FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1996
1996 - 0034.PDF
J\JI1 TS£J-\£' ZJPOSi'f Western financiers continue to approach business deals in Eastern and Central Europe with caution PAUL DUFFY/PRAGUE IT IS FIVE years since the economies of Eastern Europe started shifting towards the styles, structures and modus operandi of the West, yet die problems facing Central and Eastern European airlines wishing to lease Western aircraft, engines and equipment are not diminishing. Many operators are struggling to come to terms with the change to business structures and practices familiar in the West. Frantisek Shaby, executive vice-president for finance and planning at Czech Airlines (CSA), for example, explains how his company has had to cope with a complete breakdown of state- funded interest-free loans for fleet purchases. "It has all come to an end," he says. "Now state guarantees are not even available." He adds that, by 1992, because of the political changes in die region, followed by a severe national eco nomic crisis, augmented by the Gulf War, CSA found itself with a new fleet of aircraft on order — two Airbus Industrie A310s, five Boeing 737- 500s and four ATR 72s — but no cash to pay the bill. The Government provided an interest-free loan on that occasion, but that was the last time. Now CSA's board has approved plans for a new fleet — two 110- to 140-seater aircraft and up to six 70-to 80-seaters, but the airline will require 100% financing to buy them. At the same time, CSA will also have to face up to direct competi tion from leading European carriers. Wth the Czech market now close to deregulation, com petition may be faced from new national carri ers as well. KrzystofZiebinski, director of marketing and sales of LOT-Polish Airlines, says that 40 years of central planning has had a substantial effect on the country's transport system. The artifi cially low exchange rate used to boost traffic for the airline, particularly on subsidised routes between Comecon countries. Just as the politi cal and economic situation began to change, however, traffic, which peaked at 2.1 million passengers in 1989, fell to 1.2 million passen gers by 1991 and has climbed only slowly upwards since then. POLISH PRIVATISATION Privatisation of Poland's airports, followed by huge investment, has resulted in substantial increases in airport costs. An investment in a new fleet of four Boeing 767s, ten Boeing 737s and eight ATR 72 s, which are all leased, has cre ated a further financial burden. The fleet itself is only part of die cost — training crew on new systems and a public-rela tions campaign to inform the public about the new-look airline (LOT) have all been needed. Vadim Sorokim, senior vice-president of Ukraine International Airlines, (UIA) describes the first tliree years of the airline's existence widi a witty comment: "When you're up to your neck in alligators, it can be hard to remem ber thatyour objective was to drain the swamp". He says that die odds are stacked against CIS carriers. Just now, the Ukraine Government and GPA, joint shareholders of the airline, do not have any more money to invest in the carri er, so new investors are being sought. Negotiations are in progress with die European bank of Reconstruction and Development and two odier airlines for each to take a 9% interest in UIA. The airline has decided to buy aircraft only when it has funds for deposits. In die meantime, it will lease what it needs. Erzsebet Antal, head of finance and treasury at Malev Hungarian Airlines, describes how die airline has added Boeing 737s and 767s to its fleet since 1988, with all the difficulties of financing leasing agreements. "How can the value of these aircraft be reflected in die airline's balance sheet and help to strengthen its credit status?" she asks. From the Western perspective, there are the difficulties of assessing credit-risk ratings for companies in Eastern Europe which often have no real accounting history on which judgements can be made, and no (or poorly designed) busi ness plans to indicate what die needs of die bor rower might be. Also, die difference between the approaches of die old Comecon accounting sys tems and those practised in the West mean diat die gap is often very difficult to bridge. The different legal approaches in Russia and 32 FLIGHT INTERNATIONAL 3 - 9 January 1996
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
