As many as 700 passengers have been left stranded at London’s Gatwick airport after an Icelandic-owned airline revealed it would file for bankruptcy. Sterling Airways, which is based in Danish capital Copenhagen, has blamed the Icelandic financial collapse for making its owner, Iceland’s Northern Travel Holdings unable to continue funding.
All Sterling flights have been cancelled, including services from Gatwick to Copenhagen and Stockholm.
The company has issued the following detailed statement on their website:
Dear customers, employees and other stakeholders,
During the last few weeks, the management, board of directors, and the shareholder of Sterling Airlines A/S have been fighting a battle to keep the company alive. Sadly, this has not had a positive outcome, and we have therefore decided to file for bankruptcy which will be done later today.
During the last three years, Sterling Airlines A/S has been through a lot of changes and since acquired by new shareholders in spring 2005 the company has taken on a merger with Maersk Air A/S. In 2005, the total loss of both airlines exceeded 800 MDKK and both owners wanted out one way or the other. Therefore, all jobs in both airlines were at stake and so was also the competitive landscape in Scandinavian aviation since only the presence of a low cost carrier would ensure healthy competition and pricing on the market.
The merger process started in the autumn of 2005 and lasted until mid-year 2006, and by that time we employed over 1,200 employees with far more job security than before, and we had expanded our route network to enable more customers in Scandinavia to travel for less money.
Our operation was progressing positively and our finances were improving considering the massive losses that had been encountered in the preceding years. In 2007, we were doing very well and saw that more and more customers were choosing Sterling, and we ended the year with a positive EBITDA (operational profit) for the first time in many years.
Oil and financial crisis
With the global financial recession that started in the autumn of 2007, Sterling by winter 2007 - 2008 was seeing signs of stagnation in the market. Significant fuel cost increases, and at the same time a planned heavy expansion of our activities, made us more exposed than we would have been otherwise.
By spring 2008, the airline industry was hit by decreasing demand and rapidly increasing fuel prices. That led to Sterling accumulating large losses. During summer and autumn the management of Sterling implemented a restructuring plan of the company resulting in a reduction in fleet and manpower, and a pull-out of a lot of loss-making activities, without compromising our services. The full effect of these actions were planned to have impact start of 2009.
To get the company restructured, the shareholder of Sterling gave financial support from the end of July 2008 to the end of September 2008 transferring 444.5 million DKK to the company. The plan was to continue financial support into 2009. On the 29th September 2008, the Icelandic financial environment started to collapse. Over a 3 to 4 weeks period, the whole financial system melted down, and that resulted in our shareholder being unable to continue his support to the company. Negotiations have been conducted with several potential investors, but it was impossible to make ends meet. The inevitable result is that Sterling Airlines A/S has no option but to file for bankruptcy.
Sterling Airlines’ trademark has always been excellent staff and service. Among the staff the Sterling spirit will continue to exist. We have made our mistakes over the years. But hopefully we have done more right than wrong, and at least we have made the market more competitive to the benefit of our customers.