The Ecuadorian airline Equair closed 2022 with losses of USD 17 million. Thousands of passengers are waiting for their flights to be rescheduled.
Equair Counter at the Mariscal Sucre Airport in Quito.
With a flight between Guayaquil and Quito carried out on December 29, 2021 , the Equair airline inaugurated its operations in the country . A year and ten months later the airline announced the suspension of operations, amid financial losses.
The Ecuadorian airline had 66 weekly frequencies between Quito and Guayaquil, 12 to the Galapagos Islands, and ten frequencies to El Coca.
Since then, the company, which was incorporated as a Simplified Share Company (SAS), achieved a market share of up to 17% on the aforementioned routes.
The bet of its shareholders was to offer “the best service for price” in the market and with that intention they signed an investment contract with the Ministry of Production.
The investment committed by Equair in the project was USD 34 million, which was to be executed between 2021 and 2036.
A business that did not take off
But the numbers did not take off , in a small market like Ecuador and in which international airlines participate.
In the manager’s report presented by Equair to the Superintendency of Companies about its operation in 2022, the airline reports that “despite the great effort deployed, it was not possible to achieve what the company planned, the loss percentage for the year amounts to 91% “.
Thus, Equair closed 2022 with sales income of USD 18.8 million, but expenses for services provided of USD 31.4 million.
The above left losses of USD 17.1 million and a negative result in its equity of USD 2.5 million, according to the notes of the 2022 Financial Statements delivered to the Superintendence of Companies.
The airline also had a working capital shortfall of $7.5 million in 2022; That is, there was not enough money to operate the company.
This deficit in working capital originates because the company has a short operating time, the recognition of pre-operational expenses and liabilities related to the leasing of aircraft, according to the Notes to the Financial Statements.
The company also reported assets of USD 21 million at the end of 2022.
In addition, according to those same reports to the Superintendence of Companies, the airline leased three aircraft in 2022:
- A five-year Boeing 737-700, with serial number 38125
- Additionally, a five-year Boeing 737-700, with serial number 38126.
- And a Boeing 737-7K5, five years away.
Already in 2021, Equair had a loss in its operation of USD 2.7 million.
What the airline says
Equair reported that the decision to close operations was made after a market analysis and suggested reasons related to “profitability.”
In the company’s reports presented to the Superintendency of Companies, reference is also made to the increase in the international price of airplane fuel or JET Fuel.
In some airlines the cost of fuel can weigh up to 35% and 40% on their operating expenses.
The company’s decision to suspend its operations was surprising because it had only begun operating its flights to the Amazonian city of El Coca on August 21, 2023.
The airline has assured that it will provide all the support and advice in the separation process of the more than 200 workers.
In addition, for customers who have made an advance purchase of tickets , the company announced that ” LATAM Airlines Ecuador made available seats on its aircraft in order to take them to their destinations at no additional cost.”
It also made a specialized service hotline available to users to address all passenger queries.
“The direct contact lines are: 1800 EQUAIR or 1800 378247 or 0963871680.“
According to LATAM calculations, there would be a total need to relocate 15,000 passengers.
Until the closing of October 1, 2023, Latam confirmed the relocation of 2,000 Equair passengers on its flights.
