Spectator on facebook

Spectator on facebook

Second domestic airline folds

Slovakia's fledgling air transport industry continues to fall apart. Three months after national carrier Slovenské Aerolínie had its operating license suspended for 'irregularities,' the private line Tatra Air has been reduced to begging the government for a $4 million loan in return for a 66% stake in the firm.
State officials are not biting, however, and claim on the contrary that Tatra Air owes the Customs Office 88 million Slovak crowns (Sk) in unpaid Value Added Tax (VAT) from 1992. Unless the firm pays this debt, Finance Ministry officials say, the state will not lift a finger to save Tatra Air from bankruptcy.
"If we fail to raise the money in a short time, the company will die," Tatra Air General Director Robert Slack told The Slovak Spectator on March 3.


Tatra Air's planes have become the latest to be snatched by customs officials, leaving the nation with one airline.
photo: TASR

Slovakia's fledgling air transport industry continues to fall apart. Three months after national carrier Slovenské Aerolínie had its operating license suspended for 'irregularities,' the private line Tatra Air has been reduced to begging the government for a $4 million loan in return for a 66% stake in the firm.

State officials are not biting, however, and claim on the contrary that Tatra Air owes the Customs Office 88 million Slovak crowns (Sk) in unpaid Value Added Tax (VAT) from 1992. Unless the firm pays this debt, Finance Ministry officials say, the state will not lift a finger to save Tatra Air from bankruptcy.

"If we fail to raise the money in a short time, the company will die," Tatra Air General Director Robert Slack told The Slovak Spectator on March 3.

But an official at the Ministry of Transport said that given the nation's troubled economic situation and the cabinet's commitment to its austerity package, the government could hardly turn around and offer a loan to Tatra Air.

"I don't know how realistic their offer [to exchange the 66% of shares for $4 million] could be taken, but I think it would be absurd to throw away $4 million on the company," said Andrej Žiarovský, head of the Civil Aviation Department at the Ministry.

But Tatra Air's Slack claimed the company would be satisfied with a government guarantee which would allow it to borrow the funds from the bank, as Tatra Air itself did not have substantial property in fixed assets. "We have some foreign investors that are very interested in taking over a share of the company, but we need the government to guarantee a bank loan to tide us over for the time an investor would need to settle down in the country," Slack explained.

Long forgotten bill

Tatra Air's current financial crisis has a great deal to do with the unwillingness of the Customs Office to negotiate the terms of repayment of the firm's debt.

The saga began with the two Saab 340 B aircraft Tatra Air imported into the former Czechoslovakia in 1992. Slack explained that no law on VAT existed until 1993, and thus the firm had not been aware that any duties had been levied.

After allowing the matter to lie fallow for over six years, the Customs Office suddenly froze Tatra Air's bank accounts on November 27, 1998, claiming that the airline owed the office 66.5 million Sk in accumulated VAT taxes and 21.5 million in import duties.

Following its freezing of Tatra Air's accounts, according to Slack, the Customs Office confiscated revenues from flights from November 1998 to mid-February 1999, amounting to 15 million Sk. "The Customs Office charged the company with the duty just a few months ago," Slack said, explaining that the firm had not had time to find the necessary funds.

On February 16, Tatra Air was forced to stop selling tickets and cease operations due to a lack of money.

Since the shutdown of the company, Slack said, Tatra Air had been looking for ways to meet its debts but had been frustrated by the intransigance of state officials.

Tatra Air appealed to the Customs Office to return the 15 million Sk in confiscated funds so that the company could at least continue to pay instalments on its leased aircrafts, but the office rejected the proposal. Nor has Tatra Air's offer to pay off its customs debt in instalments over a few years been accepted by customs officials.

Slack said he did not understand the refusal of customs officials to cooperate. "Even if we think the duty is unfair and unreasonable and we don't like to pay it, we never said we wouldn't," he said.

Customs officials claim, however, that freezing Tatra Air's accounts was the only way to ensure that the company pay at least a part of its debt to the state.

"If the office had not seized the money from [Tatra Air's] accounts, they would never have seen it," Vladimír Mihalčík, head of the Legislation Section at the Customs Office.

Mihalčík also said that Tatra Air had been aware that they would have to pay a duty after they imported the planes in 1992.

"Tatra Air has to realize that Slovakia is part of a customs duty zone [with the Czech Republic] and they simply did not pay their duty," he said.

But Karol Němec, Tatra Air's Sales and Operations Director, said that the state was absurd to demand a customs duty worth 21.5 million Sk. "Not even the poorest developing countries require this duty from their domestic carriers - it would destroy them," said Němec.

According to the Transport Ministry's Žiarovský, however, Slovakia has never ratified the 1991 General Agreement on Tariffs and Trade (GATT), a world-wide convention which allows for duty-free imports of aircrafts and equipment.

"Collecting duties on air transport is certainly an anomaly, but it will be very difficult to change this system," Žiarovský said.

He also said that the Transport Ministry had tried several times to persuade Customs Office bureaucrats to change tax legislation, but their attempts had always been blocked by the Finance Ministry.

Mihalčík agreed, saying that any amendment to customs duty rates would have to be issued by the Finance and Economy ministries. He said, however, that due to lack of interest on the part of the ministries, a change in legislation should not be expected soon.

An official at the Finance Ministry confirmed for The Slovak Spectator on March 3 that within the next four months, no changes to legislation that would benefit domestic air carriers are being considered.

Tatra Air had 70,000 passengers in 1998 and expected a 15% increase in 1999. According to the firm's statistics, however, Tatra Air has lost over 1,200 customers since it stopped flying on February 16. Since 1992 the company has transported over 250,000 passengers.

Tatra Air was the only Slovak carrier that operated regular flights from Bratislava to Košice, Prague and Zurich. The company planned to extend its flights to Brussels, Milan and Munich and cooperated with Swissair and the Czech ČSA airlines.

Top stories

Coalition only agrees on how to talk. But what will they talk about?

Budget talks to decide on concrete policies. Danko wants airplanes, Fico wants better pay for nights and weekends.

Danko, Fico, Bugar.

Cloud computing becomes a standard

External servers are now much more secure than local business ones, according to experts.

Slovak firms have their eyes on the cloud.

Slovaks drink less and less

Behind the decline in alcohol consumption is, for example, the abandoning of the habit of drinking at work – typical especially during communism, according to an expert.

Kiska: Even Europe has its aggressive neighbour

President Andrej Kiska addressed UN commenting poverty, instability and climate change.

President Andrej Kiska