Czech government scraps Czech Airlines tender, rejects sole bidder

Jan FischerPrague - Czech Prime Minister Jan Fischer announced Monday that his caretaker government has decided to reject a lone bid for the country's red-ink carrier, Czech Airlines.

The cabinet opted to rescue the troubled carrier by safeguarding its cash flow and through severe cost cuts before putting the state's 91.5-per-cent share up for sale, Fischer said at a joint press conference with Finance Minister Eduard Janota.

Janota said the government agreed to secure the airline's cash flow, which would have otherwise run out as early as November, by capitalizing a 2.5-billion-koruny (145 million dollars) operating loan which the carrier received from a state-owned firm Osinek.

The move requires a nod by the Czech Republic's and the European Union's anti-trust bodies. The airline's general assembly is to draft a restructuring plan on November
19, the finance minister said.

"There is a real chance that the company will have sufficient cash flow to survive the winter season," Janota said.

The airline has dipped into losses as it was losing passengers amid the global economic crisis.

A single bidder, a Czech consortium of investment Unimex Group and Travel Service budget carrier, offered 1 billion koruny (58 million dollars) for the carrier if its equity value reached at least a zero.

The condition meant that the state would make significantly less on the transaction as Czech Airlines slumped to negative equity value of more than 700 million koruny (40.6 million dollars) by mid-2009.

Janota said that the cabinet considered the offered price and a number of bidders' conditions as inconvenient. "Not only the price but also other circumstances influenced the government's decision- making," he told reporters.

The decline in passengers at a time of the economic crisis only deepened the airline's earlier woes.

The carrier first plunged into the red in 2005 under the management of then former Social Democratic Defence Minister Jaroslav Tvrdik who rapidly expanded its fleet. The firm briefly returned to the black in 2007 after a new management carried out cost-cutting.

The troubled company - whose loss is expected to balloon to over 3 billion koruny this year - recently went through another leadership overhaul, ending up temporarily under the management of profitable state-owned Prague Airport.

The carrier was also recently shaken by bitter talks with pilot unions, which agreed to a salary cut of 30 per cent on Friday.(dpa)