The States-owned airline will now have its £46.8m. debt accumulated up to the end of last year turned into equity, along with an estimated £16.1m. of further debt which is expected to have accrued by the end of this year.
As president of the States’ Trading Supervisory Board – the airline’s shareholder – Deputy Peter Roffey explained to members that voting against the plan would not save taxpayers any money.
‘What we are not being asked to do today is to decide to spend another £65m. on Aurigny. That money has already been spent,’ he said.
‘What we are being asked to do today is basically to swap that debt for equity and to put Aurigny as a company in a fully solvent position, allowing it to trade normally.’
This will mean that, when the recapitalisation goes ahead by the end of this year, Aurigny will no longer owe Policy & Resources £62.9m. Instead, STSB’s whole ownership of the airline will be considered to have a value equal to that sum. This will prevent interest on the debt from further eroding the airline’s ability to turn a profit, although interest on loans for the leasing of aircraft will continue to be paid as part of ongoing commercial activity.
Deputy Roffey said about £36m. of the accumulated debt could be attributed to the consequences of the Covid pandemic and that £2m. of annual losses relating to services to Alderney would no longer be faced by Aurigny due to the newly-agreed public service obligation, which ensures that the taxpayer covers the cost.
This meant, he said, that only about £10m. of the losses could be put down to normal operational matters and he gave several reasons to be optimistic that these would not recur.
Perhaps the most enticing of these was the revelation – albeit without details at this stage, due to commercial confidentiality – of major new ‘interlining’ agreements with international carriers, similar to the one recently entered into with Loganair.
‘Some have already been signed... but members can expect some really big announcements about further such deals with absolutely major world players very shortly,’ he said.
‘This will massively improve Guernsey’s connectivity, both domestically and internationally.’ It would also mean those travelling abroad via the UK would not face such high levels of landing fees.
Other reasons to be cheerful included the presence of a new chairman and CEO, who had shown themselves to be more communicative, he said, and there would be no more ‘macho struggles’ with rival airlines like Blue Islands, as there was now sensible co-operation.
The simplification of Aurigny’s fleet would significantly cut costs due to removing the need for multiple crews and maintenance staff and Aurigny had undertaken to work alongside tourism and other sectors to enable packages to be marketed to the benefit of the airline and the accommodation sector.
In contrast to this rosy outlook, Deputy Roffey said allowing Aurigny to fold would guarantee an economic loss to the island, as it would be forced to deal with low-cost carriers which would only fly here if fees – which currently bring in £8.5m. – were waived.
He even offered Deputy Simon Fairclough – who had said he was sceptical – a bet that Aurigny would, as projected by the airline itself, break even by 2023. However, he said it would only be a 50p bet, as he was not overly confident.