Author: Adam Junek
Source: Ekonóm, 26.03.2009, No. 18, page 12

UPPER TITLE: CSA PRIVATISATION

Candidates of CSA privatisation are probably the French-Netherlands airlines Air France–KLM, and the Russian Aeroflot.
The tense expectation of who would join the battle for the state share in the Czech Airlines (CSA) is at the end. Four prospective buyers have submitted their applications by the deadline. They all had already been known before, so there is no surprise in this matter.
The Ministry of Finance that organises the sale of the 91.5 percent share in CSA was delivered “documents” by French-Netherlands airlines Air France-KLM, Russian airline operator Aeroflot, investment group Odien, and Consortium of the airline company Travel Service and the Unimex Group company.
“The government will now decide on what participants would be allowed to undergo an in-depth audit by CSA. It will take into account whether the prospective buyer does not represent a security risk,” said the spokesman of the Ministry – Ondřej Jakob.
It means among other things that CSA must not be purchased by company controlled by state that could jeopardise security interests of the Czech Republic.

Poor participation
Upon the in-depth audit by CSA, prospective buyers will be called to submit their offers, which the price shall be decisive in. The government believes that this airline sale would bring four to five billions of Czech crowns into the national budget. The winner should be known by the end of September.
Some experts advise that this public tender is poorly participated. In particular, there is no Asian participant of the tender the CSA would complement each other with.
“There are admittedly four prospective buyers only, but I think that it might be considered a success nowadays. It is particularly important that these are four transparent companies,” opposes Peter Kováč, Executive Manager of the Division of Corporate Finances of Patria company.
“It is obvious that we have two groups of prospective buyers. Two strong airlines and two companies, in which further interests with CSA are not much clear. I would certainly not underestimate them,” added Kováč.
Major candidates are thus Air France-KLM and Aeroflot. The aim to acquire CSA is however higher priority for Aeroflot, which will be expected to make more aggressive price offers.
Russians must more or less resolve one fundamental problem. The condition of the Czech government is that CSA must preserve its status of the national carrier. Under EU regulations, this condition is met, if the 51 percent block of shares is held by national or European company only.
On this account, Aeroflot is to enter into a partnership with a Czech or European company, as specified by General Manager of the Russian airlines – Valerij Okulov.
In the meantime, leading investment groups in the Czech Republic – PPF, J&T, and Penta, have however backed out negotiations on such partnership. According to the information of the weekly magazine Ekonom, Aeroflot conducts negotiations with Arca Capital of the financier Pavol Krúpa.

The result will also influence the Airport sale
What impact will the result of CSA privatisation have on another sale of the state-controlled company – Prague’s Airport? “It is a different case. The airlines are in quite different position then the Airport,” said Kováč.
In his opinion however, the result of airline privatisation would have its impact on it. The clearer conception of CSA development and future is offered by its new owner, the higher price would be offered by prospective buyers of the Ruzyně Airport.
The case of London’s Airport Gatwick indicates that it is not necessary to worry about lack of interest in the Prague’s Airport. The operator – British company BAA – was “forced” to tender this Airport in the last autumn, and prospective buyers still pour in. They are to submit their binding offers now.

Who the prospective buyers of CSA are
Air France-KLM
French-Netherlands airlines are the largest air carrier in Europe, and the third in the world.
In the fiscal year 2007/2008, they transported nearly 75 million people to 183 destinations all over the world. In the same period, their sales exceeded 24 billion Euro, and the net profit was 748 million Euro.
The company operates over 600 aircrafts making 1,700 flights a day.
The largest shareholder of the company tradable on the Stock Exchange is the French state with 15.7 percent of shares. Other significant shareholders include for example the banks Barclays or Crédit Agricole.

Aeroflot
The most significant Russian airlines control 45 percent of the Russian regular international transport. They cover about 17 percent of the domestic transport.
In 2007, they earn about 3.8 billion dollars, the net profits of which amounted to 313 million.
This Russian carrier disposes of more then ninety aircrafts in its fleet and employs about 15 thousand people
The Russian government holds a 51percent share in Aeroflot, its representation in the Board of Directors is however much weaker – not even three percent.

Odien
The investment group Odien is held by Turkish and American capital. It is controlled by Sarans – the Turkish family of millionaires.
Since the last year, it has been the owner of the travel agency Čedok.
The group as a whole does not show its business results. It operates mainly in Turkey where it holds its own series of media.
Odien Group was founded in 2001 as a successor of the consortium of Latona and Lazard companies that together with Komerční banka advised the state on how to prevent bankruptcies of large Czech companies.

Travel Service
The company has entered CSA privatisation in a consortium with its former majority owner – the company Unimex Group of the billionaire Jiří Šimáně.
Unimex Group is now a minority owner of a chartered carrier. Most shares are controlled by Island’s airline company Icelandair Group.
Travel Service operates sixteen aircrafts and flies to 230 destinations. Since 2004, it has been operating the low-cost brand SmartWings, and provides also services of private transport.
In 2007, the company showed earnings of 5.8 billion crowns, and its net profits amounted to 155.6 million crowns.

Up to 5 billion crowns
This is an expectation of the government from the sale of the Czech Airlines.