Slovenske Aerolinie gets back in the air after operating licence restored

Published: 8/23/1999

On August 9th 1999, after eight months in limbo, former national air-carrier, Slovenské Aerolinie (SA), re-launched regular flights between Bratislava and Kovice, after striking a bargain with the Ministry of Transport. Pavol Mlad, General Director of SA, declared that: "This is a victory. Finally, civil aviation transport has been renewed in Slovakia". After being stripped of its operating license and grounded in March 1999 (www.concise.org March 5th 1999), SA will now be allowed to operate three Tu-154 M aircraft, leased from the Transport Ministry, based on an agreement reached on July 29th 1999. These three planes, which are owned by the state but used by SA for free between May and December 1998, had formed the core of the Transport Ministry`s claims that SA had an unfair operating advantage. According to Mlad: "In reaching the general agreement, we proved that we are a stable and reliable company and that we can guarantee the further development of air transport in Slovakia". He added that the airline would fly two return routes every day, with a 30-seater Saab 340, between Bratislava and Kovice. Further plans, he said, were to renew routes from Bratislava to Moscow and Poprad, and later to Munich and Zurich. Mlad conceded that: "Unfortunately, due to operating delays and the resulting losses, our initial plan to open five to six regular routes in two years will now take maybe four years". Slovakia has not had an airline flying domestic routes since SA and its competitor Tatra Air (www.concise.org April 4th 1999) were grounded. SA`s decision to re-open its Bratislava-Kovice line was, therefore, welcome. "From the commercial point of view, it doesn`t matter to us who flies these routes, but rather how many flights there are," said Igor Dula, Deputy General Director of the Slovak Airports Authority. He added that: "We are happy to have as many airlines flying as possible, so that connections between airports develop." In November 1998, the Transport Ministry revoked SA`s operating license because of what state officials called its "unclear ownership structure." Later, the ministry annulled SA`s status as a national carrier, fined the SA for operating illegal business flights, and confiscated the airline`s three Tu-154 M aircraft. In late February 1999, the ministry announced a tender for leasing and operating the planes. The winner of the tender, the Poprad-based Air Transport Europe, never actually took the planes over, due to an April ruling of the Bratislava Regional Court, which found that the ministry was still bound by the terms of its lease contract to SA. The court placed a ban on leasing the aircraft to a third party. The July 29th 1999 out-of-court settlement between the SA and the Transport Ministry thus brings to an end an eight month legal saga. The deal commits each party to drop all claims against the other, including claims for fines, punitive damages or reimbursements. "The new contract is for five years, and the company will pay a market price rent", said former Transport Minister, Gabriel Palacka, who resigned from his post on August 9th 1999. He told journalists at a press conference on July 30th that: "The main point is that the planes will fly again.” According to Palacka, the ministry was ready to reassume its shareholder rights and duties in the company. The state controls a 34% stake in SA through the ministry. Despite the peaceful solution between the state and the airline, the case still had its sacrificial lambs. Andrej Îiarovsk˜, former General Director of the Civil Aviation Department at the Transport Ministry, was recalled from his post by Palacka on August 5th 1999, allegedly for his failure to solve the SA case. Bewildered by Palacka`s decision to "fire, not recall" him, Îiarovsk˜ argued that the ministry`s agreement with SA simply swept the airline`s problems under the carpet. "I`m not aware of any gross mismanagement of our section, and I wasn`t even told the real reasons for my recall," Îiarovsk˜ told The Slovak Spectator on August 9th. "Perhaps I became an uncomfortable person due to my uncompromising insistence that the law be obeyed." Îiarovsk˜ added that he had not had anything to do with the SA case since January 15th 1999, when it was assigned to another ministry official. He admitted, however, that his Aviation Department had not pursued the real wrongdoers in the SA case. "We should have taken the former leadership of the Transport Ministry to court, not Slovak Airlines. The Ministry, led by [opposition HZDS party deputy Ján] Jasovsk˜, was responsible for the whole thing. The SA just used the situation to its benefit." On the other hand, Îiarovsk˜ insisted that certain facts regarding SA`s ownership structure and business contracts had convinced him that the ministry`s objections had a legal basis. "The main objection we had [to returning SA`s operating license] was the ownership structure - the state`s position in the ownership structure and its role in shareholders` bodies was not clear," Îiarovsk˜ explained. "Then, of course, there was no public tender held for the Russian Tu-154 aircraft, which is not fully in accordance with commercial legislation." The ministry also objected to the duration of the original lease. The contract for the airplanes was for 25 years, Îiarovsk˜ said, with a three-year deferral of installments, which contradicted the Law on the Use of State Property. But SA`s Mlad˜ disagreed, saying that his firm`s original agreement with the ministry had contained no special privileges. "We offered the ministry the best conditions it could get, even better than the best offer in the [March] public tender," he said. Mlad added that the SA still had the ambition "to become the dominant air-carrier in the market, which for some people may be a thorn in the eye. But we are able to do it simply, by offering the best service and doing the best business."

Article ID: 771