Czech Airlines hits key targets

23rd Aug 2006

Czech Airlines has maintained income for the first half of this year at a level slightly above the approved plan. As of June 30, 2006 the airline recorded a total loss of CZK 773 million, which is CZK 20 million less than expected in the three-year plan as approved by the new company management. The plan anticipates a return into the black in 2008.

“I consider the results we have achieved to be a great success by all company staff. They prove that we can work on internal changes while not neglecting our markets and clients. That is excellent. We are managing to increase the numbers of passengers carried as well as seat occupancy in aircrafts. However, the competitive environment is pushing down average ticket prices, and therefore also revenues. Besides the negative impact of fuel price developments we are also fighting the high rate of growth of payroll costs and the costs of purchasing new aircraft resulting from contracts made in previous years,” said CSA president, Radom’r La?ák, adding, “We have a realistic plan approved by the owner; we have a concrete solution and a complete management team. We are changing CSA through gradual measures both in terms of revenues and costs.”

Total operating revenue has increased year-on-year by 8.9% to reach CZK 10.9 billion. With a share of over 83%, regular transport constitutes the greatest portion of operating revenue. In comparison with the same period last year this has grown by almost 6%. Charter transport revenues grew by almost 56% in the first half of the year and constitute another 9.2% of the operating revenue. The remaining portion consists of non-transport activities such as sales of goods and services to other carriers.

Total CSA operating costs reached CZK 11.5 billion in the first half of 2006, which is 11.3% more than last year. The biggest increase was recorded in fuel costs, which grew year-on-year by 30.5%. Payroll costs, affected by obligations resulting from collective bargaining contracts made in the spring of 2005, increased by 12.8%.  The costs of leasing new medium-haul aircraft also contributed towards total operating costs, rising by 20.2% in the first six months of 2006. Other costs grew by only 2.1%.

In the first half of the year a total of 2.46 million passengers travelled with Czech Airlines, which is 6% more than in the same period last year. The proportion of CSA passengers to the total number of passengers handled by Prague Airport stabilised at 48 percent in the first half of the year. In this period CSA is focusing mainly on optimising and increasing the effectiveness of the connections operated: the primary CSA market remains the eastern European countries. 


“As yet we cannot speak about a change of trends but we believe in success. The existing situation is an opportunity to transform CSA into a stable, competitive air carrier. Therefore we are gradually adopting and consistently performing a number of powerful - unfortunately also unpopular - measures in both the cost and revenue areas. It is our objective to maintain income in accordance with the approved OK 2006 - 2008 strategy and to maintain excellent client services, provide a new level of certainty, a future for our employees and a prosperous company for the owners,” said CSA president, Radom’r La?ák. 

The most important measures, or “quick wins”, of the present CSA management include the implementation of the current Turnaround - Revenue 2006 programme with more than 300 recommendations involving hundreds of millions of crowns, the introduction of KPIs (Key Performance Indicators) for all managers and dealers and support for business activities. They also include a simplification and slimming down of the organisational structure, the completion of centralisation of selected activities and procurement and the associated active reduction of operating costs.

CSA is also reducing manager numbers (by 20% by the end of the year) and the associated costs, e.g. for company cars etc. The savings in payroll costs also concern the regular employees - the company has prepared a modern active social programme, OK Agreement, for employees for whom CSA has no need in the future. As of today, 200 people have registered for the programme. Naturally, this all runs parallel to maintaining product quality and flight operation safety. 

The Divestment Project is also very topical, being an analysis of the possible sale of non-core CSA activities (Duty Free, Catering and Cargo) and obtaining funding to develop the main line of business, i.e. the transport of passengers by air. However, this will only happen if it brings CSA economic advantages and social benefits. 

Besides that, the CSA management has worked on the implementation of long-term and system measures adopted in the OK 2006 - 2008 strategy that aim to make CSA a stable and competitive air carrier.


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