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Dropped by its Chinese shareholder, Aigle Azur urgently needs to find new partners

By Rémy Darras
Posted on Thursday, 15 August 2019 07:15

An Airbus A320 airplane of French airline company Aigle Azur prepares to land at the Marseille-Provence airport in Marignane, France, March 29, 2018. REUTERS/Jean-Paul Pelissier

More than 18 months after the departure of Weaving Group, France’s second-largest airline Aigle Azur is fighting for its future.

Can it survive the summer?

Weaving Group, the company of the late, emblematic Franco-Algerian businessman Arezki Idjerouidène, is credited with driving the relaunch and growth of Aigle Azur.

  • Last Thursday, in response to an article in Le Figaro, Aigle Azur issued a press release looking to reassure its customers and lessors (most of the fleet belongs to charter companies)
  • But while the airline stated in the release that it had 25 million euros in cash, it has been financially free falling since at least December.
  • This requires it to “review its long-term financing and its long-haul strategy,” a source close to management says.

The company can hold out in the short term and ensure its passengers—particularly those en route to and from Algeria—return from their holidays as promised. But once its resources are exhausted, what will happen?

Failure of the long-haul strategy

“If [one] rental company takes over an aircraft, it could create panic among all the others, [which] could do the same. The company could end up with a minimal fleet and be almost dismantled,” warns a specialist in the aviation sector.

While the Algerian market accounted for 60% of the airline’s traffic in 2017 (27% market share on the France-Algeria route or 1,265,000 passengers—many of whom were affinity customers comprising dual nationals), the company switched to long-haul flights last year.

  • The strategy has not met with the expected success.
  • While Aigle Azur continues to fly to Moscow and Kiev, it terminated flights to Beijing in May and flights to São Paulo could be interrupted next month.
  • The company does not have the means to support the development of these lines, “which generally become profitable after two to three years,” according to an expert in the sector.

HNA, the “ghost” shareholder

But it is largely the serious difficulties of its main shareholder, the Chinese conglomerate HNA (49%), that weighs on Aigle Azur’s situation.

A shareholder since 2012, the Chinese have not invested a single cent. The group from the island of Hainan went all out investing in the hotel and aviation sectors, spending as much as $50bn between 2015 and 2017.

HNA has been need of liquidity since last year after the explosion of its debt to $100bn. It has disengaged itself in recent months from Aigle Azur and is now described as a “ghost” shareholder in the airline.

Some analysts are also asking about the role of businessman David Neeleman, who took over Weaving Group’s share (32%) at the end of 2017. The American-Brazilian investor is the founder of the successful discount airlines JetBlue, in the United States, and Azul, in Brazil.

In March 2018, in an interview with Jeune Afrique Business +, Aigle Azur’s president Frantz Yvelin admitted difficulties in raising capital from the company’s shareholders.

  • “They didn’t give me everything I wanted, they only gave me a few million,” he complained. According to him, 80 to 90% of the company’s development was self-financed.

Bottom line: The company is in urgent need of finding new partners, especially since in addition to the current setbacks several million euros of the airline’s revenue are still blocked from repatriation in Algeria.

This article first appeared in Jeune Afrique.

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