Air Madagascar (MD, Antananarivo) - the stricken predecessor to Madagascar Airlines (MGY, Antananarivo) - retains debt of about USD100 million, 60% of which is owed to the Malagasy state, according to the latest country report by the International Monetary Fund (IMF).
Since October 15, 2021, both Air Madagascar and its subsidiary Tsaradia (TZ, Antananarivo) have been under receivership with cumulative losses at the time totalling USD80 million. The Madagascar justice ministry oversees this process, and the government, being the sole shareholder, is fully accountable for the historical debt. According to the IMF report, the government flagged the fiscal risk of restructuring Air Madagascar's debt to its general budget. A restructuring plan for the debt was still to be approved by creditors.
"In view of the budgetary implications that this operation could possibly have, we will consult the IMF and the World Bank before any financial participation of the government in this restructuring. We are committed to making the required payments following the activation of the state guarantee on certain contracts," it said.
Last month, the IMF approved another 36-month extended credit facility for Madagascar of USD337 million plus a so-called resilience and sustainability facility of USD321 million.
Meanwhile, efforts are continuing to put the new entity, Madagascar Airlines, on the path to operational and financial sustainability. "Since its takeover of the activities of Air Madagascar and its domestic subsidiary Tsaradia, Madagascar Airlines has suffered significant losses. A new chairman was appointed in November 2023; long-haul flights to Europe and other regions were suspended, and some rental contracts were cancelled. In this context, the World Bank has announced a USD25 million loan to support future investments and the company's recovery," the report confirmed.
The first tranche of USD25 million from the World Bank has been committed for the restructuring of Madagascar Airlines' domestic fleet and IT equipment needed for the digital transformation of the airline. This is part of a USD100 million long-term low-interest loan to the Malagasy state, of which about USD60 million has been earmarked for Madagascar Airlines.
In its first 18 months since its formation in early 2022, Madagascar Airlines faced significant challenges, including operating costly long-haul flights with leased aircraft and maintaining excessive staffing levels relative to its operations. The airline incurred monthly losses of around USD30 million, leading to financial strain that resulted in grounding most of its fleet, reducing operations to just two units.
In November 2023, new CEO Thierry de Bailleul implemented a "Phénix 2030" strategy to halt all ACMI long-haul flights and the airline's regional operations to stabilise cash flow. Since then, the airline has focused on managing day-to-day operations efficiently, replenishing spare parts inventory, initiating refunds to customers and creditors, and making progress in debt repayment. As of October 2023, the airline's debt stood at USD43 million, with a reduction of USD3 million over the previous six months.
