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DEAL PUTS AUSTRIAN AIRLINES IN THE PILOT'S SEAT WITH A MAJORITY SHARE

Slovak Airlines opts for rescue landing

AN AUSTRIAN air carrier has swooped in to support Slovenské aerolínie (Slovak Airlines), which has been teetering at the brink of bankruptcy. The move has bought Austrian Airlines a majority share in Slovakia's state-run airlines.
The transaction took place in mid-January, when Austrian Airlines injected another €2.8 million into Slovak Airlines and increased its ownership to 61.99 percent. Critics are calling the deal "hidden privatization".
Spokesperson for the Transport Minister, Tomáš Šarluška, told The Slovak Spectator that the share increase is based on a loan agreement between Austrian Airlines and Slovak Airlines signed December 23 last year.

AN AUSTRIAN air carrier has swooped in to support Slovenské aerolínie (Slovak Airlines), which has been teetering at the brink of bankruptcy. The move has bought Austrian Airlines a majority share in Slovakia's state-run airlines.

The transaction took place in mid-January, when Austrian Airlines injected another €2.8 million into Slovak Airlines and increased its ownership to 61.99 percent. Critics are calling the deal "hidden privatization".

Spokesperson for the Transport Minister, Tomáš Šarluška, told The Slovak Spectator that the share increase is based on a loan agreement between Austrian Airlines and Slovak Airlines signed December 23 last year.

"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 stays the same but the distribution of shares has changed," Šarluška said.

The press office at Austrian Airlines said: "By participating in the capital increase, the Austrian Airlines Group acquired a 61.99 percent stake in Slovak Airlines."

According to Šarluška, the Transport Ministry will announce a public tender to privatize the state's remaining 34-percent stake in Slovak Airlines.

Critics have called the deal unfair.

Branislav Opaterný of the opposition party Free Forum declared that the Transport Ministry "let the secret privatisation of Slovak Airlines go through, using non-transparent means, without a proper public tender".

Now that Austrian Airlines has a majority stake, Opaterný said that no other airline would be interested in the state's minority share - except Austrian Airlines.

He accused the government of straying from its commitment to try to make the best privatization deal by negotiating a secret deal.

"A secret privatization - of what?" Šarluška retorted. "Slovak Airlines had no assets to privatize."

Slovak Airlines has been operating at a deficit for as long as it has been in business. Founded in 1996, Slovak Airlines was granted a flight operation licence without fulfilling the necessary requirements. The company did not own aircraft until 1998, when it purchased three planes and started making scheduled flights from Bratislava to Moscow.

"Slovak Airlines was doing so poorly financially that in September 2004 the aircraft leasing company took one of its planes away," said Šarluška.

According to him, shareholders had to do something fast or Slovak Airlines and its 200 employees would be out on the streets.

A privatization proposal was forwarded to the Economy Ministry prior to the financial crisis in September. However, the situation continued to deteriorate. The Transport Ministry and other shareholders decided to take a €5 million loan from Slovenská sporiteľňa.

A subsidiary of Erste Bank in Austria, Slovenská sporiteľňa issued a loan on the condition that Austrian Airlines act as guarantor.

The Transport Ministry openly talked about having to capitalize the loan if it could not meet the payment schedule.

Back in September, Marek Reviľák, Slovak Airline's spokesperson, issued a statement: "The firm has been under-financed for a long time and needs external financial help. We have been looking for a partner for more than a year. Austrian Airlines was seriously interested."

Shareholders and the Transport Ministry, which at the time had the majority stake, agreed to the loan and its conditions.

A standard privatization process takes time, sometimes years. "If we had waited for the privatization process to go through, the airlines would have gone bankrupt. There would not have been an airline left to privatize," Šarluška said.

Slovak Airlines management underwent changes in September 2004. Now, it is made up of mostly representatives from Austrian Airlines.

Thomas Kleibl, chief financial officer of the Austrian Airlines Group said: "After we have undertaken measures to stabilize the national carrier of Slovakia, Slovak Airlines, we want to continue developing the company."

Slovak Airlines owed millions of crowns to different state-owned joint-stock companies. According to Šarluška, the January transaction helped pay down some of the debt.

"You see why we had to save Slovak Airlines," Šarluška told The Slovak Spectator, "to pay off some of that state-owned debt."

Austrian Airlines sees itself as a market leader in Central and Eastern Europe. From February onwards, it plans to introduce four additional evening flights and five morning flights between Bratislava and Brussels.

Kleibl confirmed that Austrian Airlines is interested in "privatizing the Bratislava airport and plans to further develop the Slovak market according to its favourable dynamic growth potential".

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