ANALYSIS: Fresh move for CSA privatisation takes shape

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Korean Air and Qatar Airways are reportedly showing an interest in the Czech Government's renewed attempts to privatise national carrier Czech Airlines.

The Czech Government in November authorised Czech Aeroholding - parent of both the airline and Prague Airport - to prepare the tender for the sale of a stake in the SkyTeam carrier.

The company approached the 50 biggest airlines about taking part in the tender with the aim identifying potential interest. Local media reports citing Czech finance minister Miroslav Kalousek identify Czech Airlines' SkyTeam partner Korean Air as well as Qatar Airways as having responded with preliminary expression of interest in the tender. Qatar Airways, which has just decided to sell the 35% stake it acquired in Cargolux last year, would not comment on the reports.

The Czech Government, which scrapped a privatisation attempt of the carrier in 2009 after it could not agree on conditions with the sole remaining bidder Travel Service, holds a 90% stake in the airline. Under foreign ownership rules in Europe, Korean and Qatar would only be able to acquire a maximum of 49%.

The government is seeking a strategic partner for the airline's long-term development. In particular it is keen to secure a partner with long-haul operations and develop these services at Prague. Czech Airlines abandoned its own long-haul flights in 2009 as part of a major restructuring, but has unveiled plans to resume long-haul flights next summer, initially to Seoul - the hub for Korean Air.

It marks an attempt to put the carrier back on the front foot after recent heavy losses. The airline racked up net losses of almost $300 million over the last three years and has just secured European Commission approval for Kc2.5 billion ($130 million) in state aid as part of a restructuring plan including cuts to capacity, cost and revenue improvements, and sale of assets.

The cutbacks in the scope of Czech Airlines' activities already mean it carried around 4.3 million passengers in 2011 - on a par with the number it carried in 2004, the year the Czech Republic entered the European Union and well down on the 5.6 million carried at its 2008 peak.

While network carriers in Europe have been struggling generally against the backdrop of high fuel prices and weak economies, the fortunes have been particularly tough for those national carriers - like Czech Airlines - from countries that joined in the last round of EU enlargement in 2004 and 2007.

DATA FOR SELECTED CARRIERS FROM COUNTRIES JOINING EU IN 2004/7

Airline

Passenger (2004) 

Passengers (2011)

Losses (2011)

Airbaltic 0.6m 3.3m -
Air Malta 1.6m 1.8m $41m
Cyprus Airways 1.7m 1.3m $26m
Czech Airlines 4.3m 4.3m $50m
Estonian Air 0.5m 0.7m $24m
LOT Polish Airlines 3.9m 4.6m $49m
Tarom 1.1m 1.9m $100m (2010)

Source: Flightglobal Pro. All loss figures are net apart from LOT which is an operating result

The difficult market conditions have been compounded by increased low-cost carrier competition and a tougher line from the European Commission on state bail-outs.

Hungarian carrier Malev was a high-profile casualty earlier this year, while Lithuania's biggest airline FlyLAL - formerly Lithuanian Airlines - was grounded in 2009.

Elsewhere mounting losses have prompted major action. Latvian carrier Air Baltic has embarked on its ReShape restructuring programme aimed at returning it to profit, while new management at neighbouring Estonian Air has just announced plans to halve its workforce as part of major cuts.  Air Baltic is also subject to a recently opened probe by European regulators over whether historic financial support from the Latvian government contravenes state aid rules.

In the south of Europe, Air Malta has now received European Commission approval for its restructuring plan and related aid, while Cyprus Airways has just approved a recovery plan drawn up by Air France-KLM's consulting arm in a bid to turn round its losses.