Government to sell off Czech Airlines by September 2009

The government approved a plan on Monday to sell its ninety-percent stake in the national carrier Czech Airlines by September 30. The cabinet said the buyer would be chosen in a two-round tender, with several buyers already expressing interest. The government also wants to privatise Prague’s Ruzyně international airport by 2010.

Photo: CTK

Mirek Topolánek’s centre-right government has talked of selling Czech Airlines – with five million passengers annually one of Central Europe’s biggest carriers – for some time, but on Monday the idea came closer to reality. The government approved a plan to sell off its 91.51% stake in Czech Airlines (ČSA) in a two-stage tender which should be completed by the end of September.

Most analysts believe the airline is worth around five billion Czech crowns, or 230 million dollars, but the chairman of Czech Airlines’ supervisory board Ivan Kočárník surprised observers by saying he wouldn’t sell the company for less than 10 billion. Prime Minister Topolánek laughed off the comments as ridiculous, but could Czech Airlines raise more? Jan Procházka is the chief analyst for the Brno-based brokerage firm Cyrrus.

“Impossible is nothing in this world. Look at Kaka and Manchester City! But in this situation of financial crisis and bad conditions in the loan sector, 10 billion is not realistic. But I would be happy and it would be fine for everybody in the Czech Republic if someone, for example from Asia, pays this amount. But I believe it will be something nearer to five billion.”

The government plans to pick a buyer in two stages. First, the cabinet will select a pool of potential buyers, focusing on the sale's foreign policy consequences as well as the bidders' safety record. The second stage will be a simple auction, with the airline going to the highest bidder. The successful buyer will have to guarantee that Czech Airlines remains a national-style carrier, and keeps its fleet at Prague’s Ruzyně for at least five years.

Prague Ruzyně Airport

Several dozen airlines are said to be interested, although only the Russian carrier Aeroflot and the Czech-Icelandic charter airline and low-cost operator Travel Service have publicly confirmed their interest. But is the Czech Republic really willing to sell its national airline to, say, Aeroflot, given the two countries’ troubled history? Isn’t a national carrier part of a nation’s identity? In some cases, says Jan Procházka, but not all.

“I believe this is not a kind of identity. Czech beer, for example, is better for a nation’s identity but the Czech national airline? I don’t believe in that. I think this is a normal company that is used by Czech people, but it’s not helpful in creating an image for the Czech Republic.”

Jan Procházka says a strong strategic partner will help Czech Airlines weather the current financial storm, with 2009 looking like a very bleak year for the airline industry. The cabinet reserves the right to cancel the privatisation at any time, but if it goes well, it intends to use a similar model to sell off Ruzyně.