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The national carrier saga: | 13 January 2021

The national carrier saga:

Is Air Seychelles barrelling towards bankruptcy?

Is Air Seychelles barrelling towards bankruptcy?


The plot in the Air Seychelles debt crisis is thickening even further according to international news media Reuters, who on Monday published an article in which it is alleged that creditors are considering legal action against the national carrier, in a bid to recover just over US $70 million in troubled bonds.

According to the article, the consideration of action is only the latest twist in a debt saga ensuing from the unravelling of United Arab Emirates (UAE) Etihad Airways’ strategy to embark on global partnerships with airlines including India’s Jet Airways, Darwin Airline, Air Serbia and Air Seychelles.

The consortium of airlines which was officially announced in October 2014 raised two debts amounting to US $1.2 billion through bondholders of Etihad Aviation Group's Netherlands-based Special Purpose Vehicle (SPV) Etihad Aviation Partners II, raising in September 2015 US $700 million, and in May 2016, a further US $500 million through international markets.

Under the original deal, the funds would be split between the United Arab Emirates (UAE) carrier and partner airlines and each company would assume responsibility for paying off its own debt by the bond due date in 2021, although Air Berlin, Jet Airways, and Alitalia have since gone bankrupt. Under the May 2016 deal, Air Seychelles, Air BerlinAir SerbiaAlitalia, and Jet Airways signed up for the US $500 million platform financing transaction via EA Partners II, with 6.75% notes due in 2021.

Over recent years, the Seychelles government has laboured to try and pay off the accumulating debt, entering into several phases of negotiations with the UAE-based airline to find a solution to its debt obligation. In July 2020, the company communicated to the Etihad SPV intentions to engage in negotiations with regards to its debt obligations which were due on August 24, as it struggled to honour its portion of the debt, and fears that the money-guzzling company will be made insolvent mounted.

Despite lengthy negotiations, efforts are yet to bear fruits and it looks as though the government’s pockets and domestic economy could soon be taking another blow from the botched Etihad deal, once praised as the solution to turning the airline around after many years of significant losses, and the most realistic way forward for long-term commercial growth.

In November 2019, the government of Seychelles announced that it was seeking a bank guarantee to help Air Seychelles pay off its debt, after Etihad was not accepting the proposal for a sovereign guarantee.

Etihad SPV bondholders in September 2020 further rejected a debt-restructuring request from Air Seychelles to partially repay the loan, consisting of an aggregate prepayment of US $15 million and a principal extension of US $5 million backed by a government guarantee (

In fact, the national carrier’s restructuring proposal has been dubbed as somewhat light-hearted or trivial, with the creditors stating that the company has failed to put forward urgent or serious restructuring proposals to date through a statement issued to partners in December, according to the Reuters report.

The report further claims: “Air Seychelles’ latest proposal, disclosed last month in a regulatory filing by the special purpose vehicle, EA Partners, sought a write-down of more than 70% of the outstanding debt, with the remaining payment guaranteed by the government of Seychelles. However, that has been rejected by creditors.

“The creditor proposal envisages EA Partners writing off 20% of the debt, with full payment of accrued and unpaid interests. They said their proposal recognises the difficulties faced by the airline and supports adequately its recapitalisation.”

The article goes further to claim that the government intends to buy back from EA its shares in the national carrier, at nominal value.

State-owned Etihad Airways is Air Seychelles’s second biggest shareholder after it acquired 40 percent from sole holding in the aviation company in January 2012 from sole owners the Seychelles government with a vision to bring the national carrier to profitability. The acquisition saw the aviation giant investing US $45 million while also securing a five-year management contract, under the leadership of then Minister for Home Affairs and Transport Joel Morgan and former Minister for Tourism and Culture Alain St Ange.

Seychelles NATION attempted to contact Air Seychelles, Minister for Transport Antony Derjacques and Minister for Finance, Economic Planning and Trade Naadir Hassan to seek clarifications on the matter yesterday but to no avail. The publication will keep readers informed on the matter in due time.


Laura Pillay

Sources :,






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