VZCZCXRO7831
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHSL #0388/01 2461301
ZNR UUUUU ZZH
R 031301Z SEP 09
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC 0145
INFO RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHSL/AMEMBASSY BRATISLAVA 0179

UNCLAS SECTION 01 OF 02 BRATISLAVA 000388 
 
SIPDIS 
 
STATE FOR CA/OCS R. DOWELL 
STATE FOR EEB/TRA J. BYERLY AND M. FINSTON 
DEPT OF TRANSPORTATION FOR STEPHEN HATLEY 
STATE FOR EUR/CE J. LAMORE 
AMEMBASSY PRAGUE FOR B. ROCKWELL 
USEU/BRUSSELS FOR M. CATON 
 
E.O. 12958: N/A 
TAGS: EAIR ECON PGOV LO XG
SUBJECT: SKYEUROPE: DEBT-FUELED NOSE DIVE 
 
BRATISLAVA 00000388  001.2 OF 002 
 
 
¶1.  (U) SUMMARY: With mounting cashflow problems forcing it to 
miss payments to airports and suppliers, SkyEurope ceased 
operations and prepared to file for bankruptcy shortly before 
midnight on August 31.  Never once turning a profit in its 
eight-year existence, the budget airline's financial health 
worsened dramatically in the past year as the economic crisis 
deepened across Europe, simultaneously reducing customer demand 
and making it more difficult to obtain the short-term financing 
necessary to keep the company afloat.  SkyEurope's rapid descent 
began last October, when several of its leased planes were 
seized by their owner for nonpayment.  The airline continued to 
hemorrhage cash this year, and two weeks ago the Vienna airport 
abruptly ceased offering it services, forcing it to scramble to 
relocate affected routes to the nearby airport in Bratislava. 
The sudden bankruptcy has left many customers holding worthless 
tickets, and it seems unlikely they will receive refunds. 
Embassy Bratislava has not yet received any reports of Amcits 
stranded by the collapse of the airline. END SUMMARY. 
 
 
 
¶2.  (U) Already in precarious financial health and reliant on 
bridge loans to remain solvent, SkyEurope's situation worsened 
soon after the financial crisis began last fall.  In October 
2008, GE Commercial Aviation Services (GECAS) recalled four 
planes that it had leased to SkyEurope; this was followed 
quickly by a recall of six additional Boeing 737-700 jets by 
GECAS in January 2009. Faced with the loss of ten of its 14 
planes, SkyEurope temporarily borrowed older aircraft from Air 
Slovakia and Seagle Air in order to continue its operations; it 
eventually was forced to reduce its routes.  Further 
highlighting its cashflow problems, SkyEurope also announced in 
January that it had secured an agreement with Longstock SAPO LLC 
to delay repayment of its EUR 10 million bridge loan. 
 
 
 
¶3.  (U) As business conditions continued to deteriorate--the 
number of SkyEurope passengers fell nearly 23 percent in the 
year to July as the airline posted a EUR 32 million loss for the 
first half of the year--the airline filed for protection from 
its creditors under Slovak bankruptcy law on June 22.  Despite 
this, airports in several European cities, including Paris and 
Bucharest, reportedly seized SkyEurope planes in an effort to 
compel payment of debts.  After Slovak courts approved the 
airline's restructuring plan in July, SkyEurope announced that 
it had secured a new bridge loan to provide it liquidity while 
completing an EUR 16.5 million equity investment by the Austrian 
group FOCUS Equity B.V.  The equity investment was never 
completed, however, and SkyEurope's cashflow problems caused it 
to miss payments to both the Vienna airport and a number of 
suppliers.  The Vienna airport suddenly stopped offering 
services to the airline on August 14, forcing it to move the 
affected routes to Bratislava's airport.  Further payment 
difficulties caused the airports in Prague and Bratislava to 
suspend service on August 31, leading to SkyEurope's 
announcement later that night. 
 
 
 
¶4. (U) According to press reports, thousands of travelers have 
been stranded throughout Europe as a result of SkyEurope's 
collapse.  The airline had been flying 33 routes connecting 16 
European countries.  Although most other budget airlines 
operating in Europe have announced "rescue fares" for these 
stranded passengers, it is uncertain whether any of the 280,000 
people reportedly holding a SkyEurope ticket for travel in the 
next six months will be able to get a refund.  SkyEurope's 
website offers little hope, merely suggesting that customers 
contact their credit card companies or travel agents--several of 
which, for their part, have already deflected responsibility 
back to the airline.  Embassy Bratislava has yet to receive any 
reports of Amcits stranded due to SkyEurope halting its 
operations. 
 
 
 
¶5. (U) COMMENT: While the end was rather sudden, SkyEurope's 
demise was long anticipated.  Although CEO Nick Manoudalis has 
announced plans to form a new airline under the same SkyEurope 
name, it seems an unlikely proposition given the spectacular 
flame-out that left thousands of passengers stranded throughout 
 
BRATISLAVA 00000388  002.2 OF 002 
 
 
the continent.  SkyEurope's rivals, particularly Hungarian 
WizzAir and Ireland's RyanAir--both of which have recently 
announced plans to expand service to Bratislava--seem poised to 
fill much of the void left by its departure.  Additionally, the 
Bratislava airport has long hoped to steal some of the routes 
currently flying into the Vienna airport, and construction has 
begun on a new terminal championed by Prime Minister Robert Fico 
that will result in a doubling of the airport's capacity.  As a 
result, it seems likely that SkyEurope will ultimately be little 
missed. END COMMENT. 
EDDINS