30. 11. 2005 - CSA Supervisory Board unanimously supports the Board of Directors in its efforts to adjust ŘLP charging policy

Prague, 30 November 2005

At its meeting today, the Czech Airlines Supervisory Board discussed the company’s economic situation as well as key transformation projects.  The Supervisory Board considers the efforts of management to accelerate these projects the basis for CSA achieving profitability.

The Board of Directors informed the Supervisory Board on the company’s economic development, estimated economic results for 2005 and on key transformation projects.

The Supervisory Board was satisfied especially with information regarding the observance of exact time frames for the projects, as well as the results of those projects concerning revenue management, e-commerce, sales in the Czech Republic and purchase system transformation, all of which bring CSA hundreds of million of Czech Crowns and help balance the negative impact the current market brings with it.  Next year, the company expects the strategic projects to bring benefits exceeding a billion CZK.

In the context of the Purchase Transformation project, the Supervisory Board supports the management’s efforts for an aggressive review of all supplier-customer relations in order to reduce the costs in all areas of business, including the services provided by what is seen as a monopoly supplier: Air Navigation Services (ŘLP). 

Considering the unfavourable development in the air transport market this year, (especially the fluctuation in fuel prices, the natural disaster in Srí Lanka, and terrorism, but also ever keener competition from low-cost carriers and airline alliances) CSA expects a loss of about 329 million CZK according to Czech Financial Reporting Standards.

According to International Financial Reporting Standards (IFRS), used by European airlines and other companies listed on the stock market, CSA expects to show a profit of about 72 million CZK in 2005.

The loss/profit paradox is caused especially by a different method of airplane leasing depreciation reporting, where, unlike in International Financial Reporting Standards which use 18-year depreciation periods for airplanes with an average service life of 25 years, Czech Financial Reporting Standards use a shorter depreciation period of 12 years.