Volcanic Ashes Add to Central, Eastern European Airlines' Financial Woes
    2010-04-19 13:39:11     Xinhua      Web Editor: Yang Yang
 

by Lidia Moise

With airspace over Central and Eastern Europe (CEE) closed for almost three days, major airlines of the region have started to worry that the flight safety issue is aggravating the region's financial pains.

No landing or takeoff was possible over the weekend for civil aviation in most of Central and Eastern Europe that includes Croatia, the Czech Republic, Hungary, Poland, Romania and Serbia, though some flights were managed in Southern Europe over Bulgaria, Greece and Turkey.

None of the flag carriers of Romania, Poland, Hungary or the Czech Republic is in the position to absorb huge losses which only increase the fiscal deficits of these countries, which have no other alternative but to postpone their privatization dreams.

The picture is already grim for the CEE region as the national carriers mostly recorded a more than 30-percent fall in revenues in 2009.

Romania's Transport Secretary of State, Marin Anton, estimated that the painful impact of the volcanic ash cloud may cost the Romanian airlines between 1.8 million and 2 million euros (2.4 million and 2.7 million U.S. dollars) a day in revenue losses.

Romanian state airline Tarom's revenue losses are estimated to reach 1.1 million euros (1.48 million dollars) daily.

The airspace closure forced civil aviation companies to cancel about 590 flights on Romanian airports, affecting 60,000 to 65,000 passengers.

The Romanian authorities expressed earlier this year the intention to sell a stake in Tarom in 2011, but the privatization prospects depend on the company's capacity to generate profits.

Last year, Tarom's losses mounted to about 22 million euros (29.7 million dollars). The company's dream to gain a profit of 4.7 million euros (6.3 million dollars) this year may be shattered by the volcanic eruption in far-away Iceland.

The Hungarian national carrier Malev has announced that it will refund the tickets for passengers who will not agree to re-book the tickets free of charge, but did not elaborate on its revenue losses caused by the ash cloud from Iceland.

But last year's 24.4 billion-forint (124 million-dollar) net loss for Malev was impressive enough to force a warning from the International Monetary Fund (IMF).

The international aid agency has warned that Malev might become a drain on the country's fiscal budget this year, which could contribute to a higher deficit than its target of 3.8-percent GDP as agreed with international lenders.

The Hungarian government has no immediate plan to sell off its national carrier. It rescued the loss-making company in February which was in private hands for two years, after its Russian and Hungarian owners agreed to let the state back in to help the company raise its badly-needed capital.

Hungary and Romania are running IMF-led loan arrangements in order to avoid a default on their loans.

Poland's national flag carrier LOT is scheduled for privatization in 2011, as the state treasury intends to sell 68 percent of its share in the company.

But the company has not yet disclosed its financial situation for 2009. It proceeded with a restructuring program aimed at cutting costs and selling some of its non-core assets, including shares in listed Bank Pekao to improve liquidity.

LOT came to the brink of bankruptcy due to higher costs of fuel in 2008 with huge net losses of 733 million zlotys (about 262 million dollars).

The Czech authorities are mulling over the sale of a stake in the Czech Airlines (CSA) next year. The national carrier is currently grappling with billions in losses.

The CSA has not yet reported its financial results for 2009, though the market expects to see pre-tax losses.

The company expects to swing back to a profit in 2010 "unless there is a significant worsening of the economy," but its hope of reaching profit may be derailed by the devastating volcanic ashes.

The Czech government was hoping to raise about 200 million euros (270 million U.S. dollars) by selling its 91.5-percent stake in the CSA, which is a member of the Air France-KLM-led Sky Team alliance.

Bulgaria temporarily closed its entire airspace on Sunday, but the authorities said that the losses per day could hardly be assessed.

The Sofia Airport suffers financial losses due to canceled flights - mainly from unpaid airport taxes and uncollected passenger taxes, according to government officials.

Bulgaria sold its flag carrier, Bulgarian Airlines, in 2006, so its eventual losses will not pose any threat to its fiscal deficit.

The countries in the CEE region may not suffer much from the flight disruptions of the daily cargo volume, as there are no significant imports or exports depending on air transport, said Mihai Ionescu, director of the Romanian Association of Exporters and Importers.

"The flower market depends on air cargo transportation, but there are still stocks available for a few days. The same situation is with exotic fruits and some vegetables. Some restaurants may also be short of sea food for a few days, but the situation is not out of control, we cannot expect huge losses," he added.

The CEE region has a lot of very active low-cost companies which have also been affected by the airspace restrictions on civil flights. But only a few has evaluated the financial situation which still depends on how long the airspace restriction will last across Europe. 

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