Just two years after the Cabo Verde Government agreed to hand control of 51% of TACV Cabo Verde Airlines to Loftleidir Cabo Verde, a subsidiary of charter and ACMI specialist Loftleidir Icelandic, the administration has reversed its decision.
In a move that took the airline’s management completely by surprise, the country’s council of ministers announced that Loftleidir’s stake would be repurchased, “to ensure the normal resumption of the flag-carrier’s activities, essential for the development of Cape Verde”.
A government statement added: “It is imperative that the State of Cape Verde, in the name of the national public interest, intervenes with the utmost urgency in order to ensure the existence and normal resumption of the activities of TACV, Sal Airport,” arguing that the state would only be able to do so by resuming control of the airline.
The precise meaning of this statement, or why the government apparently feared that the Icelandic management was not capable of bringing back the airline from a lengthy pause enforced by the pandemic, is not clear.
The government did not respond to enquiries from African Aerospace for the reasons behind the decision.
Its decision was all the more odd given that, in spring 2021, the government had been proposing to sell off its remaining shareholding. This was one of a series of structural reforms by the government as a condition for International Monetary Fund (IMF) financial support to the archipelago.
Loftleidir Cabo Verde said it contested the government’s decision to renationalise the carrier. It said that it was analysing the situation before issuing a more formal response, adding that its management had seen the airline’s financial situation improve before the onset of the pandemic
“Loftleidir Cabo Verde reiterates that it has assumed all commitments since the acquisition of shares in 2019 and, under the new management, achieved a significant growth of the airline of more than 130%, with the creation of an international hub in Sal linking Europe and South America and, later, west Africa and North America.
“Since acquiring the majority of shares, the financial performance of the airline has improved considerably, achieving revenues of CVE 6.755.905 (€61,250) in 2019.”
The airline’s Boeing 757s were stored in the US after the Cape Verde Government halted flights to and from the islands in spring 2020 as an anti-Covid measure.
The airline added that, in March, the government and Loftleidir Cabo Verde had reached an agreement for the company’s financial reorganisation, with the aim of relaunching its operations. This included the appointment of a governmental representative as vice-president treasury within the airline, “with the objective of overseeing application of funds and the payment of debts”.
The airline added that the government had failed to honour the agreement, with its representative having blocked several scheduled payments, “including the mandatory tax and social security contributions, as well as payments to other state entities and service providers, despite appeals by the management and the airline’s executive committee.”
This situation led to a lawsuit by the state-owned operator of Cabo Verde’s Sal Airport and the impounding of one of the airline’s aircraft.
The airline noted that it did not own the aircraft and what it described as “this illegal action by the state” had damaged the airline and led to further deterioration in its finances.
The company added that Loftleidir Cabo Verde and the airline’s management team had learned “with absolute surprise” of the government’s decision to renationalise the airline.
“Loftleidir Cabo Verde is analysing its rights and what legal means it has available to reverse this nationalization and be compensated for the damage caused by this action of the Cape Verdean State,” it said.
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