Advisor sought to propose way forward (422 words)

Published: 5/25/2001

The Lithuanian State Property Fund is to open a tender for an advisor to supervise the privatisation of state-owned Lithuanian Airlines (Lietuvos Avialinijos) (LAL) and to determine which measures will be required, in order to make the sale attractive, particularly to a strategic investor. According to Antanas Malikenas, the Director of the Lithuanian State Property Fund, the advisor will be chosen within two months with the objective of finalising a privatisation strategy by the year-end and to implement the process in early 2002. Although a decision has yet to be made on how much of the airline will be privatised, it is believed that it will be a significant tranche. Exactly how the sale will materialise is difficult to anticipate, but comments made recently by Jorgen Lindegaard, new CEO of Scandinavian Airlines System (SAS), suggest that it could be interested in acquiring a Baltic airline as part of its bid to become the leading player in the regional market. However, the Lithuanian State Property Fund believes that the government and its advisors still have to undertake an evaluation, in order to identify the right solution for LAL and it is in the process of deliberating the post privatisation structure. In 2000, LAL had a share of 56-57% of the Lithuanian air transport market, carrying a total of 294,800 passengers: up from 244,000 passengers carried in 1999, with a load factor of 54.51 %: up from 44.48 % in 1999, on 2% more flights. The airline's 14.87% top line improvement in revenues, however, was not matched by commensurate improvement in earnings. Losses of $6.8m were attributed to rises in both fuel costs and aircraft maintenance, amounting to 11.71%. In response to the airline's poor performance, the State Property Fund, implemented a board re-shuffle and fired the General Director. In early April 2001, it appointed Stasys Jarmalavicius, the former Managing Director of LAL. Chosen out of four candidates, Jarmalavicius was supported by four members of the five-man board, despite the fact that Jarmalavicius himself, who was MD at the airline between 1997 and the spring of 2000, was fired because of the airline's poor performance. In 1Q2001, the company reported a loss of 7.7 m litas ($1.91 m), but at a reduced rate, compared with the 14.5 m litas ($3.5 m) of losses recorded in 1Q2000. LAL's 1Q revenues rose by 7.6%, to 41.97 m litas this year, from 39.04 million litas in 1Q2000, carrying 57,200 passengers in 1Q2001: up 15.9% on 1Q2000.

Article ID: 2560