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SALE OF SLOVAK AIRLINES LATEST IN SERIES OF SUSPICIOUS PRIVATIZATIONS

Police probe airline deal

SLOVAKIA's air transport sector cannot complain of a lack of media and public attention. In addition to the turbulent privatization of Slovakia's two major airports, a police investigation into the covert privatization of national carrier Slovak Airlines by Austrian Airlines has kept the air industry in the news.

SLOVAKIA's air transport sector cannot complain of a lack of media and public attention. In addition to the turbulent privatization of Slovakia's two major airports, a police investigation into the covert privatization of national carrier Slovak Airlines by Austrian Airlines has kept the air industry in the news.

The Anti-Corruption Bureau of the Slovak police force is investigating the Slovak Airlines sale based on a complaint filed by MP Branislav Opaterný of the opposition Free Forum party.

The transaction, with Slovak Airlines (SA) on the brink of bankruptcy, took place in January 2005 when Austrian Airlines injected €2.8 million into the struggling carrier, increasing its SA ownership stake from 11 to 62 percent. Transport Minister Pavol Prokopovič signed off on the deal after Austrian Airlines guaranteed a Sk200 million (€5.3 million) loan that SA had taken to avoid bankruptcy.

But according to Opaterný, the government broke the law in approving the privatization of Slovak Airlines, reducing its stake from 89 percent to 34 percent in SA without a public tender.

"They sold state property without a proper cabinet or parliamentary decision," Opaterný said, adding that in countenancing the transaction, Prokopovič had harmed state interests.

However, Austrian Airlines has said it is confident that the deal was transparent. The head of the airline's Slovak operation, Heinz Vystoupil, explained that AUA intended to develop the Slovak air transport market.

"Our company will no longer comment on this issue because this tender and the privatization process as a whole is a matter for the Slovak Transport Ministry," said Vystoupil.

Critics have referred to the deal for SA as a "hidden privatization," but state officials have defended the move.

"The share capital of Slovak Airlines was increased but the state did not participate. This means that the state's capital stake in the company stayed the same, but the distribution of shares changed," Transport Ministry spokesman Tomáš Šarluška told The Slovak Spectator.

The state intends to sell its remaining stake in the air carrier in 2006, but with Austrian Airlines now holding a majority stake, other airlines will be less interested in the offer, say critics.

Slovak Airlines has been in red figures for as long as it has been in business. Founded in 1996, SA was granted an operating licence even through it did not meet the requirements:

It did not own aircraft until 1998, when it purchased three planes and started scheduled flights from Bratislava to Moscow.

The airline closed 2004 with a loss of Sk528 million (€14 million), compared with an Sk141.5 million (€3.7 million) loss the year before. The company transported 206,812 passengers in 2004, down 15,427 from 2003.

Due to SA's financial problems, the company leasing its aircraft to SA in September 2004 withdrew one of its planes from SA's fleet.

At the time SA was sold to Austrian Airlines, state officials argued that the shareholders of the company had been under intense pressure not to put SA's 200 employees on the street.

But ethics watchdog Transparency International Slovakia (TIS) said it did not regard the transaction as transparent.

TIS head Emília Sičáková-Beblavá said that the investor should have been chosen in a more open manner to allow other firms to bid for SA.

The content of the SA sale contract with Austrian Airlines is classified.

The Transport Ministry provided TIS with a copy of the agreement, but only after blotting out everything except the formal names of the participants and their signatures. The ministry said that Austrian Airlines did not wish the document to be published.

TIS plans to appeal the ministry's refusal to publish the contract details with reference to the Freedom of Information Act.

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