Finance ministry recommends Korean offer for Czech Airlines

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(corrects figure in local currency)

Korean Air is in pole position to take a stake in Czech Airlines as its bid was confirmed as the only binding offer for the airline.

The Seoul-based carrier has put an offer in for a 44% stake in its SkyTeam partner. It is offering €2.6 million ($3.4 million) for the 44% stake in the carrier based on a valuation of Kc148.5 million ($7.6 million) of the carrier.

A finance ministry spokesman says it is recommending the offer to cabinet and that approval could come at a meeting in the next week. "It is not only about price, it is about the strategic development of Prague Airport and Czech Airlines," explains the spokesman. Korean Air plans to use Prague as a main European hub and using Czech Airlines to feed traffic into these services while also expanding the Czech carrier's long-haul operations. The airline has announced Seoul as is first destination after resuming long-haul flights.

Finance minister Miroslav Kalousek says the Korean Air offer will help it reach new markets in Asia while also developing Prague Airport - which is also owned by the Government - as a transit point.

If approved by the cabinet, the finance ministry says a contract could be signed in the second half of April and a deal completed before the end of the first half.

Korean is the only one of the of the 50 leading airlines approached by the Czech Government about the tender to follow through with a firm offer. An earlier attempt to privatise Czech Airlines broke down in 2009 when it could not agree on conditions with the sole remaining bidder Travel Service.

The privatisation 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.