05. 06. 2008 - Czech Airlines 2009–2013 Strategy: To Earn CZK 1 Billion

Prague, 5 June 2008

Czech Airlines is presenting its development Strategy for 2009–2013, which expects further intensive growth and the strengthening of its position.  Czech Airlines will invest into upgrading its fleet (by 2012, an option for eight new A320-family aircraft), increase the seat capacity offered by 11%, increase its sales performance, and reduce internal costs, i.e., the “production price” of one ticket, by EUR 10.  The aim of the Czech Airlines 2009-2013 Strategy is an internally efficient airline that can earn a margin of approximately 5% on its turnover, while remaining comparable in size (in terms of the number of employees and aircraft).  For 2009-2013, the Airline plans a profit that should, for the first time in its modern history, pay off all of the previous years’ losses.

The Strategy builds on the achievements of the OK 2006-2008 Strategy, which constituted a crisis plan for the salvation and stabilisation of the Airline, and which therefore contained one-off transactions, such as divestments and aircraft sales and lease back. “The threat of bankruptcy has been averted, and the basic goal of the OK 2006-2008 Strategy has been met and even significantly exceeded.  Czech Airlines has managed its financially difficult period,” said Czech Airlines’ President, Radomír Lašák, adding, “Our next great goal is to pay cumulated losses from the past, secure resources for new aircraft, invest into operations, and have cash in our accounts as a financial reserve.  Simply put, to be always profitable, i.e., to make money.

Better Revenue for Better Services

The business goal for Czech Airlines’ scheduled carriage is to maintain a 50 percent share in the premium market and a 20 percent share in the low-cost market in Prague, through Click4Sky.com.  Czech Airlines will continue to focus on the business clientele and to improve its product for this clientele. The aim of Czech Airlines-brand charter carriage is to achieve a 50 percent share in charter carriage in the Czech Republic. It again plans to generate about 60 percent of its income in the Czech Republic and the remaining 40 percent abroad, in countries where the demand for high-quality charter carriage has not yet been entirely met (e.g., Ireland, Spain, or Italy).

Lower Costs Due to Simpler and Faster Processes

The goal is to reduce the internal costs per ticket, referred to as the “production price” of a ticket, by 10 euros.  Czech Airlines is not planning comprehensive layoffs or a shutdown of non-core activities.  It will achieve greater efficiency by changing procedures and processes, further checks on all costs, pressuring subcontractors, and by pressing for internal efficiency.  Three large projects launched in 2008 will contribute to this. 

SAS, MRO, and O&D – Investments into Internal Efficiency

The new comprehensive airline system (the SAS Project), which Czech Airlines is gradually implementing, will significantly reduce booking and sales costs.  The system will replace 13 existing systems and yield savings in the order of a billion crowns over the next five years.  The Airline expects a further significant improvement of internal processes, and primarily the more efficient functioning of aircraft maintenance, from the MRO System (Maintenance, Repair, and Overhaul).  Its objective is to reduce maintenance time by up to 20 percent, and to reduce inventory stock.  Sales and marketing will implement a modern O&D (Origin and Destination) Pricing Model, which ties into the SAS Project and can define the optimum price for a given time, for the carrier and for the client.

2007 Net Profit at CZK 207 Million

The 2007 audit confirmed the expected results.  Czech Airlines generated a net profit of CZK 207 million.  Operating income increased by one percent year-on-year, to CZK 23.779 bn, and operating costs reached CZK 23.527 bn.  Czech Airlines’ income from carriage was up by nearly 6 percent (net of FX differences).  In 2007, Czech Airlines invested 1.4 billion crowns into new aircraft and paid off 1 billion crowns in operating loans.  The Airline also managed to adhere to its obligations arising from previous years’ collective agreements and to conclude new collective agreements for 2008–2010.

Czech Airlines’ Operating Result for January to April 2008 is 180 Million Ahead of Plan

In the first four months of 2008, Czech Airlines’ recorded financial results in accordance with the level of the plan. In the winter period, known as the low season, the Airline planned for a loss of CZK 453 million, and reported a loss of 444 million crowns.  Compared to 2007, its operating results are nearly CZK 300 million better.  Operating income in the first four months amounted to CZK 6.657 billion, having grown by nearly two percent year-on-year.  On the other hand, we managed to reduce our operating costs (including aircraft fuel prices) by 2.6 percent year-on-year, to CZK 7.046 billion.  For the time being, higher aircraft fuel prices are being off-set by, among other things, the reduction of other operating costs.

Daniela Hupáková
Communications Director
Czech Airlines Press Spokesperson