While airlines for smaller countries often struggle to bring in the kind of traffic that would make it profitable or interesting to investors, they serve a vital purpose of providing transportation to a given community.
The Vanuatu government is currently working with liquidators to work out a plan in which the remote South Pacific nation would not be left without an airline after its flagship carrier Air Vanuatu amassed large debts and had to suddenly declare bankruptcy (travelers looking to get home were left stranded after the airline suddenly canceled all international flights off the island.)
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After international travel suddenly ground to a halt in 2020 and only slowly started creeping back up in 2021, Madagascar's flagship carrier Air Madagascar accumulated over $36 million in debt over the course of 18 months.
Madagascar Airlines hopes to get out of bankruptcy with rebranding, World Bank loan
The airline then got to work on a turnaround it called "Phénix 2030" by bringing in new chief executive Thierry de Balleuil and rebranding as Madagascar Airlines. To bring down expenses and focus on getting back to profit before expanding, the airline also canceled its plans to lease new mid-range Embraer E190-E2 (ERJ) planes and delayed bringing back certain international routes.
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But the biggest breath of life will come from the $25 million loan that the World Bank committed to providing to keep the airline afloat. The Economic Transformation for Inclusive Growth Project is an initiative that the Washington-based World Bank hopes will help Madagascar's aviation industry and create a financially sustainable airline for the African nation of nearly 30 million people that is invariably isolated as an island.
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This is what it will take to get Madagascar Airlines back on financial track
"The World Bank is not there to repay creditors," World Bank Country Director for Mozambique, Madagascar, Mauritius, Comoros, and Seychelles, Idah Z Pswarayi-Riddihough said in a statement first reported by aviation website Simple Flying. "This financial institution is there to finance us in important investments for our development and for our return to balance."
The loan will go primarily toward maintaining and modernizing the planes presently in Air Madagscar's fleet, developing its route network to eventually restart cut flights and continuing the rebranding work to attract and retain its client base.
As part of its deal around the loan, the World Bank and Madagascar Airlines have decided that the airline will initially focus only on restarting its domestic market. The island nation spans 226,756 square miles and has ten airports in different parts of the country. As many of the areas outside the capital of Antananarivo are remote, a fully operating airline is critical to the country and many communities who need to travel long distances for purchases and government services. A north-south trip from Antsiranana to Taolagnaro takes nearly five hours by plane while many remote communities are only available by charter flight.
"Air transport is essential for Madagascar's economy, particularly for the tourism sector, but also for access to services and opportunities for the population located in the least well-connected regions by the land route," Pswarayi-Riddihough said further.
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