Czech Airlines’ insolvency petition sets out the scale of the company’s financial problems, which it partly attributes to the inability to source rescue funding from the Czech government.

The company has 266 creditors, with the total liability to suppliers amounting to Kc809 million ($37.1 million) as of 25 February, its petition to a Prague municipal court states.

But the petition, seen by FlightGlobal, adds that there is a debt of nearly Kc1 billion to “hundreds of thousands” of passengers who are owed for the cancellation of flights.

“[Czech Airlines] is unable to meet these obligations owing to a lack of liquid funds,” the petition states, adding that the company’s liabilities exceed the value of its assets.

“For this reason the [company] is also in a state of over-indebtedness.”

Czech Airlines A319-c-Czech Airlines

Source: Czech Airlines

Czech Airlines has been restructuring but says it is unable to obtain state support

It is blaming the need to file the petition on a combination of the impact of the pandemic, an absence of support from the Czech government, and the competitive pressure from other better-funded carriers.

“Virtually all of the [airline’s] competitors have received significant state aid,” it says.

The petition puts the company’s revenues last year at Kc1.69 billion compared with Kc8.5 billion in 2019 and over Kc9 billion in 2018.

Czech Airlines says it has tried to reduce its operating costs to a “sustainable minimum” since the beginning of the crisis, and sought the necessary scope for restructuring through a court moratorium on its property obtained in August 2020, and extended for three months in November.

The company states that it used this temporary protection “from the outset” to start to stabilise its business, improve efficiency and cut losses.

Czech Airlines reduced its aircraft fleet, terminated a number of contracts, optimised the use of infrastructure with parent Smartwings Group, and trimming headcount by 200 personnel between March 2020 and January 2021.

But the petition insists that – while further savings from the workforce might be necessary – any suggestions that the company will dismiss all its employees or shut down are “not true”. It says continued operation is a “priority” and this requires maintaining adequate employment.

The petition says the airline has started renegotiations with Airbus’s Canadian division over a contract for the delivery of new aircraft – the carrier has four A220-300s on order.

“These negotiations are still continuing,” it adds. The carrier also has orders for three A321XLRs.

Czech A220-c-Airbus

Source: Airbus

Czech Airlines is in discussions over its order for A220s

Czech Airlines has “repeatedly” attempted to discuss conditions for compensation or financial support from the Czech government and individual ministries, the petition claims.

It says the “historically unprecedented” crisis resulting in a “significant decline” in sales and “zero compensatory state support” – in contrast to “generous” assistance to competitors – has left the company unable to extricate itself from its difficult position without protection from creditors.

While the airline has faced “understandable” pressure from creditors during the moratorium, the creditors “in the vast majority of cases” have respected the company’s situation and “sought to find compromises” to ensure its survival, the petition says – although it also says it has “struggled” with demands from some individual creditors and potential seizure of its assets.

Smartwings Group controls 97.7% of Czech Airlines. The parent company is, in turn, 49.9%-owned by Hong Kong-based Rainbow Wisdom Investments.

Three Prague-based entities collectively hold the balance, comprising EH Group with 25%, UG Jet 2 with 13.8%, and Unimex Group with the remaining 11.2%.