Air Belgium votes to focus its development exclusively on cargo and ACMI

posted on 19th September 2023 by Eddie Saunders
Air Belgium votes to focus its development exclusively on cargo and ACMI

Following a series of external events that have weakened the company in recent years (COVID, the war in Ukraine, soaring fuel prices, inflation and falling consumer purchasing power), and in view of the current instability of the socio-economic and geopolitical environment, Air Belgium’s Board of Directors – which met today – has decided to review the company’s development strategy.

It wishes to concentrate henceforth on its two growth-generating B-to-B activities, namely cargo and ACMI (leasing between airlines) for passenger and cargo flights, and to discontinue its own Passenger business, which in the face of increased competition is proving to be chronically unprofitable to date.

In order to address its current debt and return to profitability, Air Belgium’s Board of Directors has filed for judicial reorganisation by way of amicable agreement.

The aviation sector has gone through numerous disruptions over the last three years that have severely impacted the profitability of passenger operations for airlines, and Air Belgium is unfortunately no exception.

In 2020, Air Belgium was forced to ground its fleet on account of COVID which resulted in a sudden and drastic drop in revenues, while its fixed expenditures remained unchanged.

This first episode led to a weakening of the company’s financial situation.

In 2022, just as the post-COVID recovery was getting underway, the war in Ukraine led to a precipitous increase in fuel prices coupled with a negative trend in the euro/dollar exchange rate.

Moreover, the inflation that followed the drastic rise in energy costs reduced the purchasing power of consumers.

Given the impossibility of passing the rise in fixed costs to passenger fares, Air Belgium decided in March to cancel flights to unprofitable and highly price-sensitive destinations such as the Caribbean and the French West Indies.

All these factors have had a very severe impact on the profitability of the business and on the cashflow of Air Belgium.

As of April 2023, the company has concentrated its activities on 2 main destinations: South Africa and Mauritius. The capacity of the released aircraft has been allocated to Charter and ACMI (cargo and passenger) activities.

Whereas Air Belgium’s budget forecasts expected a return to profitability in autumn 2023, the financial difficulties of the past, coupled with the current uncertain and challenging environment, are forcing Air Belgium to change its strategy.

Faced with a more than unstable socio-economic and geopolitical environment and in view of the fact that an airline has to plan for cycles of 3 to 5 years, Air Belgium’s Board of Directors has taken a number of decisions to ensure the long-term viability and growth of the company which has a staff of 500 people, namely to concentrate on the two profitable lines of business that offer growth prospects and discontinue the Passenger business.