02. 07. 2009 - Czech Airlines Accelerates its 2009 Action Plan Measures
Prague, 2 July 2009
Czech Airlines has decided to accelerate its 2009 Action Plan. In doing so, it will work with the scenario of an estimated double-digit drop in passenger numbers, even in the summer season, which is key in terms of revenue for all airlines. The planned steps respond to the economic recession and, above all, to the continuing adverse developments on the air carriage market. Other airlines find themselves in a similar position, having to operate on a market that continues to contract.
The core of the project lies in the adaptation of the flight schedule in connection with the current development of demand for air carriage, measures on the side of costs and revenue, and optimisation of the Czech Airlines fleet.
“We performed a drastic and successful restructuring three years ago, and drastic steps await us today at Czech Airlines, as well; but they will be different and done differently, corresponding to the present market developments. Whereas three years ago, Czech Airlines was in a crisis in the midst of an economic expansion, today, we are in the midst of a crisis that has reduced the aviation market by 20% in one year. Airlines, in their 2009 size, are competing on a market that is the size it was in 2005. That is why we have to continue to optimise Czech Airlines and adapt it to the reality and the market conditions,” said the airline’s President, Radomír Lašák, in commenting on Czech Airlines’ measures, adding: “In spite of the emotions that will accompany the unpopular optimising steps, we have to take those steps. The companies that remain on the market will not be those that are the most beautiful, largest, and strongest, but those that are able to adapt the best and the fastest."
Key areas of the 2009 Action Plan Acceleration project:
- Optimisation of the 2009/2010 winter flight schedule
In connection with the current development of demand for air carriage, Czech Airlines will cut back the number of flights on selected European routes or close down those routes that are not in demand among passengers. From the 2009/2010 winter flight schedule, Czech Airlines will no longer operate its own long-haul flight to New York. The long-haul flight to New York will remain in the Czech Airlines flight schedule, and will be operated in association with Delta Air Lines.
- Optimisation of Czech Airlines’ fleet
In the winter flight schedule, Czech Airlines will also optimise its fleet. The airline’s fleet will be reduced by approximately 10%: two long-haul Airbus A310 aircraft will not be deployed on scheduled flights in the winter schedule, and will be used for charter operations.
- Cost and revenue measures
The 2009 Action Plan
Czech Airlines introduced its 2009 Action Plan last December. The Plan includes measures aimed at generating additional revenue and reducing costs. The first three quick-win projects have already been successfully implemented and are generating their first revenue. Projects such as supplementary in-flight sales, in addition to the complimentary menu, or the sale of advantageous insurance with tickets, are already generating income. Czech Airlines expects much from a modern flight management system, using the so-called origin-destination method. Czech Airlines is planning to implement this system at the end of the summer, which will allow for price optimisation, not on individual transit routes, but on the basis of the point of origin and destination of the trip. The revenue achieved thanks to this project could approximate CZK 200 million this year alone.
In addition to measures aimed at generating additional revenue, the Airline has also persisted in putting pressure on its costs, in spite of the fact that Czech Airlines’ costs have noted significant cuts in the last three years of restructuring. The aim of the 2009 Action Plan is to achieve overall cost savings in excess of CZK 300 million this year. Last year, CZK 559 million was saved by the re-tendering of contracts; this year, there is potential to reduce the costs of the services or work provided by suppliers by a further CZK 443 million.
Wages on the 2008 Level
Savings were not neglected in the sphere of personnel costs, either. The airline’s management came to agreement with eight out of the nine trade unions, on a reduction of wages to last year’s level. In the profession that falls under the Union Organisation of Aircraft Mechanics, where agreement was not reached, Czech Airlines resorted to layoffs, which ensured the required five-percent reduction in wage costs.
Czech Airlines’ management responded to the crisis in aviation last December, when the members of the Management Board and Supervisory Board reduced their salaries by 15 percent. Approximately one hundred managers had their salaries frozen at the 2008 level.