16:47 05.10.2020


Rescue wings of rehabilitation: how to save the low-cost carrier SkyUp from falling (go bankrupt)

4 min read
Rescue wings of rehabilitation: how to save the low-cost carrier SkyUp from falling (go bankrupt)

Mykola Lukashuk, Head of National Association of arbitration managers of Ukraine, managing partner of PRAVOVA KONSTANTA LLC


The coronacrisis is affecting more and more areas of the economy, with tourism and air transportation among the first to suffer. We have witnessed more than six months of downtime, reputational losses due to the complicated procedure for repaying funds for cancelled flights, staff reductions and, above all, enormous debts.

The data of the State Statistics Service are not inspiring at all: compared to January-August last year, passenger traffic in Ukraine went down by 54.7%. And the most suffered aviators: 65.8% fewer people (only 3.1 million) boarded planes than last year.

These are the reality of the airlines around the world, and some of them reported their bankruptcy this summer.

There are just a few airlines in Ukraine. Also, the news of the possible bankruptcy of SkyUp shocked business circles. Until recently, the company tried to fulfill its obligations to customers and staff and most importantly - to passengers.

However, recently the management of the low-cost carrier announced significant losses: as of now about $ 30 million.

The ban on foreigners entering Ukraine has effectively put an end to income opportunities.

Consequently, the company is facing bankruptcy.

But is it necessary to resort to such extremes at once? Is it realistic to save the company in such conditions, in particular, from the loss of reputation?

General cleaning

It is possible to solve this problem. One of the options to restore the solvency of enterprises is pre-trial rehabilitation. The debtor has the right to initiate it by the decision of the founders (participants, shareholders).

Rehabilitation literally means "recovery". So maybe SkyUp should consider a recovery option instead of euthanasia? Especially when there is something to fight for.

Such a measure to revive the vital indicators of the firm gives a real chance to get out of the financial crisis. Its application is relevant, in particular, for companies whose solvency ratios have decreased due to the accumulation of invoices payable, but which, at the same time, seek to restore it without reputational losses that occur after the start of bankruptcy proceedings.

Does Ukrainian low-cost carrier SkyUp qualify for this?

I think so. In the case of an airline that is conscientious about the situation and wants to stabilize its situation, it is time to consider the benefits of rehabilitation:

• it is a procedure that is carried out without initiating bankruptcy proceedings and without putting the relevant information into the USR

• is possible only at the initiative of the debtor

• provides for the introduction of a moratorium to meet creditors' claims

• establishes the possibility of the procedure by the debtor

• minimizes court interference in the proceedings

• reduces the amount of costs for the procedure.

In general, pre-trial reorganization is "prescribed" when signs of insolvency are detected in time and the situation is quickly responded to in order to prevent the opening of bankruptcy proceedings.

Wait behind the doors

Please note: a huge plus of pre-trial rehabilitation - a moratorium on satisfaction of creditors' claims. And this protects the debtor from enforcement measures (because enforcement proceedings are suspended) and allows the debtor to streamline and settle all issues related to the repayment of accounts payable through the rehabilitation plan.

Repayment of invoices payable under this procedure is carried out exclusively within the limits and on the terms of the rehabilitation plan, which is approved by the court.

Meanwhile, the debtor company continues to operate, make a profit and saves jobs.

To sum up: only pre-trial rehabilitation will give SkyUp a chance to avoid bankruptcy and stay "on the fly" until the sky opens for air travel. Note: I wrote "while", not "if". Let's remain optimistic and search for ways out of the crisis with a cold head.