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

Airbus Seeking Financial Compensation from Czech Airlines

In 2019, Czech Airlines had placed an order with Toulouse-based aircraft manufacturing giant Airbus for four Airbus A220-300 aircraft and even chose for additional range by upgrading a previous order for three A320neo to the A321XLR. The plan was for the airline to receive and operate the new generation of Airbus aircraft by the end of 2020, as the airline was also planning for the expansion of its route network.

Chairman of the Board of Czech Airlines Petr Kudela commented on the significance of the order at the time, saying, “The A220 and A321XLR fit well with our long-term business strategy in terms of network expansion. These aircraft will definitely give Czech Airlines a competitive advantage, and will increase the capacity of our regular flights.”

Prior to the Covid-19 pandemic, which disrupted air travel worldwide and caused countless airlines — including Czech — massive losses in revenue, the national carrier was a profitable company. However, the pandemic brought forth obstacles such as lack of government financial aid to help keep it afloat in unprofitable times.

As a result, the airline suffered losses of more than 1.57 billion Czech koruna ($75.2 million), forcing it to file for reorganization on Feb. 26 after it had tried all other solutions to overcome its various financial struggles. The airline has been in bankruptcy proceedings ever since.

Airbus Joins Bankruptcy Proceedings

This week, a new creditor entered Czech Airlines’ insolvency register: Airbus. The manufacturing giant is seeking financial compensation of almost 17 billion Czech koruna for the previous order of four A220-300 and three A321XLR aircraft, which was never paid for after Czech fell into financial trouble.

In documents supplied as part of the bankruptcy proceedings for review by the insolvency administrator, Airbus is claiming 8.5 billion Czech koruna of unconditional receivables from Czech Airlines.

This is precisely 50% of the total amount Airbus is looking to win. The other half is comprised of contingent receivables, which will include interest rates and arrears fees, and stem from funds that Airbus is asking Czech Airlines to pay if the airline chooses to withdraw from the purchase agreements made in 2019.

Considering the airline’s current financial situation and how deep in debt it still is, the airline is likely to the purchase agreements, meaning Airbus is truly claiming the full amount, possibly stripping the airline of all its assets.

Should Czech Airlines — considered one of the world’s oldest airlines with more than ninety years under its belt — not succeed in its current attempt to reorganize and settle its financial debts, then the possibility of it shutting down is likely on the horizon.

Author

  • Charlotte Seet

    Fascinated by aircraft from a very young age, Charlotte’s dream was to work alongside the big birds one day. Pursuing her dream, she went on to achieve her diploma in Aviation Management and is currently working on her degree in Aviation Business in Administration with a minor in Air Traffic Management. When she’s not busy with school assignments, you can find her aircraft spotting for long hours at the airport. In Charlotte’s heart, the Queen of the Skies will always be her favorite aircraft.

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