European regional carrier VLM Airlines will seek to use six months of creditor protection to pursue a restructuring programme aimed at cutting its losses this year and returning the carrier to profit in 2017, chief executive Hamish Davidson says.
Speaking to Flightglobal on 14 May - two days after the carrier sought bankruptcy protection from a Belgian court – Davidson says the carrier's restructuring programme is intended to return the carrier to “closer to break even” in 2016 and predicts that by the middle of 2017 it will be “back in the black”.
At the heart of the strategy will be the “consolidation” of the carrier’s existing route network and the sale and lease back of its six owned Fokker 50s, Davidson says.
The airline incurred a €13 million loss in 2015, Davidson reveals, but he says the need to seek creditor protection was prompted by KBC bank’s decision to “very disappointingly” withdraw its financing guarantee from the Antwerp-based carrier.
He says that the court has eight to 10 business days to decide whether to approve VLM’s application for creditor protection.
Davidson says the carrier’s losses were exacerbated by a “significant change in fortunes during the course of 2015” when having completed a management buyout from Germany's Intro Aviation in 2014 it was announced that “all ACMI operations were not going to be continued by Cityjet” a company still owned by Intro Aviation at the time, he says.
“At that time VLM relied on ACMI operations” for some 95% of its revenue streams Davidson says and this forced the carrier to rebalance the business and increase scheduled flying.
Davidson says KBC’s decision to withdraw its support came despite progress already being made to reduce the carrier’s losses following his appointment as chief executive in January 2016 and the hiring of turnaround experts from the Bottom Line Consultancy.
Davidson decided to exit loss making routes such as Birmingham to Waterford, Rotterdam to Hamburg and services to Liege. VLM used the aircraft freed up by this route closures to build up a base in Friedrichshafen for domestic German routes previously operated by InterSky.
He says the carrier is “extremely happy” with the performance of the Friedrichshafen routes so far.
During this year VLM will seek to “consolidate” its existing network, Davidson says. Having sold four of its 10 Fokker 50s to lessors, he is now in talks with “half a dozen” lessors to sell and lease back the remaining six to bring “liquidity” and “some working capital” into the business, Davidson stresses.
The carrier has been steadily reducing its workforce to reduce costs, with numbers falling from 190 in January to 174 by April. He expects this to fall to 160 by the end of the year. While Davidson claims he wishes to retain the majority of staff, he says he is “disappointed” that unions have not “bought into” the restructuring plan and have not ruled out the threat of industrial action.
Following the buy out from Intro Aviation, VLM’s chairman Arthur White owns 80% of the shares. Davidson says there are no “immediate” plans to bring in new investors, but does not rule this out in the long-term.
Source: Cirium Dashboard