Wet-lease specialist Avia Solutions Group attributes the underperformance of its SmartLynx airline division to operational and maintenance problems last year, as well as a downturn in the cargo sector.
Avia Solutions divested the Latvian division of SmartLynx during October-November, and the carrier subsequently ceased operations.
The company states, in its third-quarter results, that “operational shortcomings” last year led to “reduced customer confidence” in the carrier.
Its operations were affected by limited maintenance capacity which caused delays and disruption, while a downturn in demand for its narrowbody cargo services forced early lease terminations.
Avia Solutions adds that it provided over €130 million ($150 million) in financial support to SmartLynx, becoming its major creditor.
It says the measure aimed to ensure liquidity to reduce the impact from airline customers, as well as a lessor bankruptcy, over the summer season this year.
Analysis of SmartLynx’s creditor list shows total claims amounting to €238 million including €117 million associated with Avia Solutions’ ASG Finance arm.
Another €51 million is claimed by SmartLynx’s Estonian and Maltese operations, which were being retained at the time of the Latvian airline’s disposal – although Avia Solutions indicates in its third-quarter statement that these are also being divested.
Avia Solutions is re-organising its broader operation, consolidating its European air operator’s certificates to create a “lean fleet structure”, it states.
This fleet optimisation will include “further exit” from loss-making narrowbody cargo services – the company’s cargo fleet includes Airbus A321 converted freighters – and Avia Solutions expects this to generate “positive effects” next year.
“Divesting SmartLynx-related AOCs and cutting 70% of narrowbody cargo [wet-lease] operations has strengthened our financial position and improved key metrics,” says the company.
Avia Solutions Group turned in a nine-month net loss of €40 million in contrast to a profit of €83 million last year.
