Slovenia's Adria Airways Shuts Down

The month of September claimed its last airline casualty with the shutdown of Slovenian flag carrier Adria Airways, which offered scheduled and charter services and cargo service to a number of European destinations. 

Adria was a longtime member of the Star Alliance of airlines. Before closing down, the carrier desperately had been seeking a new source of capital to counter severe financial problems. 

Adria, shouldering a debt burden of approximately €90 million ($99 million), operated a fleet acquired via off-balance sheet operating leases. In September, it was made public that two of the airline's Bombardier CRJ100 aircraft were reclaimed by lessors over unpaid lease rentals. Prior to suspending operations, Adria operated a number of flights for Lufthansa group carriers via wet lease arrangements. The airline operated services for Austrian Airlines, Swiss and Lufthansa.

"Bankruptcy proceedings were initiated by the management of the company because of the company's insolvency," stated Adria, which is owned by Germany-based restructuring specialist 4K Invest. During the week prior to the carrier's bankruptcy filing, almost all flights had been canceled. Faced with a blow to Slovenia's economy and tourism industry, the government is said to be toying with the idea of establishing a government-controlled airline.

The Slovenian government is in discussions with Lufthansa, as well as airport operator Fraport, over the transfer of some of Adria's routes to the German-led group of airlines. Lufthansa's wholly owned subsidiaries include Austrian Airlines, Air Dolomiti, Brussels Airlines, Eurowings and Swiss International Air Lines, none of which operate to Slovenia's capital. The government also is in discussions with Lufthansa about the German carrier possibly taking a piece of a newly launched carrier.

In suspending operations, private-equity-backed Adria joins several other carriers that closed up shop: Aigle Azur, France's second-largest airline, which entered liquidation on Sept. 27 after two unsuccessful attempts to land a buyer; XL Airways, a France-based low-cost carrier that went into administration on Sept. 12. due to financial difficulties; and Thomas Cook Group, which confirmed on Sept. 23 that all the U.K. companies in its group had ceased trading, including Thomas Cook Airlines, a victim of uncertainties arising from a number of factors, including Brexit, competition from low-cost carriers and the rise of online travel purchasing. 

The Slovenian government completed the sale of a 96% stake in then financially ailing Adria to 4K Invest in March 2016 for €100 million, followed by the subsequent acquisition by the restructuring specialist of the remaining 4% stake in the carrier. The sale was part of a privatization and reform program launched by eurozone member Slovenia in 2013 to avoid the need for a financial bailout. In 2011 the Slovenian government injected €50 million into the airline.

Adria is one of the carriers providing flights for Nordica, the state-owned Estonian airline that began service in November 2015, following the insolvency of Estonian Air.

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