Czech govt launches new bid to sell flag carrier

By bne IntelliNews November 9, 2012

bne -

The Czech Republic is set to make yet another attempt to privatise struggling flag carrier Czech Airways (CSA), and hopes to offload the company before completion of a restructuring next year, Prime Minister Petr Necas said on November 8.

"We have, of course, made an analysis of the market, we see some possibilities as open and we want to use the window of opportunity for finding a strategic partner," Necas said, reports CTK.

According to other outlets, the renewed attempt to sell CSA is being driven by the finance ministry. "I will ask the cabinet today to request, as the main shareholder, Cesky Aeroholding to prepare the privatisation," Finance Minister Miroslav Kalousek said earlier in the day, reported.

Finance Ministry spokesman Ondrej Jakob says the government has sent a letter to the world's 50 biggest airlines inviting them to participate in a tender, reports AP. The airlines will have until the end of November to submit preliminary, unbinding bids.

CSA is approaching the end of a three-year restructuring programme, in a bid to optimize costs. The Czech government approved in June the transfer of CSA to Cesky Aeroholding, a move which will see it merged Prague airport operator Letiste Praha.

The government previously tried to privatise the airline in 2009, following heavy losses from a failed expansion plan. However, the sole bidder - Czech charter airline Travel Service - said it refused to buy CSA without securing a capital injection from the government.

The state, on the other hand, said it canceled the sale because the bid - the only one received - was too low. Necas says his government is ready to do the same again if there's no suitable bid.

Unimex - the holding containing Travel Service - offered €40m in 2009. E&Y has valued the assets of CSA - which do not include its aircraft, which are leased - at CZK148.5m (€5.8m). The total value of Cesky Aeroholding is around CZK2.3bn according to local media reports. CSA swung into a pre-tax loss of CZK 241m in 2011 from a profit of CZK76.2m a year earlier, due to aircraft leasing costs and rising fuel prices.

The European Commission gave approval in September for the government to hand CSA €100m in aid to the state-owned airline. A ruling from Brussels in late 2011 was the catalyst for the collapse of Hungary's Malev early this year. However, scratching around for every penny in a bid to consolidate its fiscal position, Prague will be happy not to have to find that chunk of cash should it manage to offload CSA without an added cash injection.

However, it's up against a host of other struggling European flag carriers that would love to find a strategic investor. The list potential European buyers looks extremely short, limited by the crisis, whilst it's believed that a handful of airlines from the Middle and Far East may be interested in securing a European hub.

However, EU rules bar European airlines from being controlled from outside the bloc. A deal to sell Polish Lot to Turkish Airlines collapsed earlier this year due to the legislation.

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