Aviation Associations: This is an unexpected turn and a blow to the industry
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Smartlynx engaged in full-service aircraft rental and charter services worldwide. The company’s website states that it had more than 500 office and technical employees, as well as 1,300 crew members.
“Signals, some kind of signs were there in the summer, but there was no idea that it would result in such a development of events.
So, yes, it is quite an unexpected turn and a blow to the aviation industry,” concluded Zigmārs Vestfāls, member of the board of the Latvian Aviation Association.
In the last week of November, “Smartlynx Airlines” offered employees to voluntarily terminate the employment contract by signing a confidential agreement. It is “de facto” known that “Smartlynx Airlines” undertook to pay the salary, but informed that there might not be enough funds to immediately credit the money for the unused vacation.
It was explained to the employees that “Smartlynx” is evaluating the possibility of starting insolvency. In that case, employees will be able to satisfy their claims from the guarantee fund.
The Labor Inspectorate begins an investigation into the dismissal of employees
On the business social media “LinkedIn” in the last few weeks, several members of the “Smartlynx” crew from different countries have published records that they have not received their salary, even for two months.
“Smartlynx” representative Agija Kol-Kanča told the LTV program that the company does not owe the employees anything. When asked about the many complaints on “LinkedIn”, she answers that they are not employees of “Smartlinx Airlines” and never have been.
The program concluded that these people were not employed directly, but through intermediaries – recruitment companies.
“Pilots, flight attendants primarily and technicians, that is another group, they are not employed by a real, actual employer, they have no social guarantee, they have no protection in such situations,” said Dace Kavasa, head of the Latvian Aviation Trade Union, about the specifics of the industry.
The State Labor Inspectorate has started an investigation into the release of employees, but it is still too early to draw conclusions.
“Questions have been prepared and already sent to the company we are interested in. Therefore, we have gotten involved and are doing everything necessary to understand whether everything is being followed within the limits of the law,” informed Andris Saulītis, head of the Zemgale regional state labor inspection.
According to the latest data available in the Enterprise Register for the year 2023, “Smartlynx Airlines” had 382 employees. At least more than ten have not signed the proposed agreement on the termination of the contract, confirmed the Aviation union.
Until the middle of October of this year, the owner of “Smartlynx Airlines” was temporarily the richest citizen of Lithuania, Gedimins Žiemelis. His assets were valued at 2.8 billion euros last year. Avia Solutions Group, owned by Žiemel, calls itself the world’s largest full-service aircraft rental company.
A month before the suspension of Smartlynx Airlines, it was transferred to an investment fund based in the Netherlands, and CEO Edvins Demenus and CFO Mindaugas Kazakevičs got a 5% share each.
According to a leaked list of creditors, the airline owes 238.4 million euros,
mostly to related companies, but 64 million euros have not been paid to other creditors. “Smartlynx” has accumulated a debt of one million euros against the State Revenue Service.
“Smartlynx” representatives did not respond to “De facto”‘s request for an interview this week, but sent a written comment: “At the time when the existing company’s management team purchased “SmartLynx Airlines”, there were specific business development plans, on the basis of which it was also possible to attract an investor. Unfortunately, due to various circumstances (among them, the complicated legal proceedings of the sanctioned GTLK aircraft, which was affected by the war started by Russia in Ukraine, the desire of the aircraft lessors for immediate, not long-term revenues, the changing market situation), these plans could not be implemented and everything changed rapidly.”
Road to insolvency?
“Smartlynx Airlines” legal protection process has started. This means that time is given to settle relations with creditors.
However, as Armands Rasa, the person supervising the process “De facto”, revealed, he submitted an application for the termination of the legal protection process, because the board informed that the required action plan will not be developed.
The applications submitted by Rasa and the company to terminate the legal protection process will be considered in writing on December 10.
The LTV program concludes that this is most likely a path to insolvency.
“People, I hope, will find work very quickly, another question is whether they will all stay in Latvia and make their contribution to the Latvian aviation industry. That is another question. It is likely that some of them will not stay in Latvia. That is the saddest part of this story,” says the head of the association Vestfāls.
The group of the former owner of “Smartlyx Airlines” continues to expand the business in other parts of the world. For example, “Smartlynx Australia” has become a regional carrier at Sydney Airport and “Smartlynx” has recently obtained a certificate for flights in Thailand. This has raised questions in the industry, whether the Latvian business has not been separated from the group in order to write off debts.
The Ministry of Transport has started an extraordinary financial compliance evaluation of the airline. The change of owners of “Smartlynx Airlines” does not in itself confirm the scheme, but creates a basis for checking compliance with the law, the ministry explained.
