Small Planet Airlines – The rise and fall of an airline
The German subsidiary of the Small Planet Group, Small Planet Airlines Deutschland, got off to a promising start in 2015. There were two competent managing directors on board, Andreas Wobig and Oliver Pawel, who were already familiar faces within the airline industry. Wobig and Pawel had unexpectedly left their former employer, Germania. A mechanical and aerospace engineer, Wobig brought technical know-how to the company.
The Small Planet Group, based in Lithuania, acted as a holding company and bundled together all its other subsidiaries in addition to the German offshoot. The Lithuanian company was originally founded by Vytautas Kaikaris and Andrius Staniulis as a merger of Small Planet Airlines Lithuania and Poland, which they had bought up. Small Planet Airlines Lithuania arose from the insolvent Lithuanian FlyLAL Charters. Its Polish counterpart was a subsidiary of FlyLAL Charters Polska.
The subsidiaries of the Small Planet Group
In addition to the German subsidiary with its headquarters in Berlin, the Small Planet Group also founded a Lithuanian and an Italian subsidiary. Other subsidiaries also existed in Estonia, Cambodia, Poland and Thailand.
Small Planet Airlines Lithuania
The Lithuanian subsidiary was founded in 2010 and was based out of the airport in Vilnius. The company filed for insolvency in October 2018 and restructuring was no longer an option. Its business operations were wound up together with the German subsidiary.
Small Planet Airlines Italia
Also in 2010, the Small Planet Group founded another company in Italy, which was sold on again in 2013. This was due to the revocation of the air operator’s certificate (AOC) because of financial difficulties.
Small Planet Airlines Estonia
Small Planet Airlines Estonia, which emerged from FlyLAL Charters Estonia and had its home airport in Tallinn, owned only one aircraft that operated flights for a Swedish airline. Following the Swedish carrier’s insolvency, Small Planet Airlines Estonia was completely wound up in 2012.
Small Planet Airlines Thailand
The founding of the Thai subsidiary served to bridge the financial shortfall during the bad European winter months. The Small Planet Group held 49 per cent of the company’s shares, which were surrendered after the company was dissolved in 2015 due to ongoing safety concerns in Thailand. The company was not able to add new routes to other countries.
Small Planet Airlines Cambodia
After the failure of the Thai subsidiary, the Small Planet Group launched a Cambodian subsidiary with a 29 per cent stake, likewise with the purpose of offsetting the low demand for winter flights. The poor financial situation of the holding company had an impact on the subsidiary in Cambodia. Airline operations were suspended here too.
Small Planet Airlines Poland
The Polish subsidiary Small Planet Airlines Poland operated 12 Airbus A320s and handled flights to holiday destinations for various tour operators. The Polish subsidiary also had to contend with financial problems due to the economic difficulties of Small Planet Airlines Germany, which ultimately led to the former’s insolvency and airline operations being discontinued.
Small Planet Airlines Germany
On the German market, the subsidiary of the Small Planet Group operated as Small Planet Airlines GmbH. The airline’s aim was to offer charter flights for German tour operators and thereby take German tourists to their holiday destinations. Although it operated on a small scale initially with just two leased machines, the company had set itself comparatively ambitious goals. This was because the bar was set very high in Europe. Even at that time, the dynamic state of the market did not make it easy for small airlines to resist the pressure applied by competitors. Germania was one of the main competitors. As a result, the German managing directors aimed to become one of the market leaders in their segment and, with a projected turnover of around 30 million euros, to stop making losses in the very first business year.
Like the other subsidiaries, Small Planet Airlines Germany was a subsidiary of the Lithuanian Small Planet Group.
Start of airline operations
The lack of an AOC made operating flights with German aircraft impossible. Instead, the airline first started operating with aircraft from its Polish and Lithuanian sister airlines in October 2015. After the requisite certificate was issued by the German Federal Aviation Authority in 2016, Small Planet Airlines Germany was able to begin regular operations with two leased aircraft. Within two years, the airline expanded to six aircraft with additional aircraft leased during the peak season.
The clients and holiday destinations served by Small Planet Airlines Germany
The airline’s clients included the two major tour operators TUI and Thomas Cook, for whom Small Planet Airlines mainly flew to destinations in southern Europe. Around 460 flights to Majorca and Antalya were to be operated for Thomas Cook, while the airline envisaged performing fourteen flights per week for TUI. Among the destinations were Menorca, Burgas in Bulgaria and Heraklion and Kos in Greece. DER Tour was another of the airline’s major customers, alongside TUI and Thomas Cook. Other clients who had their charter flights handled by the airline were Condor and the FTI Group. The main destinations were in the Mediterranean region and North Africa. These included Rhodes, Agadir, Antalya Hurghada and Marsa Alam.
