William Malcolm

Prague Court Grants Smartwings Debt Deferral

Czech Airlines and Smartwings petition for an extraordinary moratorium was granted by the Municipal Court in Prague today. The extraordinary moratorium is valid for three months, and it can be extended by a quarter of a year under exceptional circumstances. Both companies will continue to fly.

Bankruptcies cannot be declared for the companies during the moratorium. “Obligations directly related to the maintenance of the company’s operations arising after the declaration of an extraordinary moratorium are entitled to be paid by the debtor for the duration of the extraordinary moratorium in preference to previously due liabilities,” the court said. The company did not disclose the number of liabilities.

CSA and Smartwings informed about the request for a moratorium on Wednesday. According to spokeswoman Vladimíra Dufková, the moratorium’s need stems exclusively from the consequences of the pandemic, which has caused the biggest aviation crisis globally. Both companies were profitable before the pandemic outbreak and are expected to return to profitability after it disappears. Last year, Smartwings reported a pre-tax profit of CZK 183 million. In 2019, CSA had a pre-tax profit of CZK 79.2 million.

“The operation of Smartwings and CSA has not changed. Both companies operate all scheduled flights according to flight schedules and continue to renew other routes depending on the development of the epidemiological situation in individual countries and travel restrictions. Smartwings Group, like other airlines, is restructuring to savings and an extraordinary moratorium is only a suitable temporary measure that gives Smartwings and CSA the necessary time to ensure the financial stability of the company in cooperation with financing banks, aircraft lessors and other creditors, “said Jiří Šimáně, Chairman of the Board of Directors of Smartwings on Wednesday.

Due to the declaration of a state of emergency by the government and the introduction of emergency measures related to the spread of coronavirus, Smartwings Group recorded a 95 percent drop in flights from April to June compared to last year and an 80 percent decline in July and August.

While some airlines have received targeted assistance from their countries, Smartwings and CSA have not yet. They want to use the COVID Plus program, which the Export Guarantee and Insurance Company (EGAP), after notification by the European Commission in the second half of July.

Smartwings now operates flights from Prague to 25 destinations, from Brno to nine and from Ostrava to two. Czech Airlines operates flights to 12 destinations and plans to restart flights to Barcelona, Madrid, Budapest, Gothenburg, Bucharest, Brussels, Warsaw, and Milan in September.