Smartwings, Czech Airlines Seek Debt Relief Under Lex COVID-19

Czech Airlines

Smartwings and CSA from the Smartwings Group today filed a petition with the Municipal Court in Prague to declare an extraordinary moratorium under the Lex COVID-19 law.

The announcement of an extraordinary moratorium is to protect both Smartwings and CSA when the revenues of both companies have dropped dramatically. Simultaneously, according to communication, companies will gain time to design and negotiate a long-term sustainable solution that will benefit creditors, employees, and passengers.

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 epidemic 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 company’s financial stability in cooperation with financing banks, aircraft lessors and other creditors, “said Smartwings Chairman Jiří Šimáně.

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 an in-flight drop performance of 95 percent in April to June compared to last year, and more than 80 percent 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, established by the Export Guarantee and Insurance Company (EGAP), after notification by the European Commission in the second half of July.

“The loan application process for this loan is a complicated and time-consuming procedure requiring several parties’ agreement. For these reasons, in particular, the Smartwings Group has taken advantage of an extraordinary moratorium. We are negotiating all available financing options to keep both companies running. We have worked closely with our funding institutions and other stakeholders, and we have also newly hired an international consultant, EY, which has extensive experience in restructuring and financing, as well as the necessary specialization in aviation, “added Šimáně.

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 renew flights to Barcelona, Madrid, Budapest, Gothenburg, Bucharest, Brussels, Warsaw, and Milan from September.