PRAGUE – The Czech government Monday decided to cancel the sale of flag carrier CSA Czech Airlines to a Czech-Icelandic consortium, citing a range of concerns, and will instead continue restructuring the company.
“The government agreed it will not sell,” Prime Minister Jan Fischer told reporters after a regular cabinet meeting. “There will be hard restructuring, namely to the expense side,” he added.
The airline’s pilots last week agreed to a 30% pay cut in return for the resignation of carrier’s management team. The airline’s new boss is the head of the Prague airport. He will keep both positions.
The sale of the unprofitable airline was first called into doubt in August when Air France-KLM SA withdrew from the tender amid the downturn in the industry and after examining the Czech airline’s books.
That left just one bidder, a consortium of Czech financial firm Unimex and charter airline Travel Service. Icelandic airline Iceland Air Group Holding is a shareholder in Travel Service.
A spokeswoman for the consortium said the group’s 1 billion korun (about $58 million) bid was “above standard,” given the airline’s continuing unprofitability, debt load and leasing payments.
The consortium in late September placed a bid for the airline but made the deal conditional on the government infusing the company with cash ahead of a sale to bring the airline’s base capital, which is currently negative, at least to zero.
Finance Minister Eduard Janota said the price offered wasn’t right and that the bidder’s conditions were unacceptable. Mr. Janota added that advisory company Deloitte, which the government was consulting on the tender, recommended that the government not accept the bid and to cancel the tender.
The government earlier this year said it hoped to generate about $270 million by selling its 91.5% stake in Czech Airlines, which is a member of the Air France-KLM-led Sky Team alliance.
CSA reported a $100 million net loss for the first half of the year and said it would sell jets, cut staff and reduce routes to try and return the airline to profit in 2010.