The National Audit Office doubts that the mortgage for a state guarantee for Icelandair meets claims that can amount to up to ISK 15 billion, RÚV reported. There is also reason to wonder whether the scenarios set up by Icelandair’s management are realistic.
The first discussion on the Minister of Finance’s bill on state guarantees for Icelandair ended at seven o’clock last night and the matter was referred to the Budget Committee.
The bill assumes that the Icelandic state guarantees a credit line to the airline amounting to USD 108 million, or approximately ISK 15 billion. Certain conditions are set for the guarantee. Among other things that Icelandair manages to increase its share capital by ISK 20 to 23 billion, and the share offering will take place in mid-September.
Many have submitted comments on the bill, including the National Audit Office. It states, among other things, that the conditions for the responsibility appear to be relevant and presumably determined after a detailed discussion by the senior executives of the ministries involved.
The main issue is how guarantees for the recovery of state support should be arranged, says the National Audit Office. The bill is sparse on this, but it is clear that the company’s mortgageability has become such that there are few traditional mortgages that could be secured by a loan, unless they are at the back of the mortgage queue. The bill states that in the event of Icelandair’s bankruptcy, certain assets of the company, such as trademarks, booking systems and, as the case may be, landing rights will flow to the Treasury. This ensures that the company’s key assets can be disposed of in order to promote rapid reconstruction. However, the National Audit Office considers it highly unlikely that the assets specified meet the requirements, which can amount to up to ISK 15 billion.
Furthermore, the National Audit Office says that there is reason to consider whether the scenarios on which Icelandair’s management has set up and based its plans are realistic. It is impossible to assess this without a thorough evaluation by experts, and then it would be quite uncertain that something new would emerge. The National Audit Office can therefore not assess this issue. It was appropriate to draw the attention of the Budget Committee to this so that Althingi is clear that there are uncertainties.
Another possibility would be for the Treasury to acquire a share in Icelandair if guarantees were taken out or the operation was simply taken over and resold. However, it is not up to the National Audit Office to take a position on this.
