September 19, 2019 / 5:16 PM / 3 months ago

Air France and easyJet drop Aigle Azur bids as liquidation looms

PARIS (Reuters) - Air France-KLM (AIRF.PA) and easyJet (EZJ.L) withdrew competing offers for Aigle Azur on Thursday after missing an overnight court deadline to improve their bids to acquire part of the collapsed budget airline’s operations and staff.

FILE PHOTO: An Airbus A320-200 aircraft, operated by Aigle Azur, lands at Orly Airport near Paris, France, September 6, 2019. REUTERS/Benoit Tessier/File Photo

An Air France spokeswoman confirmed it had decided against submitting an expected joint offer with long-haul niche carrier Air Caraibes because “our conditions for doing so weren’t met”.

EasyJet said it had also pulled out but remains committed to France and its operations at Paris Orly airport.

Aigle Azur, the biggest shareholders of which are China’s HNA Group and Brazilian entrepreneur David Neeleman, has suffered in the wake of a botched long-haul expansion.

Now the withdrawal of three major bidders delivers a blow to government-backed efforts to sell off parts of Aigle Azur’s business and save a large proportion of its 1,150 jobs.

The airline’s unfolding bankruptcy is the latest among smaller European airlines struggling to contend with higher fuel costs and stiff low-cost competition.

The privately held carrier, founded in 1946 to serve Algeria and other North African routes, was granted protection from creditors this month and grounded its fleet of 11 Airbus jets within days, stranding about 19,000 passengers.

FAST-CHANGING

Lionel Guerin, a former Air France executive who had tabled and then withdrawn an offer, has submitted a new bid that requires a 15 million euro ($16.6 million) French government loan, according to French news site La Tribune, which first reported Air France’s withdrawal.

Air France, easyJet and other bidders are attracted by Aigle Azur’s valuable take-off and landing slots at Orly as well as flying rights to foreign destinations, which become harder or impossible to acquire piecemeal under liquidation.

But absorbing Aigle Azur operations would have required Air France to negotiate a complex deal with its own unions within days, waiving internal rules that bar it from granting any senior or flight captain roles to new hires.

EasyJet also pulled out because it believed the deadlines were too short for an adequate assessment of the business and acquisition risks, a source briefed on the decision said.

During the bankruptcy proceedings it emerged that Aigle Azur’s debts amounted to 148 million euros - more than previously estimated and equating to about half its 2018 revenue.

Transport Minister Jean-Baptiste Djebbari remains in contact with potential buyers and their unions in a “fast-changing situation”, a French official said, adding that bidders can legally cancel any withdrawal within 48 hours.

Reuters was unable to contact Guerin, and a spokeswoman for Air Caraibes parent Dubreuil Group did not respond to requests for comment.

FILE PHOTO: An Airbus A320-214 aircraft, operated by Aigle Azur, sits on the tarmac at Orly Airport near Paris, France, September 6, 2019. REUTERS/Benoit Tessier/File Photo

The Evry commercial court near Paris had ordered Aigle Azur’s liquidation under a “going concern” process that buys more time for a potential rescue. Hearings resume on Sept. 23, with liquidation scheduled four days later.

Air France shares were up 0.1% at 9.12 euros by 1553 GMT, while easyJet was little changed.

($1 = 0.9052 euros)

Reporting by Laurence Frost; Writing by Benoit Van Overstraeten; Editing by Alexander Smith and David Goodman

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