02. 10. 2008 - The Prague Airport Authority and Czech Airlines Crowned the Settlement of their Property Relations Today by Signing the Contractual Documentation
Prague, 2 October 2008
The management of the Prague Airport Authority and Czech Airlines today signed the contractual documentation that addresses the settlement of their mutual property relations at Prague Airport. This step will remedy a number of discrepancies which arose in 1991 in the division of the original joint company into two new entities: the PAA and Czech Airlines. The land and building swap will increase the value of both companies prior to their privatisation and allow for their further effective development. Whereas the Prague Airport Authority will get land and buildings in the Southern Grounds, Czech Airlines will get the land around its head office in the Northern Grounds.
The existing arrangement of property relations between Czech Airlines and the Prague Airport Administration had burdened both companies, and complicated their further development. For example, Czech Airlines had owned a number of buildings, the land for which, both under and around them, was owned by the Prague Airport Authority. Hence, Czech Airlines had access to them assured only in the form of easements, which were non-transferable. On the other hand, Czech Airlines had an easement on land related to the planned development of a parallel runway.
Increasing the Value of Both Companies before Privatisation
The resolution of both companies’ property and legal relations will cause an increase in the privatisation value of the companies. For most potential investors, the former legal situation had been non-transparent and therefore also risky. “This step gives us a compact area for the continued development of the Airport and the related infrastructure and services. It is excellent news for future investors, as until now, the airport grounds had not offered such potential,” said Miroslav Dvořák, CEO of the Prague Airport Authority.
Czech Airlines’ concentration in one locale will bring significant cost savings and an overall improvement in the efficiency of its operations. “This is a logical transaction which is enhanced by the fact that Czech Airlines does not need approximately 80% of the assets that constitute the subject of the swap, for its further activities. We are not a real estate agency, taking care of the maintenance and lease of buildings we do not need. For several years, we have invested massively into the main thing for us – new aircraft,” said Czech Airlines’ President and Chairman of the Management Board, Radomír Lašák. In 2006 alone, Czech Airlines invested 10 billion crowns into new aircraft, with annual instalments amounting to CZK 1.8 bn; furthermore, the development strategy counts on continuing to upgrade the airlines’ fleet, planning to invest another CZK 8 bn by 2013.
Conclusion of the Transaction
The positive financial effect, in the order of hundreds of million of crowns, will enable Czech Airlines to invest into its core business. Czech Airlines will use the funds obtained for its further development, for example for the potential construction of the new Hangar G and the renovation of Hangar F (its largest), and also for bolstering its operating reserve, in the event of further shake-ups in the industry. The transaction will also have a positive impact on the overall financial results, which will enable the Airline to erase most of its cumulated losses from previous years, dating back to 1990.
Of greatest benefit for the Prague Airport Administration is the creation of a compact area suitable for the development of a commercial zone. A similar space, which is a regular part of international airports, had been missing in Prague.
Press Spokesperson of the Prague Airport Authority
email@example.com, 724 365 353
Press Spokesperson of Czech Airlines
firstname.lastname@example.org, 724 183 139