Bulgaria Air needs cash

SOFIA (SeeNews) – Bulgaria Air, the country’s flag carrier slated for privatization, can keep its 30 percent share of the passenger traffic market this year but needs an urgent financial injection in order to remain competitive after Bulgaria joins the EU, a top company official said. «The opening of the skies before Bulgaria Air is ready to fight for its market position may lead to bankruptcy regardless of the management intentions if no strategic investor is found and the state fails to raise the company’s capital,» Bulgaria Air Executive Director Zlatin Sarastov told SeeNews in an interview. The company has the resources to keep its market share prior to Bulgaria’s accession to the EU planned for January 1, 2007, he said. The Bulgarian government hopes that by that time it would have signed the Union’s «open sky» agreement, which allows any flight operator from the EU to set up business wherever it wants. After several failed attempts to sell the Bulgarian flag carrier, the government now hopes to divest 99.99 percent of Bulgaria Air by June and keep a «golden share» to safeguard national interests. «The alternative to privatization is the fulfillment of the government’s obligations for the raising of Bulgaria Air’s capital,» said Sarastov. The previous government pledged to secure 30 million levs (15.3 million euros) in Bulgaria Air’s capital in 2002 when the company succeeded the collapsed flag carrier Balkan Airlines. The total capital investment in Bulgaria Air made by the state since the company was set up in 2002 amounts to 5 million euros, said Sarastov. The capital has been increased by an additional 1.6 million euros from profit accumulated over the years, he added. Apart from raising its capital to 30 million levs, Bulgaria Air needs a minimum investment of about 1.5 million euros in know-how and systems software to remain competitive in the longer term. Around 1.5 to 2 million euros will be needed for the modernization of the company’s aircraft in line with EU standards, if the new owner decides to continue to use the operational leasing schemes currently employed by Bulgaria Air to hire planes, said Sarastov. Smaller Bulgarian carrier Hemus Air has been the only one to show interest in the latest plan for the privatization of Bulgaria Air so far. Fight for life «Our business plans envisage that Bulgaria Air would operate at a profit in 2006,» said Sarastov. The company’s 2005 pretax profit dropped to 500,000 levs from 1.7 million levs in the previous year. Bulgaria Air plans to invest around 2.5 million levs in 2006, mainly in software, the company’s website, a call center and staff training. «We need to bring our website in line with state-of-the-art technologies, as the key markets of Bulgaria Air are serviced mainly online […] and the call center would raise sales,» said Sarastov. Bulgaria Air is currently training 28 new pilots. Bulgaria Air will hire five new aircraft under a five-year operational leasing scheme, paying monthly installments of $140,000 (116,500 euros) in 2006. At the same time two aircraft from the company’s current fleet of nine would be returned, as their leasing term expires, so the company would operate with 12 aircraft this year. Harsh competition Bulgaria’s real estate property investment boom, rising economic activity and closer EU integration prospects have been the major motors behind the steep rise in passenger traffic for the air carrier over the last three years, said Sarastov. The market of international flights has grown between 20 and 25 percent over each of the last three years and even key players have been surprised by the intensive growth, he added. «Now, every company in the market is aware of the growth potential of the market and seeks to increase its share,» said Sarastov. «Aviation plays an increasingly important role in European integration. The EU entry of the Czech Republic, Poland and Hungary has led to double increase in traffic […] This is about to happen in the Bulgarian market,» he concluded.