Four bid for Czech Airlines

Four companies submitted bids March 23 for the first round in the privatization process for state-owned Czech Airlines (ČSA), a smaller number than many expected, but one that nevertheless includes the two strongest competitors: Air France-KLM and Darofan, a Czech subsidiary of Russia's Aeroflot.

The global economic downturn has been prohibitive to many companies' expansion plans and could be the reason no Asian companies submitted bids, said Cyrrus analyst Jan Procházka, who said he had anticipated bids from eight to 10 companies. The missed opportunity will be more of a detriment to Ruzyně Airport than ČSA, as the airport will remain without a hub for travel to Asia ahead of its own privatization.

"Nobody from Asia will have a hub there, which means the price for Ruzyně Airport will decrease," he said. "[Asian companies] are fighting to survive in their own markets, so they have no time for acquisitions in faraway markets."

The four companies in the running, including the Unimex travel consortium and the Odien group, have the advantage of entering a market already close to theirs, making the acquisition a more cost-friendly one. Unimex-TVS is 51 percent owned by the Unimex Group, controlled by Czech entrepreneur Jiří Šimáně. Odien Group owns the Czech travel agency Čedok.

"For the Czech Republic, a specialist in Eastern Europe makes sense because it's on the home market," Procházka said.

The government will use the first round to assess security risks of the bidders and whether they are "directly or indirectly controlled" by state authorities whose foreign or domestic policies could pose a threat to security. Criteria for the winning bid preclude companies without at least 51 percent of their capital in EU countries. The winners of the first round will advance in May, and a second round, in which price will be the only consideration, will conclude this September.

While Aeroflot is 51 percent owned by the Russian state, they are bidding through Darofan, which is a 100 percent Czech subsidiary. According to their bid, Aeroflot is looking for a partner from the Czech Republic or the European Union to qualify under the criteria.

Aeroflot's bid will likely cause a "big political discussion," Procházka said, but the company is his pick to win the overall bid.

"My tip is that Aeroflot will win, because the synergy it has with ČSA is the biggest. ČSA and Aeroflot are both strong in Eastern Europe, and ČSA has a license for flying to the United States, so it makes sense," he said.

The government has estimated the value of ČSA at between 3 billion Kč ($145.8 million) and 5 billion Kč. Despite the smaller-than-expected number of bidders, Procházka said his estimate still stands at 4.5 billion Kč.

Claire Compton can be reached at
ccompton@praguepost.com