8. 3. 2007 - CSA's 2006 Results Come in Ahead of the Airline's 3-Year Plan

Prague, March 8, 2007

Czech Airlines (CSA) has been successfully meeting the objectives of its OK 2006-2008 strategy, approved by its general meeting in June 2006. Preliminary data shows that the company is likely to incur a loss of only 397 million Czech crowns, which is 88 million crowns less than was projected back in June. These results also beat the 2005 figures by 99 million crowns, despite the fact that the company is facing much greater financial demands. Based on international accounting standards, CSA reported a loss of USD 1.509 million.

The company's plan for 2007 is built around realistic assumptions that should allow the company to return to profitability after a number of years of losses. The business plan, as approved for this year, anticipates a profit of 42 million Czech crowns. However, this figure could be negatively affected by the introduction of the new Labor Code, which could add up to 180 million crowns to expenses. The forecast results also depend on the completion of the current ongoing restructuring process, which includes the sale of some residual assets. The company has assured its ability to meet its liquidity demands for 2007 and it has also been able to obtain guarantees for the financing of this year's purchase of five new Airbus A320/319 aircraft.

The key objective of CSA's management is to maximize the value of the company for its shareholder. By the end of 2007, the airline plans to finalize – in collaboration with the Czech Ministry of Finance and the Czech Ministry of Transportation – a proposal for its privatization.

Earnings Up, Costs Down

In 2006, the airline reported revenues of 23.476 billion Czech crowns, representing a year-to-year increase of more than 1.3 billion crowns. 2006 was also the year in which CSA's management started to introduce standardized management tools to support and monitor sales, which the company was previously lacking. Ticket sales and the development of the airline's network will now primarily be numbers driven. In line with its current marketing strategies, CSA has introduced a series of motivational programs for its sales associates and an incentive system for ticket agencies. The first results started to be seen in the later part of 2006 when, for example, just in November and December, the company was able to increase its year-to-year monthly revenue by more than ten percent (after exchange rate adjustments). 

The real impact of the airline's new sales management system will however not be felt until the 2007 results, where the company expects to further boost its revenues by an additional one billion crowns.

Last year's total operating expenses came in at 23.592 billion Czech crowns. In 2006, CSA was able to save more than 352 million crowns in expenses by centralizing its purchasing and by re-bidding tenders for outsourced services. Of this total, more than 200 million crowns has already shown up in the 2006 cash flow and the remaining, roughly 150 million, should be reflected this year. These cost savings include such changes as the selection of a new insurance broker, which on its own represented a saving of roughly 80 million crowns a year, and changes to aircraft handling partners at foreign airports. Management has also identified other potential areas where the company may be able to save up to a total of 450 million crowns. Unfortunately, the airline has so far been unable to achieve similar savings in personnel costs. Management has been unable to reach an agreement with its unions on a reduction in scheduled 2007 salary increases in which, under the existing collective bargaining agreements, CSA's employees are scheduled to receive salary increases of from 4.2 to 15.0 percent.

CSA Increasing Its Passenger Volumes and Aircraft Availability, Growth Expected to Continue this Year

Last year, CSA carried almost 5.5 million passengers. The number of passengers was up by 4.7 percent on a year-to-year basis. In 2005, the airline carried 5.2 million passengers and it carried 4.3 million passengers the year before. The company projects growth in passenger volumes to continue into the future, as it is expecting to see the gradual impact of its new business model. The total carrying capacity of the airline will also grow due to the arrival of the new Airbus planes, which have larger seating capacities. This year's business plan is projecting a total of 5.8 million passengers.

CSA's regular passenger service represents the largest share of its results – an area where the total number of passengers carried increased by approximately 3.4 percent over the year before, to a total of 4.7 million. CSA's charter business was up by approximately 13.0 percent in 2006. This represented a total number of almost 800,000 passengers carried.

Maintaining 50 Aircraft and 5,000 Employees

The company's current strategic plan envisions maintaining the current size of the company – i.e. 50 aircraft and roughly 5,000 employees. Part of the plan also includes the divestiture of part of the company through the sale of its Cargo Terminal and Catering Divisions. 

Daniela Hupáková

CSA Press Spokesperson