Chinese state corporation CITIC is negotiating the sale of 49.9% stakes in Czech no-frills airline Smartwings, which also owns 98% of Czech Airlines (CSA) sources told Hospodářské noviny daily on August 26. The airline is facing financial difficulties and the Chinese owners are not willing to lend a helping hand, sources said.

The Chinese shareholders announced their intention to sell their stake in late July and now they are trying to exit with a minimal profit, the daily wrote. CITIC bought the shares in 2015 for CZK1bn (€38mn).

The pandemic has caused the collapse of the aviation industry globally. Smartwings Group was also hard hit as it recorded a 95% y/y drop in traffic from April to June during the lockdown and an 80% decline in the last two months. In June, it announced plans to axe 600 jobs and steps were taken to shore up its finances.

According to the plans, the Chinese shareholders, together with owners Roman Vik and co-founder and chairman Jiri Simane, were to invest hundreds of millions of crowns in rescuing the airline.

Representatives of the company said earlier that it will be necessary to invest around CZK2bn to save the company.

Negotiations began for a state guarantee for a commercial loan amounting to CZK900mn through the state insurance company EGAP.  In June, the Czech parliament added the airline to the list of companies that can apply for the guarantee scheme.

Czech media reported that Smartwings had requested a deferral of its debts based on the Lex Covid regulation to give them time to restructure operation. The airline will be helped by international consultant EY in overhauling its business.

The extraordinary moratorium on debt repayment is only a temporary measure and would give time to agree on the terms of a new loan with lenders.

According to the Minister of Industry and Trade Karel Havlícek, any further involvement of the state beyond these guarantees is excluded such as the redemption of the Chinese stake.

Smartwings carried 8.2mn last year and reported sales of CZK28bn. The unaudited report shows a profit of CZK133mn for the year.

The airline operates 25 flights from Prague, 9 from Brno and 2 from Ostrava 

CSA operates flights to 12 destinations and plans to renew flights to Barcelona, ​​Madrid, Budapest, Gothenburg, Bucharest, Brussels, Warsaw, and Milan from September.