Several Smaller airliners in Sweden threatened with Bankruptcy as the economy faltersFriday, 02 December 2011
Several of the smaller airlines operating in Sweden are struggling to cope with the lousy economy of the micro sector such that their futures look bleak.
According to reports, most of then are turning on their sides to see what can be dome to maintain some sustenance. As such may are working on ownership changes, bankruptcies protection application and restructurings as to keep their heads over water in something that could take several years to be realised.
Just looking at the data, Air Sweden and some other 3 to 4 companies are struggling for their for their future.
Swedish Transport Agency, which oversees and licenses of the airline industry has "a handful" of small companies with very tight finances under special supervision. Some perched on the brink of bankruptcy.
According to Carina Peterson of the Swedish Transport Agency and responsible for reviewing companies' finances, the Authority will now be meetings with City Airline and Skyways in a nearest future to review how they plan to keep flying and not to fall from he sky. For the case of City Airlines, it has to do with its financial position, in Skyways, there has been major personnel changes and ownership changes. In addition, the company since last summer has been registered in Cyprus.
Until 1992, domestic air travel in Sweden was governed by the SAS and Linjeflyg. After deregulation, a large number of small regional companies have focused on passenger and cargo flights have come - and gone – that tell you he tough doing some types of business in Sweden is when you are a small company.
“We have been busy trying to keep track of what's happening in the industry. Changing ownership or name, and to say the least, fragile balance sheets makes it a very big problem,” says Carina Peterson.
If a company does not meeting the Transport Agency's financial requirements, traditionally and by the stringent rule, the licenses for operating a passenger services is revoked. Last spring the license of Air Sweden was revoked on the ground. The company appealed to the administrative court and a hearing was scheduled in October. The day before the meeting, Air Sweden withdrew from it.
Today, Air Sweden, has been carrying our reorganisation with unpaid taxes of Skr1.8 million. The company has during 2011 and 2010 also accumulated nearly 20 different payment procedures. That is heavy and Sweden does not smile when it come to taxes. Whether a company is going down of up it must pay its taxes. There is no room for manoeuvre – then if you are a small company, you just have to fold.
AdvertisementThis is why far more companies are folding because of unpaid taxes amounting to many millions, and the government debt enforcement officer are constantly hawkisly looking for money even for relatively small debts.
You know that economic principle of taxation which says that “a tax should be designed in such a way that it does not discourage production and which the collecting authority can effectively collect?” In Sweden it is not so. It is a dictatorship type approach in tax collection and there is not humour for flexibility in the way taxes are levied n this country.
A company that has had problems with taxes, which in early November had unpaid taxes and charges for over Skr4 million is Tor Air AB. Another company that has struggled with the lousy economy this year is Golden Air.
One factor contributing to the mess is the industry is reported to be an all ticketing company. These are companies who only sell airline tickets, for example, Småland Flight, Zealand Flights, Gotlandsflyg and high coast flights, in different destinations but let another air carrier to perform the flight.
Sometimes it can just as often occur that the airline did not receive compensation from the ticket-selling company. Just in November, for instance, several companies announced that they will reduce traffic in the near future. City Airline, for example, pulled down on the cost of flight between Gothenburg and Umeå and Gothenburg and Tallinn.
Germanwings ceased its traffic between Berlin and Copenhagen and Direct Flights stopped flying between Visby-Bromma and Visby Norrköping.
Last week, however, a newcomer to enter the Swedish market for passenger airline, Flybe, will now operate Bromma to Copenhagen.
“We will become a serious competitor to put an end to SAS,” declared the company.
Flybe promises to have three departures each weekday, two on Sundays and one departure on Saturdays to Copenhagen.
“Since SAS and Norwegian were deleted from Arlanda and Bromma we choose these as a starting point and this might be the death knell for the SAS,” believes the company.
But to compete with SAS is a hard thing given that SAS operate as super company that never lack capital. Even if it makes looses the governments that own the company will keep on pump in money. So, it is just a matter of wait and see.
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