The flights departed from the following cities in Germany:
The company scheduled several teams of six crew members for each of the aircraft.
Decline and insolvency
Significant delays and unscheduled stopovers caused considerable dissatisfaction among passengers and clients. Some of the delays lasted for more than ten hours. Poor communication subsequent to such delays led to Small Planet Airlines Germany losing its most important clients. This included TUI, the FTI Group, Thomas Cook and DER Touristik. According to passengers, claims for compensation were ignored and not paid.
Other holiday airlines such as TUIfly, Condor and Germania took over the flights.
Why the company went insolvent
According to former Managing Director Oliver Pawel, the main cause of the financial difficulties was the procedures for recruiting and training cabin crew. In addition, as a result of Air Berlin’s insolvency, Small Planet Airlines was forced to return the aircraft it had leased from Air Berlin. The airline consequently operated with only one aircraft on the German AOC in the winter of 2017/2018. Various wet-leased aircraft, which came with cabin crew provided, were used as substitutes.
Training sessions for their own staff therefore had to be completed at the other affiliated companies. This was compounded by poor planning by staff members, which had to be made up for through expensive sub-charters. Sub-charters were in high demand in the summer of 2018, which meant Small Planet Airlines was forced to fall back on whatever was still available due to the short notice. Due to the high demand, sub-charter providers were able to apply surcharges of over 50 per cent and more to contracts. The contracted airlines then sometimes did not fulfil their booked service, but were intended for flights with a high crew requirement. Flights were cancelled or encountered significant delays, which could not be made up for due to the company lacking its own aircraft.
Another reason given for the insolvency was engine damage, which led to the aircraft being out of service for almost three months. No replacement engine was available at short notice, even from within the company. The grounding again forced Small Planet Airlines to lease costly sub-charters at short notice and caused further flight delays.
The extremely high costs of sub-chartering and the amount of compensation for cancelled or delayed flights were specified as the main reasons for the airline’s insolvency.
The course of the insolvency proceedings and potential investors
On 18 September 2018, the airline finally filed for insolvency in self-administration. This put the affiliated businesses in financial difficulties. The Polish subsidiary in particular was badly affected by the insolvency and had to file for insolvency itself shortly afterwards.
Meanwhile, the Berlin-based company Zeitfracht had expressed interest in taking over the German subsidiary. However, important assurances given by the parent company in Lithuania regarding maintenance and testing operations had not been fulfilled. Zeitfracht consequently broke off the negotiations.
In October 2018, SF Aviation Holding B.V. expressed interest, but no agreement could be reached by the end of October either. Information provided by a member of staff suggests that the Turkish airline Onur Air was also interested in Small Planet Airlines Germany. Since no investor could be found by 31 October 2018, the company laid off its employees and suspended flight operations on 1 November. Two aircraft were subsequently returned to their owners, while two other aircraft remained at Paderborn-Lippstadt Airport in order to ensure that operations could be resumed quickly in the event of an agreement being reached with an investor. The last flight landed at Hamburg Airport on 1 November. After that, the airline disappeared from Flightradar.
A preliminary agreement was finally reached with SF Aviation Holding B.V. with the intention of taking over the insolvent holiday airline. The precondition of the agreement was that flight operations would resume within six months. At the end of November it was revealed that these negotiations had also collapsed. As a result, standard insolvency proceedings were initiated on 1 December 2018. Creditors had until 20 January 2019 to submit their claims, and the hearing at the insolvency court was held on 26 February 2019. After the company filed for insolvency, the administrator received more than 10,000 compensation claims from former passengers totalling around 5 million euros.
The Federal Environment Agency had also imposed a fine of 10.2 million euros because too few emission allowances had been purchased for CO2 emissions. This sum consisted of a fine and the additional demand for the emission allowances. Records show that the Berlin-based airline had only 1,533 authorisations, whereas 81,731 would have been required. According to the airline, the large discrepancy was due to a transmission error. There were several more creditors in addition to the passengers, including former business partners, lessors and a major tour operator. The sum of all the claims was 50 million euros. The failed airline also left in its wake 400 employees who lost their jobs.