Czech Airlines has become a bit too profitable, according to the Czech government, which is refusing to provide the airline with a capital injection.
In July, the government said it would not provide CSA with a 500 million koruna (US$15 million) cash injection to help cut the company's debt after the carrier recorded its first financial year profit since 1995. 'The company's results have been so good that the cabinet sees no need to become involved in its finances,' says incumbent Transport and Communications Minister Petr Moos, after the airline turned a $7.6 million loss in 1996 into a $2.8 million profit in 1997.
But the airline says that as part of a four-stage privatisation plan, it still needs current shareholders, including the government run National Property Fund, to help increase its capital.
All this, says CSA, has to be in place before it can concentrate on the second stage of privatisation, namely bringing in an institutional financial investor. 'This investor will be requested to increase again the capital of CSA and thus improve the company's position for the third and last stage,' says Jioí Prusa, CSA's executive vice-president of marketing. 'It would be at this point that we intend to involve a strategic partner or partners, preferably an airline with commercial ties to CSA,' he says.
Speculation in the local press on the identity of the investor points to the Chase Manhattan bank, which is rumoured to be participating in a $15 million loan for the airline.
CSA denies that it is looking for a loan, while the government adds that any institutional investor would be invited to take a stake, not just provide a loan.
Source: Airline Business
