The Seychellois president, Wavel Ramkalawan, has touted the possibility that Air Seychelles (HM, Mahé) may be reduced to a domestic island-hopper carrier given the unsustainability of its debt burden.

According to The Nation newspaper, Ramkalawan queried during his State of the Nation address last week whether it would not be more profitable for Air Seychelles to focus more on domestic routes as well as ground handling services rather than compete in the international market which has driven the bulk of its debts.

“We have to make a decision and my government will. And I wonder if the time has not come for Air Seychelles to focus on domestic flights, and abandon the international segment which is a problem for the company," he said.

Amid losses of SCR800 million Seychellois rupees (USD37.8 million), the airline is now seeking SCR109 million (USD5.15 million) in budgetary support to finance staff salaries, Ramkalawan added.

Air Seychelles is a 60/40 venture between the Indian Ocean archipelago's government and Etihad Aviation Group's EAG Investment Holding Company Limited (EAGIHC). When it bought its stake in 2012, EAGIHC paid for it by investing USD20 million and providing a further USD25 million as a loan to Air Seychelles.

To help with growth, Air Seychelles, as a member of the Etihad Equity Alliance, was party to a bond whose scheduled repayments have become particularly onerous in light on the pandemic. Air Seychelles now owes USD72 million to its bondholders who have been unwilling to accept drastically revised terms.

In any case, COVID-19 has served only to exacerbate mounting losses that had already begun to accrue as a result of steep competition from foreign airlines. Finance minister, Naadir Hassan, told parliament last year that Air Seychelles's overall debt pile now stands at almost USD90 million, a figure he described as "frightening".

If Ramkalawan does therefore move to reacquire Etihad's stake in Air Seychelles, the airline would also have to exit leases on its two A320-200Ns - from CDB Aviation and Air Lease Corporation - which it uses to serve Johannesburg O.R. Tambo, Malé, and Tel Aviv Ben Gurion at present as well as run charters. It also operates five DHC-6-400s, which it owns, on shuttle flights between Mahe and Praslin Island.

Given Air Seychelles' positioning in the tourism niche, the Seychellois government has tasked its Islands Development (IDC, Mahé) company to maintain flights to other islands in the archipelago that do not see enough demand to sustain year-round scheduled passenger flights. IDC currently employs a Do228 and two Beech 1900Ds to serve the remote islands of Alphonse Island, Desroches, Farquhar, Assumption Island, Coetivy, Marie-Louise, Platte, and Remire Island.