Profits loom for revitalised Czech Airlines

Czech Airlines has reported a profit of CZK 563 million for the first nine months of the year, CZK 886 million better than at the same point in 2006.  The positive results are propelled primarily by the increasing carriage performance, which is due to a targeted management of sales and marketing.  The Airline is meeting its OK 2006-2008 Strategy, which was approved by the Airline’s general meeting in June 2006.  This year, the Airline’s financial plan envisages a profit of CZK 40 million.

“For the first time in three years, Czech Airlines is again profitable, even when we do not reflect income from the sale of its assets,” said Czech Airlines’ President Radom’r La?ák in commenting on the results.  “Excellent results, which the Airline has achieved regardless of extraordinary items, serve as evidence that the OK 2006 - 2008 Strategy was built on realistic foundations.  They also demonstrate the effectiveness of our restructuring and the measures we have introduced in sales,” he added.  The financial results improved primarily due to optimising the use of our fleet, cancelling or reducing loss-generating routes and strengthening the most sought-after ones, targeting sales management, and focusing on better-paying clientele.

Revenue is Growing, Costs Have Been Stabilised
We are managing to keep increasing our revenue.  Operating income has increased, with comparable exchange rates, by 4.6 percent, to CZK 17.95 billion.  Primarily income from scheduled passenger carriage is higher, by CZK 900 million.  The reason is a stable number of passengers with higher average yield, i.e., revenue per person-kilometre flown.  Income from carriage is up by 3.7 percent, but also non-carriage income has grown, by nearly 20 percent, due primarily to ACMI leases (the lease of an aircraft with its crew, maintenance, and insurance).

On the other hand, with comparable exchange rates, operating costs have grown slightly, by 1.7 percent, to CZK 17.34 billion.  The reason is primarily the growth of wage costs in line with collective agreements, and higher instalment payments for aircraft.  Net of exchange rate differences, operating costs have dropped by CZK 477 million year-on-year.

Carriage Results are Stable
In the first three quarters of the year, Czech Airlines carried over 4.2 million passengers, i.e., roughly the same as in the same period last year.  The cause is primarily the lower seat capacity offered, due to ACMI aircraft leases.  The stagnation in the number of passengers is also due to the fact that in the first year of its OK 2006-2008 revitalisation strategy, the Airline has focused primarily on increasing income.  Its main goal was to attract better-paying clientele and not to sell tickets under price.  Due to that strategy, the number of business passengers has increased by three percent year on year, and the number of better-paying passengers in economy class has gone up by more than 41 percent, being the primary cause behind the increasing revenue.  A solution to the stagnating number of passengers has come in the form of a new project for selling off available capacity, through the subsidiary


In the first nine months of 2007, Czech Airlines aircraft have also carried nearly 16,100 tonnes of goods and post.  Overall, Czech Airlines operated over 30,100 flights.

“The excellent financial results that the Airline has been attaining in the second year of its turn-around OK 2006 - 2008 Strategy allow us to focus on our further development,” said Radom’r La?ák.  “Czech Airlines has therefore decided to make use of an advantageous option this year, to order another eight Airbus A319 aircraft, to be supplied in 2011-2012.  The Airline is also implementing a new integrated information system for aircraft maintenance administration and management, the so-called MRO system, and a new comprehensive airline system for supporting key sales activities, such as booking, ticket pricing and issuing, passenger and baggage handling, and Internet sales.  After years of stagnation, the Czech Airlines network will also expand, as Czech Airlines introduced a new route from Prague to Bordeaux in its winter flight schedule, with a touch-down in Munich.  Further innovations should appear in the 2008 summer schedule.”

Results According to International Accounting Standards
According to International Accounting Standards, which are not influenced by extraordinary transactions, Czech Airlines reported a profit of USD 9.828 million after tax, for the first three quarters of the year.  Revenue has increased by 10.5% y/y, to USD 876,827 million.  The difference in results calculated according to Czech and International Accounting Standards is primarily due to a different accounting for financial leasing, provisions, exchange differences, and the written-down prices of assets being retired.