UPDATE 2-Czechs continue CSA sale after Air France-KLM exit

Wed Aug 19, 2009 6:35am EDT

Related Topics

* Air France-KLM no longer bidding for CSA

* Czech finance ministry says sale will continue

* Final bidder has until Sept. 30 to submit offer

(Adds dateline PRAGUE, Czech comment, background)

By Jason Hovet and James Regan

PRAGUE/PARIS, Aug 19 (Reuters) - The Czech Republic said on Wednesday it would continue with the sale of state-owned Czech Airlines (CSA) with only a single bidder after Air France-KLM (AIRF.PA) withdrew from the process.

A consortium of Czech companies Unimex and Travel Service (ICEAIR.IC) remains in the tender, one of the biggest privatisations expected in central and eastern Europe this year.

Air France-KLM (AIRF.PA), Europe's biggest carrier, said it had withdrawn from the tender process due to the impact of the economic environment on the airline industry.

"The (Czech) finance ministry has received Air France-KLM's decision... (and) will continue in the tender and is not changing its proceedings," the ministry said in a statement.

It also extended the deadline for the consortium's bid by 15 days until Sept. 30, after which it will submit the sale decision to the caretaker government, just weeks before an October election.

Analysts have said the sale fetch up to 5 billion Czech crowns ($275.3 million) for the state, which is tackling a ballooning government deficit that is expected to rise above 5 percent of gross domestic product this year.

But the withdrawal of Air France could hit the price.

"The departure of one of the bidders brings the competition level to zero, so the potential income may decrease because there is no counterweight left," said Milan Vanicek, analyst from Czech brokerage Atlantik FT.

CSA has seen its passenger numbers fall by about 10 percent in the first half of the year as the economic downturn cuts into air travel. Its first-quarter loss widened to $51 million from $44 million the year before.

Air France-KLM said economic circumstances meant CSA could focus instead on trying to restore its profitability on its own through a recovery plan.

"In this context, Air France-KLM wishes to further strengthen the existing partnership between the two groups and to continue to explore with CSA any new areas of cooperation that could be of mutual benefit to each company," it said in a statement.

In April, the Czech Finance Ministry picked Air France-KLM and the Czech consortium as second-round bidders for CSA, rejecting bids from Russia's Aeroflot and Odien. [ID:nLK90118]

Air France-KLM has been a key player in the much-anticipated consolidation of the European airline industry, as carriers struggle with increasing competition, rising fuel costs and a drop in air travel caused by the financial crisis. ($1=18.16 Czech Crown) (Editing by Karen Foster)

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