Czech Republic's Smartwings, which also owns CSA Czech Airlines, has finally managed to secure a financial injection. It has come in the form of a loan provided by several banks, all as part of the Czech Republic's Covid Plus program.
Smartwings secures a loan
Czech airline Smartwings has finally secured a loan agreement last week to help it weather the ongoing crisis in the aviation industry. The loan agreement is between Smartwings and a syndicate of banks, led by Unicredit Bank, and it totals CZK 2 billion ($90 million). The other banks involved are Komerční banka, Československá obchodní banka, and Česká spořitelna. The Czech Republic's Export Guarantee and Insurance Corporation (EGAP) is underwriting it, and Smartwings is paying it CZK 200 million for it.
The CZK 2 billion loan will mature in six years, and it has been provided to Smartwings as part of the Czech Republic's Covid Plus program. The loan will help Smartwings fund its operations while they continue to be loss-making as a result of the ongoing travel restrictions as a result of the COVID-19 pandemic.
Smartwings has also secured backing from its shareholders, most notably Unimex Group, and from its lessors and business partners. The latter group includes Lufthansa Technik. Altogether, Smartwings has built up financial reserves amounting to CZK 7 billion ($315 million) to help it get through the current crisis. The CZK 7 billion exceeds Smartwings' liabilities for the time being. Its daughter airline, CSA Czech Airlines, is in administration.
A major breakthrough for Smartwings
Smartwings has not had an easy 2020. It saw a 90% drop in revenue last year, and the airline it owns, Czech Republic's flag carrier CSA Czech Airlines, has issued a notice that it would lay off all staff.
Jiří Šimáně, the Chairman of the Board of Directors of Smartwings, commented on the news by saying the following:
"This is a key milestone for Smartwings, after a year of battling the effects of the coronavirus pandemic. The financing deal, which concludes the moratorium process, will allow Smartwings to continue operating over the coming financial period. We appreciate the trust and professionalism that the banks and EGAP have shown us at this difficult time, especially UniCredit Bank, with which we have been cooperating for more than 20 years."
Restructuring is underway
While this news means that the Covid Plus program will help Smartwings, it will still not be helping CSA Czech Airlines. CSA will not be granted financial assistance as part of this funding for Smartwings, and its bankruptcy proceedings are continuing.
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Further details of the CSA's fate will be decided in June. CSA, almost 100 years old, is one of the five oldest airlines in the world. The Czech Republic's government has been criticized for not providing any means of assistance for the national brand.
What do you think of the news that Smartwings has been given a loan while Czech Airlines is in bankruptcy proceedings? Let us know what you think in the comments below.