13. 6. 2006 - CSA's New Strategy ‘OK 06 – 08’
Prague, 13 June 2006
Czech Airlines has adopted its new strategy ‘OK 06-08’, which should lead the airline out of its deficit within three years, and return it to the black. It is based on enhancing sales, maintaining the airline’s traditionally high-quality on-board service, introducing new long-distance flights and a number of cost-cutting measures, and restructuring the company, including the possibility of selling off some of CSA’s subsidiaries.
"An immediate change to internal procedures and business practices is critical to the future of Czech Airlines. The highly competitive airline industry environment requires CSA to set itself apart from both low-cost and traditional airlines. This can only be achieved by offering our passengers good value for money," Radomír Lašák, CSA's new president stated as he introduced the new strategy for the national airline. He added that "CSA will not become a low-cost carrier. The quality of the services provided by CSA will remain at a high level, which has helped the airline to rank in a top position in a number of international surveys and awards. We will however significantly reduce our operating costs; and, most importantly, we will improve the marketing of our services."
Among the necessary steps to be taken in order to reverse the current lack of profitability at Czech Airlines are an improvement in CSA's ability to respond to changes in the marketplace, the elimination of bureaucratic procedures and the introduction of highly focused marketing tools – all of which will help Czech Airlines to significantly boost its net income. CSA currently also plans to focus even more on its primary business – the carrying of passengers (on both regularly scheduled and charter flights).This will especially include its corporate clientele, who demand services at a high level of quality and are willing to pay a premium for additional services. It will also include our economy class travellers, who will still be able to enjoy our high quality of services and services which set travel on CSA apart from travel on its competition.
"All of our newly introduced measures focus around the idea that Czech Airlines should be the first choice of passengers flying to or from the Czech Republic," Radomír Lašák commented in remarking on the airline's new strategy; adding, "we will simplify our ticketing sales process and we will keep strengthening our eastern connections. We are currently proposing a plan to maintain and expand our long-distance fleet and our new long-distance flights will be targeted at East Asian destinations."
The airline's new management plans to undertake an analysis of CSA's secondary business activities such as the cargo, catering and duty-free services; and, possibly, it will make a decision to put these business units up for sale. The gains from the sale of these segments would be used to strengthen and further develop CSA's primary business – the transportation of passengers. Non-scheduled passenger transportation (charter flights) will be set up as a separate subsidiary of the airline.
The implementation of the 'OK 06 – 08 Plan' should lead CSA to recover its profitability over the three-year period. "CSA lost its profitability gradually over several years and it would be naive to assume that the company could miraculously restore its profitability in a single year," CSA's president stated. He added, "A company in this condition can't be fixed using a single, comprehensive solution. In a part of the 'Earnings 2006 Programme', we were able to identify more than 300 individual improvements, which when combined, have a real chance to turn around CSA's results and return the company to the black. These new measures were identified during the March – June period and they are slowly being put to work."
KEY ELEMENTS OF THE ‘OK 06 – 08 PLAN’
- Changes in CSA's Marketing Strategy
- Improvements to Ticket Selling Procedures – More attractive offers for passengers; simplification of the pricing structure – make it easier to select a ticket – CSA's prices will have a more competitive edge and be favourable to passengers at the same time; expansion of ticket sales over the internet and by phone.
- Expansion of the Existing Route Structure – Instead of adding new destinations, each route will undergo a strict cost-benefit evaluation process.
- Introduction of New Long-Distance Flights
- Improvements in the Effectiveness of the Company's Operations
- Sale of Secondary Activities – Catering, duty free, cargo – based on an analysis.
- An Independent Charter Unit – Turning the unit into a separate subsidiary; re-initiation of talks with Travel Service in an effort to become the domestic leader in the passenger charter market.
- Management Changes ¬– Specifically in price creation, sales, management of earnings, productivity and effectiveness; increase the staff's interest in corporate results – focus on performance and the customer; setting of measurable individual performance parameters.
- Reduction in the Total Workforce (including management) – A 10-20% reduction, especially in administrative positions.
- Reduction in Salary Expenses – Opening of collective bargaining agreements.
- Reduction in Operating Expenses – Centralising of purchasing and the finding of savings; the outsourcing of secondary activities.
- Transition to a Modern IT Platform – A new integrated information system for CSA air traffic control, online booking, SMS information, check-in kiosks (e-ticketing).
- Improvements in Fleet Utilization – Unification of the aircraft fleet; the minimising of the number of type series; optimisation of aircraft maintenance; improvements to the organisation of ground processes; identification of new, more efficient, aircraft rotation methods.
- Aircraft Fleet Renewal – Including the long-distance fleet (starting in 2008).
- Assuring Financial Stability
- Active management of operating profitability.
- Assuring adequate flexibility in the use of corporate assets and resources.
- Strategy for the management of market risks.