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CSA Czech Airlines faces up to challenging outlook, privatisation on hold

19-Jun-2009
CSA Czech CEO, Radomir Lasak
CSA Czech CEO, Radomir Lasak

Prague based CSA Czech Airlines is the national airline of the Czech Republic. It is one of the oldest airlines in Europe, having provided passenger services since 1923.

It currently operates scheduled services to 69 destinations in 41 countries, including most major European cities and to various points in the Middle East, North America, North Africa and Asia. It also operates charter and cargo services.

The airline runs a frequent flyer programme called "OK Plus" in reference to the airline's IATA designation, and has been a member of the SkyTeam Alliance since March 2001.

A319 fleet to grow

The CSA fleet is exclusively made up of narrowbody aircraft, with a modest forward order book for a further nine A319s scheduled for delivery over the next three years. The delivery of these aircraft will allow for some growth, and will permit retirement of older model B737s, which have higher maintenance and fuel consumption costs.

Fleet in service and on order

Manufacturer

Type

 In Service

On Order

Airbus

A310

1

0

Airbus

A310

2

0

Airbus

A319

7

9

Airbus

A320

8

0

Airbus

A321

2

0

ATR

ATR 42

1

0

ATR

ATR 42

7

0

ATR

ATR 72

4

0

Boeing

737 (CFMI)

6

0

Boeing

737 (CFMI)

10

0

Saab

340

2

0

Total

 

50

9

Manufacturer

Type

Delivery Year

Total

Airbus

A319

2010

1

Airbus

A319

2011

4

Airbus

A319

2012

4

Total

 

 

9

Privatisation is imminent? - or not, and at what price?

Czech Finance Minister, Eduard Janota, said in late May-2009 the Republic's present caretaker government would not complete the privatisation of Czech Airlines during its term of office. Janota said a new Cabinet, formed after October elections, would decide on the airline's new owner.

The sale thus faces a delay, as the previous Czech government had planned to choose the buyer for the state's 91.5% stake by the end of Sep-2009.

The tender process has completed its second (supposedly decision-making) round, under which the previous Cabinet picked two contenders – either Air France-KLM or a Czech consortium comprised of investment company Unimex Group and low-cost airline and charter carrier Travel Service to take over the carrier. This followed the elimination of Russia’s Aeroflot and private equity firm Odien from the bidding process.

The airline hed been expected to fetch up to USD240 million.

But Czech Airlines’ first quarter loss widened to USD68 million, compared to a loss of USD44 million in 1Q2008, on the back of a record decline in passenger numbers to 945,000, a year-on-year drop of 12%.

Company President, Radomir Lasak, said, "as far as passenger numbers are concerned, we are back at the level of four years ago. We have revised the company's financial plan for this year as well as for the following year."

He added the company's pre-tax loss should not exceed USD18.8 million this year following a full-year profit of USD26.0 million in 2008, and that he expected a USD8.2 million profit in 2010. 

Czech Airlines looks to proactive responses to the economic crisis

In response to the economic crisis, Czech Airlines has introduced a “2009 Action Plan”, aimed at generating additional revenue and cutting costs, in the order of USD52 million for the year, with impacts to become evident primarily in the second to fourth quarters of 2009.

In the meantime, Czech Airlines is doing what it can to stimulate ancillary revenues. The supplementary in-flight sale of refreshments beyond the complimentary menu, the sale of advantageously priced insurance and special promotional airfares have been successfully introduced. Airport sales desks will have greater potential to collect excess baggage charges and pricing innovations will result in additional supplementary revenue streams.

Contracts with outside suppliers will be re-tendered, and, to cover aircraft standing costs during a period of reduced demand, two B737 aircraft have been put on wet-lease to Libyan carrier, Nayzak Air Transport.

Labour costs are also under attack. As at May-2009, the carrier had reached agreements with all but one key union for staff wages to be frozen for the year at 2008 levels. The exception is the aircraft mechanics union, where the airline has resorted to lay-offs to achieve a 5% reduction in salary costs. Members of the Management and Supervisory Boards reduced their salaries by 15%.


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