Inquiries into the privatisation of Air Moldova have resulted in a damning verdict on the process, which is set to be discussed by the country’s parliament, along with the controversial sale of Chisinau airport.
The order of business for the plenary session on 4 October includes hearings on the four-month parliamentary inquiry set up to analyse privatisation and concession of public property over 2013-19. It was tasked with evaluating the legality of the procedures and decisions.
Air Moldova’s privatisation has been lambasted by the inquiry commission, which concludes that the decisions and attitude of the government authorities were “irresponsible and harmful to the public interest”.
The privatisation decision, issued in 2018, was taken at “astonishing speed” and under “non-transparent conditions”, the inquiry states.
Air Moldova had been managed by an interim administrator during 2015-18 but the inquiry sharply criticises the way the company was run over this period, describing the governance practices and business planning as deeply flawed.
This created a “paradoxical situation”, it says, with debts rising and its market share declining from 48% to 43% between 2014 and 2017 even as passenger numbers roughly doubled to 1.13 million.
At the time of the privatisation the authorities declared the airline – which had a turnover of L3 billion ($170 million) – to be on the verge of bankruptcy, despite efforts from the economics ministry and public property agency.
Air Moldova was sold to a company, Civil Aviation Group, which was 49% owned by Romania’s Blue Air.
At the point of the sale, the inquiry states, Air Moldova had registered debts of L1.3 billion and negative equity of more than L100 million.
While under interim management the airline had operated with no set performance targets and no independent audit report on the carrier’s financial statements was produced – even though such audits were compulsory and had been contracted.
The inquiry describes this particular aspect as amounting to serious negligence, and that it indicates “unwillingness” of the company’s management to disclose possible violations detected by auditors, or even weak auditing, to the public.
Chaotic management in the run-up to privatisation included the “harmful practice” of being forced to lease aircraft from other companies because Air Moldova’s own aircraft were grounded by poor maintenance planning or lack of funds to purchase components.
The airline was granted state aid in September 2017 and the inquiry puts the total state aid figure at L90.2 million. It says that a restructuring plan submitted in March 2018 did not mention a “single word” about possible privatisation but, less than two months later, the property agency signed evaluation contracts for the airline’s privatisation – a move which, the inquiry says, “contradicted” the restructuring plan and other matters relating to the state aid.
“[This] reinforces the belief that the privatisation plan of Air Moldova was adopted quickly, without a proper analysis and preliminary preparations,” it adds.
“This further suggests that the restructuring plan was only formally presented, to justify obtaining the state aid – authorised by the [competition regulator] – through fraud or abuse of trust.”
It describes the privatisation decision as “ad hoc” and that the actions of the ministries of finance and economics, and the property agency, were “unco-ordinated”, and questions the depth of an company evaluation which took only two months and valued the company at L48.2 million – suggesting it failed to include several items of value, such as agreements and memberships, beyond its physical assets.
“Cumulatively these facts arouse [within the inquiry commission] reasonable suspicions regarding the lack of good faith of the persons [in government] responsible for the privatisation process and the diligence with which this privatisation was organised in order to protect the legitimate interests of the state,” the inquiry states.
Blue Air-led Civil Aviation Group revealed a year ago that it had emerged as the successful bidder for Air Moldova, stating that it had offered L50 million and would take over the carrier’s L1.2 billion debt.
