Cabo Verde Airlines on Tuesday announced it has cancelled all flights just weeks after the Cabo Verdean State reversed its privatization, taking over the 51% stake in Transportes Aéreos de Cabo Verde (TACV) held since 2019 by Icelandic investors alleging several management failures and immediately dissolving the social bodies.
The reversed privatization of Cabo Verde Airlines was approved in a cabinet meeting, given the “serious concerns” with the compliance with the principles, terms, assumptions and purposes defined in the privatisation process, and whose intention had been previously announced by the prime minister, Ulisses Correia e Silva.
The state’s alleged concern is the compliance with the agreed procedures of payment of expenses, accounting records and contracting, the safeguarding of the interests of the company and objectives of the partnership as a result of involvement in acts and contracts that reveal substances and serious conflicts of interest, the contribution to strengthening the economic and financial capacity and capital structure of the company or on the full implementation of the direct sale in time, payment terms and other terms.
The state also pointed out several serious issues regarding the funding, operations, and governance of the TACV, which it referred to as threatening to the sustainability and would seriously jeopardise the public interest and impose a sharp increase in risk to the state.
The airline has not operated commercial flights since the onset of the pandemic prompting a new agreement that was signed between the state and Loftleidir in March 2021 to make the company viable (involving since November the issuing of state guarantees to around €20 million of loans for salary payments and other urgent expenses), which also provided for the ceding of both parties in different matters.
“After the resolution agreement, facts have been identified in the governance of TACV and in the relationship of Loftleidir Cabo Verde and stakeholders with TACV that may contribute to the unsustainability of the continuation of the agreement, as there is a serious, real and significant risk that Loftleidir Cabo Verde will not comply with its proposed capital investment in TACV,” said the state.
On 27 June, CVA’s board announced the suspension of sales and flights until 12 July, in light of the government’s then announced intention to re-nationalise the company and a request by the state to seize a Boeing – leased by Loftleidir Icelandic EHF – due to alleged debts.
“It is with surprise and apprehension that the management of CVA is witnessing, in parallel, the actions of the State of Cabo Verde, as a minority shareholder, threatening to nationalise, the attempted seizure of assets of third parties who do not have debts to the airline or the state,” reads a statement signed at the end of June by the company’s chief executive, Erlendur Svavarsson.
“I must express my disappointment with the government’s decision to attempt to arrest the aircraft on Sal Island, which prevents the company from resuming operations as planned. After 15 months of preparation [CVA’s flight suspension period due to the Covid-19 pandemic], investment in a new booking platform, staff training and dissemination of schedules and destinations, the company is ready to fly. But we are prevented from doing so, entirely based on government intervention,” noted the chief executive.
While not many may know of the Cape Verde Islands, it is an archipelago of islands located in the ‘middle’ of the Atlantic with a strategic geographic location between the Americas, Africa and Europe. The geographic location of the airline attracted the attention of the Icelandair Group, which operates under a similar circumstance with its main carrier Icelandair.
In 2017, the two entered into an agreement in which they both would manage the state-owned airline Transportes Aéreos de Cabo Verde (TACV), later Cabo Verde Airlines. In March 2019, the Loftleidir Cabo Verde – of which 70 percent was owned by the Loftleidir Icelandic ehf, an Icelandic charter airline owned by the Icelandair Group, and 30 percent by Icelandic investors – bought 51 percent of the airline. The state retained 39% stake with the remaining 10% sold to Cape Verdean emigrants and company employees.
By Victor Shalton Odhiambo