Czech Republic’s historic airline announces plans for major downsizing

Czech Airlines have told the Labour Office that they are preparing to sack up to all of its 430 employees, the daily Hospodářské noviny wrote on Wednesday. The national carrier has been impacted heavily by the coronavirus crisis, is in deep debt, and cannot expect help from the government. Smartwings, which owns Czech Airlines, earlier in February asked the government for a CZK 1.1 billion rescue package, but the request was declined.

Founded in 1923, Czech Airlines is the fifth oldest still-operating airline in the world. It has been owned by the low-cost airline conglomerate Smartwings Group since 2018. The initial stage of the coronavirus pandemic caught Czech Airlines just as the company was modernising its airfleet and the subsequent travel ban last spring hit it hard.

Despite the re-establishment of several connections during the summer, the airline announced in July that it would be downsizing its personnel from 700 to 300. The company was able to secure delays on debt repayments during 2020 and has sold several of its aircraft to raise money. The current debt moratorium is scheduled to run out on February 27.

Smartwings had requested the CZK 1.1 billion loan from the government to keep Czech Airlines afloat and create a support programme similar to that put in place with hotels and bus companies, where the airline would receive money for the empty seats it cannot fill due to restrictions. This request was denied.

According to Hospodářské noviny, it seems that Czech Airlines is therefore close to being forced to close. Information that downsizing is being prepared was confirmed by the head of the cabin crew personnel trade union Tereza Löffelmanová. She also said Czech Airlines employees have received no information about how the company plans to survive in the coming weeks.

Hospodářské noviny writes that one of the options on how to solve the problem within Smartwings Group is to focus on saving the Smartwings budget airline branch and let Czech Airlines become insolvent. However, whether this is in fact what the company is looking to do is unclear, because management refuse to comment until the debt moratorium expires.

Neither is it known how much Smartwings and Czech Airlines actually owe in debt, the paper writes. It is likely substantial given that passenger numbers fell by 80 percent to 1.8 million last year. In 2019, the company was also negatively affected by the worldwide groundings of the Boeing 737 Max model aircraft, whose malfunctioning flight control system caused two crashes for other airlines.

Karel Havlíček, the Minister of Industry and Trade, has told Hospodářské noviny that the government is not preparing any specific type of support for Smartwings.