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Wednesday, May 10, 2000
Czech Airlines narrows the field to two candidates By Frantisek Bouc Wings -- made up of airlines KLM Continental, Northwest and Alitalia -- and Global Alliance -- consisting of Air France and Delta -- emerged from a list of five candidates that also included Star Alliance (Lufthansa, United), Qualiflyer (Swissair) and Oneworld (British Airways, American Airlines). CSA President Miroslav Kula said that the trend in air transport is toward alliances, and that CSA must join one if it is to remain competitive. He said that the final choice will come down to whether the company's board prefers higher risk and potentially higher profits, or a more stable position that would virtually rule out further expansion. While CSA would become a minor partner in the Global Alliance, joining the newly fragmented Wings alliance would make the Czech airline a founding member of a reformed alliance, with a clear opportunity to expand further. KLM and Alitalia split in late April over disagreements between KLM and the Italian government concerning the timing of Alitalia's privatization and issues concerning Milan's Malpensa Airport. CSA Vice President Vaclav Kral said that CSA would like to become its new alliance's specialist for Eastern and Southern Europe, and that wish will have an impact on whom they choose. "We know, for instance, that neither KLM nor Delta fly to cities like Sofia or Riga," Kral said. "We would focus on the Baltic republics, Ukraine, Belarus, or the states within the former Yugoslavia." But Kral said that teaming up with Wings would bring CSA a strategic partner in America and it would increase the number of destinations the airline flies from 50 to 600. Deputy Transport and Communications Minister Karel Sellner said that the main criteria in selecting the two alliances were their profitability, CSA's potential influence and the level of interest they showed in joining with CSA. "We want CSA's position to be as close to equal as possible, so that [CSA] can keep a certain measure of independence and the alliance would also respect [Czech] national interests," Sellner said. Kral said that CSA will also want to gain from the alliance the ability to develop new destinations in Eastern Europe and funds for further remodeling of Prague's Ruzyne Airport. Once bitten Kral said that he would not comment on which of the two alliances was favored until the final verdict is released in mid-June. However, a source close to CSA who did not wish to be named said that Global Alliance was in the lead. A bilateral partnership of CSA and Global Alliance's Air France collapsed in 1994, after two turbulent years. Air France took over a 19.9 percent stake in CSA in 1992, but economic woes brought about a collapse of the partnership and the Czech government bought the shares back in 1994. But Air France has undergone a successful privatization since the split with CSA. Today a 57 percent stake is in the hands of the French government, while the company's employees hold 11 percent and the remaining 32 percent of the shares are traded on the stock market. CSA still uses most of the services and equipment given to it by Air France during the time of the alliance. Sellner said that the state intends to privatize its 88 percent stake in the air carrier but first wants CSA to enter into an alliance. Sellner said that after what happened to Hungary's Malev Airlines -- the carrier's simultaneous privatization and entering an alliance turned into a conflict of interest -- was a factor for CSA to split the two deals. The state expects to sell its share to the future alliance partner. Frantisek Bouc's e-mail address is fbouc@praguepost.cz
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