Romania’s Blue Air grounded amid government concern over debt

Romanian discount carrier Blue Air Aviation SA canceled all flights through Monday after its bank accounts were frozen by the state amid concerns over unpaid debt.

The sudden intervention left Blue Air unable to pay daily operating costs, the carrier said, with the grounding leaving thousands of passengers stranded at airports across Europe and beyond. The government said the halt to services was unjustified and urged the company to discuss a rescheduling of the debt.

Like other carriers, Blue Air was hit hard by the coronavirus crisis, and its latest difficulties may signal a wider financial squeeze on the sector as the summer travel period gives way to the winter low season just as spiraling inflation lifts costs and weighs on consumer spending.

Analysts at Sanford C. Bernstein said this week that the risk of bankruptcies among European short-haul airlines had increased, with several of those based in Eastern Europe among the most vulnerable.

Blue Air’s main competitors, Wizz Air Holdings Plc and Ryanair Holdings Plc, have already stepped in with offers of “special tariffs” for passengers impacted by the grounding. Bernstein said the pair have the flexibility to quickly draft in aircraft to grab share in markets where incumbents struggle.

More than 2,000 Romanian citizens have so far requested assistance from Bucharest in returning home, Prime Minister Nicolae Ciuca said on Wednesday, while others have had to find alternative flights or cancel trips.

Transport Minister Sorin Grindeanu said national flag carrier Tarom SA will also be allocated about 5 million lei ($1 million) to send planes for some travelers.

Blue Air received a six-year state loan of 300 million lei in 2020, guaranteed with a 75% stake. While the carrier entered a special restructuring procedure, it had continued to operate and was allowed to carry on selling tickets even after receiving several large fines for canceled or delayed flights.