotiate agreements with its creditors to reduce its debt. These agreements may include the negotiation of more favourable terms, the partial reduction of existing debts, and the deferral of interest. The purpose is to ensure the company’s long-term viability.

According to the ch-aviation fleets module, Air Belgium currently operates a fleet of ten aircraft, seven of which are leased and the rest owned: two A330-200s (both leased from Altavair); one A330-200F (leased from CMA CGM); two A330-200(P2F)s (one of them leased from Altavair); two A330-900s (both leased from Thunderbolt Aircraft Lease); and three B747-8(F)s (one leased, from BOC Aviation).

Passengers with tickets for flights scheduled after October 3 will be reimbursed “as a matter of priority in the scope of the proceedings,” the airline pledged.

Air Belgium employs around 500 people, and while it is not yet clear exactly what will happen to them, “the management intends to reassign them gradually to other activities operated by the company.”

Air Belgium was founded in 2016 and launched commercial flight operations in March 2018. At the start of this year, CEO Niky Terzakis confirmed to ch-aviation that the company had raised another EUR10 million euros (USD10.7 million) in new loans and existing loan extensions, the bulk of which came from a new shareholder, Hongyuan Group. The cargo-centric Chinese group acquired 49% of the capital of the Belgian airline, leaving 51% in the hands of existing shareholders, but further investment in the carrier does not appear to have been forthcoming.