Slovak Government Unable To Pay Carrier's Debts
Slovakian carrier Slovak
Airlines terminated all scheduled service on Tuesday after Austrian
Airlines Group (AAG) -- a 63-percent majority shareholder in Slovak
-- declined to offer any more financial support to keep it
solvent.
In a statement released Tuesday, Austrian Airlines Group said
the Slovakian government has failed to honor a long due legal
agreement even after receiving several extensions, the latest of
which expired December 31, 2006. Since then, AAG hasn't granted
Slovak Airlines any further financial support.
AAG said, "Since the decision over the issue promised by the
government has been repeatedly delayed, including in the government
meeting held on 17 January 2007, and an evaluation under EU law has
been decided as what appears to be a conscious and prolonged
delaying tactic demonstrating a lack of readiness to pay, there is
no perspective for the restructuring of the company."
AAG purchased its 62-percent stake in Slovak Airlines in January
2005 with the understanding the Slovak government would assume $7.5
million of the company's debt. AAG had in mind to restructure
Slovak Airlines and guide it through a financial recovery thus
avoiding bankruptcy. According to Austrian newspaper derStandard,
an audit conducted after the sale showed Slovak's debts at closer
to $14 million.
Despite assurances from Slovak's transport minister Lubomir
Vazny his ministry would make up the difference, no money from the
Slovak government has been forthcoming.
AAG said Tuesday, "It is absolutely unacceptable that - two
years after the signing of the contract and when Austrian Airlines,
the contractual partner, has suffered substantial damages -
implementation of the obligation that was entered into should even
come into question. Slovak Airlines will terminate its scheduled
services today."
The Austrian company says it owns two of the aircraft operated
by Slovak Airlines, and its Board has decided to immediately return
the Fokker 100 and Boeing 737-300.
According to AAG's release, the Slovakian government's agreement
to assume Slovak Airlines' liabilities, along with a range of other
obligations, was a precondition for the stock sale giving AAG a
majority stake.
As one of the newest members of the European Union, having
joined as one of ten central European countries granted membership
in May 2004, Slovakia will have to face the music with the courts
of the European Commission -- AAG has said it will pursue all legal
options in seeking compensation for damages.