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Korean Air acquires a share of Europe

After Hainan Airlines in Aigle Azur and, Korea national carrier Korean Air acquired a 44% stake in ailing Czech carrier CSA. A further sign of the soaring interest of Asian airlines for the acquisition of European air carriers.

PRAGUE- CSA is today a far too small carrier to stand on its own, especially as Central Europe has one of the world’s densest numbers of air carriers serving relatively small populated home bases: CSA is the national airline of a country of 10 million inhabitants, Adria Airways serves only 1.9 million inhabitants in Slovenia, Croatia Airlines some 4.3 million while Hungarian national carrier Malev used to serve 10 million inhabitants, before to get bankrupt in early 2012.

The atomization of demand in central Europe has made business for national carriers increasingly difficult. Especially as low cost airlines have some of their strongest bases there. Korean Air decision to acquire 44% of Czech air carrier CSA represents probably a risky investment for Korean Air. Despite the fact that the Czech Republic- and especially the city of Prague- is one of the most visited destinations in Europe.

On April 4, a 44% stake in CSA was signed between Korean Air and the Czech Government for the purchase of stocks and shares by the end of the second quarter of 2013.
According to Czech Aeroholding –owner of CSA-, “Korean Air’s stake in Czech Airlines will positively impact CSA’s cost structure, due to the synergies available in purchasing services, technology and other items”, said Czech Aeroholding management.

A single offer from Korean Air was submitted by the 01-Mar-2013 deadline for binding offers. On 13-Mar-2013, the Government of the CR approved the sale of a 44% stake in Czech Airlines for a nominal price of EUR2.64 million.

Czech Republic Government declared following the signature: “The new stake bought by Korean Air in Czech Airlines will significantly impact the entire Czech Republic, thanks to tighter ties with the rapidly growing Asian region, increasing awareness from potential Korean and Asian investors, increasing commercial collaboration and reinforced tourism between the Czech Republic and Asian countries”. Korean Air CEO and chairman of the board of directors Yang Ho Cho said: “We have known Czech Airlines for a number of years, during which we have both been part of the SkyTeam alliance. Our successful codeshare collaboration only confirms that our decision to become a strategic partner of the Czech national carrier, culminating in our signing of the contract, is the correct decision. We consider Czech Airlines a trustworthy partner with whom we wish to expand into Central and Eastern Europe. We believe that Czech Airline have a lot of room for growth. As a SkyTeam partner, we think that both Korean Air and Czech Airlines can benefit through this cooperation,” highlighted Petr Necas, Czech Prime Minister.

Czech Republic Government: “The entry of the Korean company represents a guarantee for the Czech Republic and its citizens that a significant Czech company with a ninety-year-old tradition will not disappear. However, this step also means that its future development and also employment in the region will be secured,” said Miroslav Kalousek, Minister of Finance. Source: Company statement, 10-Apr-2013.

Synergies between CSA and Korean Air will help providing for the Korean carrier a hub within Europe. The Korean carrier will lease to CSA an Airbus A330-300 to help the Czech carrier to establish a new Prague-Seoul route. Both CSA and Korean wil together propose a daily flight. Korean Air will also expand its network at Prague, with increased codeshares on CSA and connection timings.

Chinese carrier Hainan Airlines was the first Asian carrier to invest into a European airline by taking a 48% in French regional carrier Aigle Azur.

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Luc Citrinot a French national is a freelance journalist and consultant in tourism and air transport with over 20 years experience. Based in Paris and Bangkok, he works for various travel and air transport trade publications in Europe and Asia.

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