Lithuanian carrier's privatisation announced against backdrop of seizure and release of 737 for fee debts

Published: 2/16/2000

State-owned and loss-making Lithuanian Airlines is to have 54% of its shares sold, under a proposal made to the Lithuanian government by the State Property Fund. The state will sell 49% to an unnamed strategic investor and 5% to the airline"s employees, although the timing for the disposal has yet to be set. The airline is set to increase its capital ahead of the privatisation, with an increase in capital of 14.4%, in order to bring the company"s capital to $30m, so improving the attractiveness of the company, given that the primary assets of the airline are two Boeing 737-200s and three Yak-42s. The privatisation of the airline was expected to happen in the second half last year, when the government confirmed its interest in selling 49% to a strategic investor at the beginning of 1999. However, managers of the airline were concerned that the state should retain 51%, with a foreign partner only having a 25% stake. It appears that the deteriorating condition of the airline, which lost $2.33m at the nine months stage of 1999, combined with a decline in passengers numbers and load factors falling to 44.5%, has both delayed the sale and strengthened the government"s resolve to bring in a partner. The concern was further increased by the arrest of an LA Boeing 737-500 at Heathrow, where it was held for 10 days for non-payment of debts to ATC organisation, Eurocontrol, reported to be about half a million Euros. The identity of the partner has been the subject of intense speculation. British Airways and SAS have been the most recent names among many mentioned as possible partners.

Article ID: 1431