The demise of Lithuania’s FlyLAL appears inevitable after it suspended operations on Saturday. This follows the collapse of a potential buyout deal by Swiss investment firm SCH Swiss Capital Holdings.
The airline, which employs some 360 people, said more than 29,400 passengers would have to change their travel plans because of its move.Airline officials said it terminated a preliminary agreement with the Swiss company after it failed to pay US$1 million that would have cleared FlyLAL’s debts and potentially saved it from bankruptcy.
In a statement released Saturday morning, the airline said it was forced to make the move to stem its losses and not make things worse for its creditors after Swiss investment fund SCH Swiss Capital Holdings AG failed to meet the terms of a buyout agreement that would have allowed the airline to cover about $1 million in debt.
Company Chief Executive Vytautas Kaikaris said the suspension was one of the few options left to try to save his company.
“We believe that the decision to suspend the operations is the most appropriate at this moment. We are doing this trying to stem further losses and prevent further deterioration in creditors’ situation,” said Kaikaris in a statement.
“FlyLAL - Lithuanian Airlines will file for bankruptcy if no proposals for future airline development are received in the nearest days.”
“Unfair market conditions, record-high oil prices and low demand for winter season flights were the main reasons,” for the airlines plight, the airline said in a statement.
Since it was privatized in 2005, FlyLAL has run up large debts, which now total some US$26 million.
Some 30,000 FlyLAL tickets had been sold and were still valid before Saturday’s announcement.