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Czech Carrier CSA On The Brink Of Bankruptcy

A Czech Airlines A319 landing at London Heathrow. (Photo: AirlineGeeks | William Derrickson)

An airline that has been flying across Europe and the world for the past 98 years could be the next victim of the pandemic-induced crisis in the aviation industry.

Prague-based Czech Airlines (CSA), the flag carrier for the Czech Republic, has filed for reorganization under the country’s Insolvency Act. Before making this decision, the company had sent a letter to its entire 430-person workforce informing them that they were going to be dismissed, leaving the carrier with no staff.

The airline is unable to meet its financial commitments after a moratorium that had been previously granted by a court in Prague expired on Feb. 27. Unlike other carriers in Europe, CSA has not received financial assistance from its government.

“Despite recommendations of the European Commission and the International Air Transport Association, CSA did not receive any financial support from the government, as opposed to its direct competitors,” the airline told Flightglobal. “The Czech state refused to participate in the rescue of CSA despite the fact that the shareholders declared their readiness for financial support to CSA.”

The reorganization is aiming to merge CSA with parent company Smartwings, which operates another eponymous airline under a different Air Operator’s Certificate. Last May, the Smartwings Group refused to be renationalized by the Czech government, requesting instead a loan or a loan guarantee to allow the company to maintain its ownership structure unaltered. Currently, the group is owned by Czech businessman Jiri Simane and his partners, with a 49.9% minority stake owned by CITIC Group Corporation, a Chinese state-owned investment company, Simple Flying reports. According to E.U. laws, this is the highest stake that non-E.U. entities can have in E.U. carriers.

Earlier in February, the Czech Airline Technics CSAT, a maintenance company which is a subsidiary of state-owned Prague Airport, withheld two ATR 72 aircraft from the airline due to outstanding debts due by CSA to the maintenance unit, reports Aerotelegraph.

CSA had to return its largest aircraft, an Airbus A330-300, to its original lessor and suspend its only long-haul route — a flight to Seoul — as a consequence. The airline currently has orders for three Airbus A321 XLR, due to be delivered in 2023, and six Airbus A220-300, which were deferred due to its financial difficulties. The carrier is still in possession of one single Airbus A319-100 and one Airbus A320-200 in addition to five ATR 72-500, two of which are still being held by the maintenance company.

With no other legal alternatives after the expiration of the moratorium, CSA is now out of options and can only hope for an external intervention to continue its 98-year history. These interventions could come in the form of state-guaranteed loans from the government or a merger with parent company Smartwings Group.

Vanni Gibertini

Author

  • Vanni Gibertini

    Vanni fell in love with commercial aviation during his undergraduate studies in Statistics at the University of Bologna, when he prepared his thesis on the effects of deregulation on the U.S. and European aviation markets. Then he pursued his passion further by obtaining a Master’s Degree in Air Transport Management at Cranfield University in the U.K. followed by holding several management positions at various start-up carriers in Europe (Jet2, SkyEurope, Silverjet). After moving to Canada, he was Business Development Manager for IATA for nine years before turning to his other passion: sports writing.

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