Wednesday, August 19, 2009

No Air France-KLM Takeover of Czech Airlines

In what shouldn't be terribly surprising news given present economic conditions, Air France-KLM announced that it would withdraw its bid for the State-owned Czech Airlines.  See Sean Carney & Steve McGrath, Air France Withdraws From Czech Airlines Bidding, Wall St. J., Aug. 19, 2009 (available here); Robert Wall, Air France Withdraws From Czech Privatization, Aviation Wk., Aug. 19, 2009 (available here).  From the Wall Street Journal story:

The privatization of CSA Czech Airlines was thrown into doubt Wednesday after Air France-KLM withdrew from the tender because of the downturn in the industry and after examining the Czech carrier's books, leaving just one bidder left in the process.

The Czech Ministry of Finance said the tender would continue, and the remaining bidder, a consortium of Czech and Icelandic investors, said it remains interested despite Air France-KLM's withdrawal.


In addition to the tough business environment and worsening financial positions for both airlines, Air France-KLM decided that the expected synergies from a tie-up wouldn't be enough to justify the investment, said a person close to the matter. An Air France-KLM spokeswoman declined to comment beyond the company's statement.

Following the recent recomposition of Italy's Alitalia and Greece's Olympic Airways, Czech Airlines remains one of the last State-controlled carriers in the European Union.  The Czech Government, however, appears committed to its privatization efforts despite this obvious setback.  Despite the airline's unprofitability, the Czech Government has not sought to inject with State aid--either legitimately through European Commission channels or by the backdoor (i.e., the Greek and Italian way).  If no takers can be found for the ailing airline, however, it will be interesting to see what the State will do in response.

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