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Icelandair to acquire Travel Service

Smart Wings operator could field 30 planes by 2009

By Riva Froymovich
Staff Writer, The Prague Post
May 16th, 2007 issue

Travel Service, the Czech Republic’s largest privately owned airline and operator of the country’s first low-cost carrier, Smart Wings, has signed a letter of intent to be acquired by the Icelandair Group. The cost of the sale has not been disclosed.
“We appreciate that such an important international investor like Icelandair Group has trust in us,” said Roman Vik, general director of Travel Service, in a company statement. “By 2009, Travel Service could operate more than 30 aircrafts … [making it] an important player in the market.”
The Prague-based company currently flies charter, business-jet and commercial flights from Prague, Brno, Karlovy Vary, Ostrava, Pardubice and Budapest to more than 230 airports on four continents. Its fleet of 12 Boeing 737 airplanes has an average flight time of one hour and 30 minutes to keep prices low.
Icelandair has apparently taken a liking to that philosophy.
“The airline has a good and increasing position in the charter and low-cost market in Eastern Europe, which is an interesting and fast growing market,” said Icelandair’s chief executive, Jon Karl Olafsson, in a statement.
Travel Service’s current owners will continue to work with the company, he said.
The contract has the Reykjavik-based carrier set to acquire a 50 percent stake in the Czech company before July, with the rest to be purchased in 2008 with the aid of loan capital.
The precise terms of the agreement will be settled next month following a due-diligence period. The first part of the sale would increase Icelandair’s 2007 revenue 30 percent over last year, to about $1.1 billion (22.9 billion Kč). That figure is expected to grow to about $1.3 billion once the second half of the deal closes in 2008.
Icelandair is making an effort to expand its operations in Eastern Europe. Last year, for instance, it bought the Latvian airline Latcharter.
“It is obvious that if Icelandair Group acquires Travel Service, it will grow fast this year,” said Olafsson. “This airline is, regarding number of passengers and fleet, close to Icelandair’s scheduled operations in size.”
The Czech airline’s revenue for 2006 reached about $284 million.
It is unlikely that the airline’s ticket prices will be much changed, said Tomio Okamura, board member of the Association of Czech Travel Companies and Agencies.
This is especially true as overall prices rise due to an increase this month in the air passenger duty for the Czech Republic, he said.
“It’s not clear yet whether Travel Service was sold because it was a profitable company or because it had problems,” said Okamura.

Riva Froymovich can be reached at rfroymovich@praguepost.com


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