On a Wing and a Prayer

The low-cost Slovak airline has suspended flights as it struggles to stay afloat - Photo: J. Cafik

Despite the gloomy economic forecasts and a decision to file for bankruptcy protection, the Slovak budget carrier SkyEurope is committed to surviving the financial crisis.

“This period of re-organization under creditor protection will give the company time to restructure its debt and become attractive for new equity investment,” the company spokesman said in a press release Jun. 22.

SkyEurope, which has been in the red since its founding in 2001, has often paid wages late and covered expenses and losses with investors’ money, according to employees and company reports. The financial situation deteriorated further last fall when the airline was again unable to post a profit for the seventh consecutive year, suffering additional pressures from the economic downturn that began in 2008.

Then on Jun. 22, Orly Airport in Paris seized one of SkyEurope’s aircraft and another two were confiscated in Bucharest, to be held as collateral for unpaid debts. SkyEurope owes €529,000 to the Bucharest Airport, according to the Romanian Transport Ministry. Orly also confirmed that unpaid debts are the reason for its confiscation of the plane, according to a report in the Czech news portal iHNed.cz.

Authorities in Bucharest later released the planes, but negotiations between Orly management and SkyEurope were still pending as of this writing.

Due to lack of funds, SkyEurope suddenly suspended flights across Europe in June, possibly the clearest indication that SkyEurope has severe financial difficulties. Flights originating in Vienna, Prague and Bratislava were the first to go. Selected routes from these cities are being covered by Air Slovakia for time being.

The Romanian Times reported on Jun. 29, that another SkyEurope flight to Vienna was not allowed to leave Bucharest, after Baneasa Airport sequestrated the aircraft because of the debt. Passengers left without knowing whether they would get refunds for their tickets.

SkyEurope Austrian manager George Geisler-Brunner left his position as of Jun. 1, because the airline’s reports of its financial difficulties were inaccurate, as claimed by internet portal Austrian Aviation Net. He was replaced by Gerald Unger, who had previously worked for SkyEurope.

The current crisis has meant a severe loss for the carrier’s reputation. As recently as August 2008, polls showed that SkyEurope was honored the best low-budget airline in Eastern Europe. But Jason Bitter admitted that clients’ complaints had increased in recent months, with complaints about the delays and general condition of the aircraft.

SkyEurope spokesman Tomáš Kika told the Czech news agency iHNed.cz that the company is challenging the French airport’s actions, and has ordered a legal analysis of the move. Talks are progressing, and the seized aircraft could be released on Jun. 26.

The airlines announced days earlier that it had applied for court protection from creditors for three months. SkyEurope’s finance director, Nick Manoudakis, said in a press release that according to Slovak law, court protection from creditors may last for up to 90 days, and can be prolonged by two more months. Manoudakis stressed that the company’s goal is to restructure its debt and gain new investment as soon as possible. He refused to elaborate on the sum SkyEurope would like to obtain through new investment.

The airline has been facing growing pressure from creditors as it entered the summer tourist season, according to the Slovak news agency SITA. Under the negotiated protection, existing contracts will have to be observed by both sides during the restructuring process and all ongoing services during this period will be paid as due. Protection will apply to the collection of debts from before the protection period was put in force. SkyEurope Airline AS, based in Bratislava, operates flights from its three bases in Bratislava, Prague and Vienna. Its fleet has decreased from 15 to its current eight Boeing 737 planes; the airline intends to increase the number to ten planes this summer. The company was founded in September 2001. Its share capital is €661,223.

The head of SkyEurope Jason Bitter insisted in late June that the company would continue operations in spite of consistently negative results.

“EasyJet was also profitable at a time when it was a smaller company than we are now,” Bitter told the Slovak business weekly Trend.

Bitter claimed that the financial crisis has even helped SkyEurope on some routes, but principally in and out of Vienna and Prague. The Slovak headquarters was hit hardest by the global economic slowdown, because Slovak travelers are not accustomed to paying €100 for tickets for hour-long flights within Europe unlike Austrians and Czechs. The unstable environment and cumulating economic questions worry SkyEurope management. However Jason Bitter remains optimistic.

“The best news I have is that the worst month of this year is already past – it was January,” Bitter said. In addition, he places hopes in increased traffic in the summer holiday months, which tend to be the strongest season for most airline companies that, in the past, have meant high sales for SkyEurope’s best European routes.