Leisure operator Small Planet Airlines announced that its Lithuanian business—Small Planet Airlines UAB—has filed for restructuring under Lithuanian law, as a knock-on effect of debts at its German and Polish airlines that both hit financial difficulties this fall.
Small Planet Airlines GmbH—the group’s German airline— launched insolvency proceedings in September, after late aircraft deliveries, crew shortages and technical events collided with its rapid expansion plans.
In October, Small Planet’s Polish operation also entered “accelerated arrangement” restructuring proceedings. Accelerated arrangement is an insolvency step under Polish law, aimed at averting bankruptcy.
These two restructuring processes have now taken their toll on Lithuanian operation Small Planet Airlines UAB, which had been expected to deliver a €3.4 million ($3.9 million) operating profit in 2018. However, the Lithuanian airline took on guarantees and joint liabilities for the German and Polish operations, creating exposure to their debts.
“There is a major difference between restructuring in Polish and German companies, and in Lithuania. Small Planet Airlines in Poland and Germany were loss-making companies, whereas Small Planet Airlines Lithuania continued to operate successfully this year,” Small Planet Airlines Lithuania CEO Kristijonas Kaikaris said in a statement issued Oct. 23.
The Lithuanian restructuring is “a vital step” to protect the company from financial problems in Germany and Poland.
“The company needs time to pay off the liabilities it has been exposed to due to restructuring proceeding in Poland and Germany,” Small Planet Airlines Group said, adding that the restructuring will have no impact on the Lithuanian airline’s operations.
This winter, Small Planet Airlines Lithuania expects to carry 100,000 passengers with a fleet of eight Airbus A320s.
“For the restructuring to be successful in Germany and Poland, finding a new investor is vital, whereas the Lithuanian company can survive without it. However, we are leaving this option on the table and having talks with potential investors since additional financial injection would allow Small Planet Airlines Lithuania to go through the restructuring easier and faster. We believe restructuring will allow us to soften the potential negative impact for the Lithuanian company and continue its flight operations successfully into the future,” Kaikaris said.
Small Planet Airlines UAB posted a €2.3 million ($2.8 million) pre-tax profit in 2017 and passenger numbers were up 32% this summer. The company expects revenue to reach €122.7 million by the end of 2018, up nearly 20% year-over-year.