Cape Verde's deputy prime minister, Olavo Correia, said today that without State intervention, Cabo Verde Airlines (CVA) will “disappear”, but guaranteed that this support will be based on the responsibility it holds in the company's share capital.
“Without the State to intervene in the company, as a shareholder, the company will disappear, we have to be clear on this matter. This is how it is in Cape Verde, how it is in Portugal, how it is in Germany, how it is in England and how it is in most countries ”, said Olavo Correia, who is also Minister of Finance, when he spoke in parliament, in the annual debate on the state of the Nation.
At stake is a privatized company in March 2019, led since then by Icelandic investors, in which the State still holds a 39% stake in the share capital, but which has been stalled for more than four months due to the covid-19 pandemic, with the suspension of all international flights to the archipelago.
“The State is still a shareholder in the company. In fact, our initial strategy was to privatize 100% of the company, but it is obvious that in this context it will be absolutely impossible to privatize the company 100% ”, said Olavo Correia, when asked in parliament about the future of the airline.
Negotiations between the Government and the CVA administration on state support for the company have been known for several weeks, still without understanding, at a time when the resumption of international flights in Cape Verde is expected for August.
However, the deputy prime minister left the warning: “The State will only intervene to the extent that it is responsible for the company's share capital. And that is a shareholder obligation ”.
He added that it is necessary to find in the short term “a solution to make the company viable, until the international aviation market recovers”.
In March 2019, the State of Cape Verde sold 51% of the then public company TACV (Transportes Aéreos de Cabo Verde) for 1,3 million euros to Lofleidir Cabo Verde, a company 70% owned by Loftleidir Icelandic EHF (Icelandair group, which held 36% of the CVA) and 30% by Icelandic entrepreneurs with experience in the aviation sector (who took the remaining 15% of the 51% privatized share).
The Cape Verdean Government concluded this year the sale of 10% of CVA shares to workers and emigrants, but the remaining 39%, which should be sold on the stock exchange, to private investors, will now remain in the domain of the State, a decision announced by the executive due to the effects of the pandemic.
“In the short term, given the implications of covid-19 for civil aviation, the state cannot leave the company. On the contrary, the State has to assume its commitment to the company in order to transform it into a financially healthy company and put it at the service of the Cape Verdean economy ”, underlined Olavo Correia.
He explained that the “solution” for CVA will have to allow it to become a “sustainable” company and anchored in the connection to the diaspora, connection to the main destinations in Europe and Africa, but also using the company to “help the economic recovery” of the archipelago.
CVA management clarified this week that the recent approval of a $ 12 million (10,2 million euros) state guarantee was a “formality” of a previous loan and that the company needs a new financial injection to “improve the liquidity".
Asked by Lusa about the endorsement approved by the Cape Verdean Government for the loan, the board of directors explained that this guarantee "is not part of the future discussion of financing in progress among shareholders".
“This State guarantee is just a final formality between the State and bank IIB, required in conjunction with the State's participation in the shareholders' previous contributions to the airline. For this reason, the State guarantee will no longer provide cash funds to the airline at the moment ”, clarified the company.
However, management assumes that it expects with “expectation and hope” that “other actions are eminently taken by the airline's shareholders, in order to improve the company's current liquidity for the benefit of its employees, creditors and all other interested parties” .
Before the crisis caused by the covid-19 pandemic, CVA management had already pointed out that the company urgently needed a long-term loan to guarantee its operation.
The CVA transported almost 345 thousand passengers in the first year after the privatization (March 01, 2019 to February 28, 2020) of 51% of the company, an increase of 136% over the previous period, according to data provided to Lusa by the company.