Thomas Westerholm / Inderes assessed on November 2, 2023, following the merger of Lifa Air and Genano, that:
“The merger removed the acute financing risk.”
At the time, Inderes also estimated that the new entity would offer better prerequisites than before for achieving sustainable profitability. In a comprehensive report published in December 2023, it was further stated that Genano had strengthened the group’s balance sheet and provided better conditions for reviving a heavily loss-making earnings profile.
Now, a little under three years later, Inderes is once again raising the issue of an acute cash crisis and an unsustainable debt level.
In my opinion, this raises a question that should not be glossed over by merely looking at the current cost structure or the financing of the upcoming strategy:
What actually happened to the company’s financial position during the Genano arrangement and the years following it?
According to Pallas Air’s 2023 pro forma figures, the operating loss of the combined entity would have been approximately 6.4 million euros and the net loss for the financial year approximately 5.7 million euros, had Genano been consolidated into the group from the beginning of the year.
In my previous post, I also raised the question of multi-year maintenance revenues received in advance via Genano’s lease financing and the corresponding future maintenance obligations.
When the 2023 corporate transaction was described as a solution to an acute financing risk, but the company is now once again in an acute cash crisis, I believe it would be justified to also review the transaction itself in hindsight:
What did the impact that was estimated at the time to strengthen Genano’s balance sheet and financial position consist of, how sustainable was it, and how have the cash flows and liabilities associated with it evolved in subsequent years?
This is not Monday-morning quarterbacking regarding Inderes’ forecast at the time. Forecasts can naturally turn out to be wrong.
Rather, the point is that the current situation provides, in my view, a very good reason to go back to the starting point and examine what was actually transferred to Pallas Air in the 2023 arrangement – both in terms of assets and obligations.