Viking Airlines was granted protection from creditors and placed in the hands of an administrator by a district court in Solna, outside Stockholm, on December 2.

It ceased flying on October 18 after returning four aircraft to a leasing company. Its licence from the Swedish Transport Agency was withdrawn the same day until the end of March, with flights operated in the meantime by Greek-registered Viking Hellas Airlines. Creditors will meet next Tuesday to consider the administrator’s report.

The UK’s major travel groups may prefer Viking Airlines does not return. They stand to benefit from the absence of a carrier that supplied seats both to long-established operators such as Sunvil and to online retailers such as Travel Republic trading at the lower end of the market.

Industry regulator the CAA might also prefer to see capacity kept tight, given the impact on price – and the risk of failures – if seats outnumber customers willing to pay a price that gives everyone a profit.

Reduced capacity

But many smaller operators and retailers that depend on dynamic packaging will hope Viking Airlines returns for summer 2011. Without its presence they must deal with reduced supply – particularly as easyJet will aim to dynamically package its own flights with accommodation from Lowcost Holidays through new brand easyJet Holidays.

The administrator’s letter to creditors reveals the extent of Viking Airlines’ losses – SEK151 million Swedish krona (£13.2 million) in the year to August 2010 and a further SEK30 million (£2.6 million) to October. Its debts total SEK144 million (£12.6 million).

The report blames the ash cloud in April, the bankruptcy of Goldtrail Holidays in July and the failure of Viking Airlines’ “single largest customer”, Kiss Flights, in August.

It also outlines arrangements that would allow a restructure – involving a €5 million “contribution” from “one of the company’s largest customers” and creditors owed more than SEK10,000 (£874) paid 25% of what they are owed.

If Viking Airlines does not restructure and resume flying it is difficult to see who would step into the breach. That would mean a continuing squeeze on sections of the trade.

Viking Hellas could operate the planned summer programme, having taken over flying this winter, but would need more than the four aircraft it currently operates. Viking Airlines operated 10 last year.

Swedish registration also allowed Viking Airlines to carry holidaymakers from Scandinavia, giving it a foothold in two of Europe’s three main markets. Without a Swedish licence, Viking Hellas may not be capable of mounting a similar operation.

Viking carriers

The precise relationship between the Viking carriers is unclear. Viking Hellas has variously been described as a subsidiary of Viking Airlines, a member of the Viking group and an affiliate. The creditor’s report describes it as “an affiliated Greek company”.

Viking Hellas launched from Manchester to Athens and Iraq in February this year, and since October has operated the former Viking Airlines programme from Gatwick. It has flights around the Mediterranean on offer for summer 2011.

The Greek carrier is run by Christian Tadjeran, former president and chief executive of Viking Airlines. Its Athens address is the same as Viking Airlines’ operations and dispatch office.

Viking Airlines is 60% owned by European Aviation & Technical Services and 40% by Black Pearl Investments (BPI) Iceland, a company set up by former XL Airways chief executive Phil Wyatt.

Viking Hellas’s general sales agent in the UK is Gatwick-based Meridian Aviation, which also sold Viking Airlines seats. Wyatt’s brother Jim is a Meridian director and company secretary, and Phil joined as a director last month. The collapsed Kiss Flights was set up as part of Meridian before its sale in 2009.

Executives and directors at Viking Airlines and Meridian appear unwilling to clarify the situation, possibly because Phil Wyatt came under the scrutiny of tabloid newspapers over the failure of XL Airways in 2008.

Viking Airways directors and BPI investors Magnus Stephensen and Halldor Sigurdarson held senior positions at XL. Renewed media interest is unlikely to be helpful to the restructure.