Adria saved

Banks approve debt conversion plan

UPDATED

This afternoon, Slovenian banks unanimously approved to convert Adria Airways' multi million Euro debt into shares and endorsed a 50 million Euro cash injection from the government, saving the national carrier from bankruptcy. The banks will now gain ownership stakes in the national carrier granting them a share in future profits and decision making. Two weeks ago all banks agreed to convert debt into equity except for Nova Ljubljanska Banka (NLB), which was unhappy with certain terms of the debt conversion and requested for tougher cost cutting measures to be implemented. An agreement with the banks was a precondition for the government to provide a 50 million Euro bailout. A new political crisis in Slovenia will not impact on the state aid promised to Adria. Last night Slovenia’s government lost a confidence vote in parliament, affectively toppling Prime Minister’s Borut Pahor’s administration.

Adria Airways recorded a loss of 63 million Euros in 2010. Nevertheless, the airline’s management is confident that the Slovenian carrier will post a profit within two years. The management has told the media that it has come to a deal with employees after “marathon negotiations” took place for them to agree to a new collective agreement which will see their pay, allowance and holiday time slashed. Adria currently employs 450 people. Under the new restructuring plan, 22% will lose their jobs. Details of the recovery plan should be made public within the next few days.

Adria has had a crisis filled year as it celebrates 50 years of existence. The Star Alliance member concluded negotiations in January to acquire much needed liquidity and named Klemen Boštjančič, former Chief Supervisor of construction firm Vegrad, as its new CEO. By the end of August the airline carried 851.639 passengers, a modest increase on last year’s result.