State juggles stake in Czech flag carrier as Chinese suitor waits in the wings

By bne IntelliNews April 4, 2016

State-owned Czech Aeroholding plans to transfer its remaining 19.7% stake in struggling national carrier Czech Airlines (CSA) to state firm Prisko, local press reported on April 4. The move is speculated to be a step towards full privatisation of the flag carrier.

The planned share-transfer is in line with an agreement with the two other CSA shareholders, Korean Air - which has a 44% stake - and Czech budget carrier Travel Service, which bought a 34% stake in CSA from Czech Aeroholding last year. The transfer has not yet been approved, E15 reports.

"The aim is to ensure, through companies belonging to Czech Aeroholding, the further development of the Vaclav Havel Airport in Prague," ministry of finance spokeswoman Katerina Vaidisova said. Prisko was founded by the National Property Fund and is controlled by the finance ministry.

Korean Air has thus far shown no appetite to exercise its option for Czech Aeroholding’s remaining stake in CSA. Current EU regulations prevent any company from outside the bloc holding a stake above 49% in EU airlines, although Brussels does maintain a loophole for exceptions on a negotiated case by case basis.

Likely waiting in the wings is the China Energy Company Limited (CEFC) conglomerate, which has been on a buying spree on stakes in Czech and Slovak assets. CEFC has a 10% stake in Travel Service and plans to buy an additional 39.92% stake. In March it bought a stake in Invia, the Central European online travel agency, as part of a move to build up a travel and accommodation services chain for Chinese visitors and investors to Prague and around Central and Eastern Europe.

According to the Czech Republic’s most prominent Sinophile, President Milos Zeman, CEFC is considering buying Korean Air’s 44% stake. The head of state made the claim ahead of last month’s official visit by Chinese counterpart, Xi Jinping.

Former CSA chief executive Jaroslav Tvrdik is now the top CEFC representative for Europe, while CEFC chairman Ye Jianming is an aide to Zeman. "The presidential office is beginning to look like a subsidiary of CEFC", which "now has even more people in Zeman's office than Russia's Lukoil," Hospodarske Noviny claimed late last year, referencing common claims during Zeman's time as prime minister in the middle of the last decade that the Russian oil company was a major sponsor of his premiership.

Travel Service operates regular budget flights under the brand name SmartWings, and also provides charter flights. The company now claims to be the biggest Czech airline and carried 5.7mn passengers last year.

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