Copenhagen-based low-fare carrier Sterling Airlines declared bankruptcy this morning, October 29, 2008. The carrier grounded its entire fleet of 24 Danish-registered aircraft, and ceased operations.A multi-lingual message posted on Sterling's website said that a "battle to keep the company alive" had failed in the face of significant increases in fuel prices over the past year, and the global financial recession. A restructuring plan was initiated over the summer, however the meltdown of the financial market in Iceland several weeks ago became the last straw. It prevented Sterling's Icelandic owner from coming through with the financing that would have allowed the airline's operations to continue. In short, the airline ran out of money, with no time left to raise more.
Here is an excerpt from the Sterling Airlines bankruptcy announcement:
With the global financial recession that started in the autumn of 2007, Sterling by winter 2007 – 2008 was seeing signs of stagnation in the market. Significant fuel cost increases, and at the same time a planned heavy expansion of our activities, made us more exposed than we would have been otherwise.Buzz on the grapevine is that Sterling's more than 1,000 employees were given no advance warning of the shutdown of the airline. Instead, many employees heard about the bankruptcy from news reports -- unfortunately not an unusual situation in the case of airline bankruptcies. Worse still, employees were not paid for September, and rumor has it that crews who were away from base are now stranded at their layover hotels.
By spring 2008, the airline industry was hit by decreasing demand and rapidly increasing fuel prices. That led to Sterling accumulating large losses. During summer and autumn the management of Sterling implemented a restructuring plan of the company resulting in a reduction in fleet and manpower, and a pull-out of a lot of loss-making activities, without compromising our services. The full effect of these actions were planned to have impact start of 2009.
To get the company restructured, the shareholder of Sterling gave financial support from the end of July 2008 to the end of September 2008 transferring 444.5 million DKK to the company. The plan was to continue financial support into 2009. On the 29th September 2008, the Icelandic financial environment started to collapse. Over a 3 to 4 weeks period, the whole financial system melted down, and that resulted in our shareholder being unable to continue his support to the company. Negotiations have been conducted with several potential investors, but it was impossible to make ends meet. The inevitable result is that Sterling Airlines A/S has no option but to file for bankruptcy.
As usual in these situations, the press is full of stories about thousands of stranded passengers who now have to find alternative transportation, and pay additional fares in order to return home. This is very unfortunate, of course, but presumably those passengers at least have jobs to come home to.
Another sad day in what has to be one of the saddest years for commercial aviation.
