Between 2013 and 2019, the SATA group "accumulated losses of around 260 million euros, of which 233.4 million euros (90%) were generated by Sata Internacional - Azores Airlines," reads the audit.
An audit by Portugal’s Court of Auditors (TdC) of the SATA group, an aviation company owned by the Azores regional government, identifies Azores Airlines, its international carrier, as responsible for “about 90% of the accumulated losses between 2013 and 2019,” which totalled €260 million.
In the document, released on Wednesday, the TdC “identifies that the main cause for the significant worsening of the SATA group’s economic and financial imbalance was the negative performance of the subsidiary SATA Internacional – Azores Airlines, S.A. [which runs flights to and from the archipelago], responsible for about 90% of the accumulated losses in the period in question.”
Between 2013 and 2019, the SATA group “accumulated losses of around 260 million euros, of which 233.4 million euros (90%) were generated by Sata Internacional – Azores Airlines,” reads the audit consulted by Lusa.
The analysis of the accounts of the group, which also includes the aviation company SATA Air Açores – which is responsible for intre-island flights – was made following a request from the Azores legislative assembly.
It found that between 2013 and 2019, liabilities “rose from 199 to 465 million euros and equity was subject to a sharp erosion, reaching the negative value of 230 million euros at the end of 2019.
“Throughout that period, the company faced a situation of technical bankruptcy, with negative equity amounting to minus €203.3 million at the end of 2019,” the audit states.
The TdC takes the view that these Azores Airlines results were in part caused by “the management options related to the process of renewal of the long-haul fleet and its subsequent reversal, as well as the operation of routes subject to public service obligations without the corresponding financial compensation.
“The evidence gathered by the Court suggests that the decision to replace four Airbus A310-300 aircraft with two Airbus A330-200s – of which only one would become part of the company’s fleet – was a strategic decision that was not technically supported,” the audit states. “As a consequence, losses in the order of 42 million euros were registered, of which about 22 million euros between 2016 and 2019.”
The TdC also considers that the decision “caused serious constraints to the operation, affecting the respective competitive position precisely at the moment when, through the partial liberalisation of the Azores airspace, the company began to face competition from other airlines in the dispute for some of the routes that historically generated the most value.
“On the other hand, the Azores Regional Government’s decision to impose the operation of routes subject to public service obligations without the corresponding financial compensation also contributed to the deterioration of the company’s economic and financial situation, translating into the accumulation of losses, between 2015 and 2019, of around 41 million euros,” the TdC says.
As for SATA Air Açores, the audit says that “the persistent delays in the payment of compensation due by the Autonomous Region of the Azores as grantor in the inter-island air services concession contract – which at the end of 2019 totalled 51.7 million euros – contributed to worsening the strong financial imbalance that the company already showed in 2013 and which has become worse in subsequent years.”
The TdC also warns “about the high degree of informality that continued to characterise the functioning of the governing bodies of the SATA Group companies, which embodies non-compliance with legal and statutory provisions, which is not admissible in a context of management of public money.”
In June, the European Commission approved government aid to support the restructuring of the airline, in the shape of €453.25 million in loans and state guarantees, but to be offset by measures to include a reorganisation of the corporate structure, namely the divestment of a controlling stake (51%) in Azores Airlines.
In March, the Azores regional government opened a tender for the privatisation of SATA group company Azores Airlines, with interested parties having 90 days to submit bids, in a process that is expected to be concluded in September or October.
The specifications for the privatisation of Azores Airlines provide for a sale of a “minimum” of 51% and a “maximum” of 85% of the company’s share capital.