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Aigle Azur Flies Into History Books

Aigle Azur Flies Into History Books

Aigle Azur, France's second-largest airline behind flag carrier Air France, has become the latest casualty of strengthening fuel prices and cut-throat competition, entering liquidation on Sept. 27 after two rounds of bidding were unsuccessful.

The now-downed carrier also had embarked on an ambitious campaign to expand from profitable medium-haul routes to long-haul destinations. As noted in a previous FreightWaves post, destinations in Algeria accounted for approximately half of Aigle Azur's operations; the carrier posted revenues of €300 million ($330 million) for 2018.

A French bankruptcy court had granted potential buyers until Sept. 16 to lodge sustainable rescue plans. 

Aigle Azur, based at Paris Charles de Gaulle and Orly airports, filed for bankruptcy and was placed in receivership on Sept. 2, with all flights suspended on Sept. 6. The airline carried about 1.9 million passengers in 2018, operating scheduled services with an all-leased fleet of aircraft as well as charter and air cargo services. Initially, expressions of interest in acquiring Aigle Azur were lodged by 14 entities, including some major players. The court eventually ruled that "no durable solution has been proposed by the buyers."

Air France and French conglomerate Dubreuil Group, parent of Air Caraïbes and French Bee, expressed interest during the first bidding round but withdrew a reported joint offer. Dubreuil Group is the parent of two small carriers, Guadeloupe-headquartered Air Caraïbes, the regional airline of the French Caribbean, and French Bee (formerly French Blue), a French low-cost, long-haul airline based at Paris Orly Airport that operates a scheduled network between France and worldwide leisure destinations.

U.K.-based low-cost carrier EasyJet initially expressed interest in Aigle Azur's Paris operations but withdrew its offer, as did Spanish low-cost carrier Vueling. Airline veteran Lionel Guérin also had been identified as having sought to buy Aigle Azur, as had Gérard Houa, a shareholder of Lu Azur, which holds 19% of the share capital of Aigle Azur. Houa had proposed injecting €15 million in return for a 90% stake in a relaunched Aigle Azur.

In addition to Houa's stake, China's financially troubled HNA Group, parent of Hainan Airlines, is Aigle Azur's largest shareholder with a 48% stake, while airline investor David Neeleman, who co-founded four airlines — Morris Air, WestJet, JetBlue Airways Corporation (NASDAQ: JBLU), and Azul — holds a 32% interest. Both opted not to inject further capital into saving Aigle Azur.

September has not been a good month for airlines. Thomas Cook Group confirmed on Sept. 23 that all the U.K. companies in its group have ceased trading, including Thomas Cook Airlines, a victim of uncertainties arising from Brexit to competition from low-cost carriers and the rise of online travel purchasing. Thomas Cook had been trying since February to sell its airline business.The 178-year-old low-cost travel specialist has gone into liquidation after failing to reach agreement with stakeholders and lenders. 

In August, Cook confirmed details of a £900 million ($1.1 billion) rescue plan that would hand control of its package tour business to Hong Kong-traded Fosun International, a conglomerate that owns holiday resort chain Club Med and is the largest shareholder in Cook with an 18% stake.

The deal called for Fosun to acquire a 75% holding in Cook's package tour unit and up to a 25% holding in its airline business in exchange for £450 million. Another £450 million was to be accessed from lenders and bondholders. The deal cratered, however, when the size of the deal was increased to £1.1 billion to guarantee sufficient working capital. Cook was unable to raise the additional £200 million. The U.K. government subsequently declined to offer Cook a bailout.

XL Airways, a France-based low-cost carrier, went into administration on Sept. 12. due to financial difficulties. XL carried about 730,000 passengers to several U.S. cities as well as to the Caribbean and Reunion, an overseas department and region of France in the Indian Ocean, and to China.

XL Management had indicated that the carrier needed about €35 million to stay aloft. Over the last year, XL management unsuccessfully negotiated with potential buyers, including Air France, which rebuffed overtures for XL to become its long-haul, low-cost arm.

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