12. 03. 2009 - Czech Airlines Reported a Profit of Half a Billion Crowns in 2008
Prague, 12 March 2009
According to unaudited results, Czech Airlines reported a profit before tax of CZK 500 million. Its financial result is 389 million crowns higher than in 2007. According to international accounting standards (IFRS), Czech Airlines achieved an unaudited consolidated profit before taxation of USD 550,000 in 2008. That means a year-on-year improvement by USD 9.375 million, at a time when the worldwide recession had begun to hit the aviation industry, in the form of reduced demand.
The Results Were Influenced by Expensive Oil and Economic Crisis
The 2008 results were influenced by the record prices of oil in the first half of 2008, which reached a record high of USD 147 per barrel. Thanks to good fuel hedging, in combination with exchange rate hedging, the impact of the price of fuel on Czech Airlines’ finances was only CZK –400 million crowns compared to plan. “Without this hedging of fuel and the exchange rates of the euro/dollar and the crown, the impact on Czech Airlines’ financial result would have been another 1.2 billion crowns higher,” said Czech Airlines’ Vice-President for Finance, Luboš Černý. In the second half of the year, the aviation business was hit by the global financial crisis, in the form of a reduction in passenger demand, which meant a revenue outage of -400 million crowns for Czech Airlines.
The OK 2006 – 2008 Strategy
Czech Airlines’ financial results were positively influenced by the successful completion of the three-year OK 2006 – 2008 Strategy, which included the completion of divestments and the SWAP (swap of buildings and land in the Prague Airport Grounds, aimed at untangling the ownership relations with Prague Airport). The core of the entire OK 2006 – 2008 revitalisation strategy involved strengthening sales and concentrating on the main line of business – passenger carriage, retaining the traditionally high quality of services, saving on costs, and looking for internal reserves. With the fulfilment of the OK 2006 – 2008 restructuring strategy, Czech Airlines has generated a profit for the second year in a row. The cumulated loss from previous years dropped below one-half of the company’s registered capital, thereby meeting the basic goal of the 2006 – 2008 Strategy.
“Today, Czech Airlines is a restructured company that is ready for privatisation,” said Czech Airlines’ President, Radomír Lašák, adding: “More than by Czech Airlines’ financial results, the outcome of privatisation will be influenced by the economic crisis and the condition of other airlines. In spite of that, I am convinced that the privatisation of Czech Airlines is the right step even at this difficult time.”
Operating Revenue on Last Year’s Level
In spite of a significant drop in income in the last quarter, operating revenue was successfully maintained at last year’s level of 23.241 billion crowns. Passenger carriage accounted for the greatest share of revenue. Charter carriage noted growth compared to last year, by CZK 348 million, to 3.124 billion crowns. Operating expenses were successfully reduced by another 363 million compared to last year, to 23.192 billion crowns, in spite of the fact that the company’s expenses on financial leasing payments grew year on year. Czech Airlines continues its cost-cutting steps this year, as well, focusing primarily on the Technical Division.
The number of passengers on the scheduled and charter flights of Czech Airlines grew by 2.4 percent last year, to over 5.6 million passengers. The growth for the year as a whole is slower than that in the previous year, primarily due to the impact of the crisis, dropping by 8% in the fourth quarter of 2008.
The carriage results do not include passengers carried under so-called ACMI leases, which are leases to other carriers of aircraft from the Czech Airlines fleet, inclusive of the crew, maintenance, and insurance. This activity, which Czech Airlines has successfully developed in recent years, brings in revenue of hundreds of million crowns every year. The most significant ACMI lease last year was the all-year lease of the largest aircraft in the fleet, the Airbus A310 for 209 passengers, to India. But Czech Airlines aircraft also flew in Europe, for airlines such as Adria Airways, Jet Airways, and SAS.
The Entire Industry is Declining
According to the IATA statistics for 2008, the number of passengers only grew by 1.6 percent, and in December 2008, international air carriage dropped by 4.6 percent compared to the same month the year before. For 2009, the IATA expects a three-percent drop. The last such year-on-year drop in the number of passengers carried came after the air attacks of 11 September 2001, i.e., more than seven years ago. An even more significant drop than in passenger carriage was noted in international cargo carriage, which dropped by four percent in a year-on-year comparison.
Plan for this Year
The Plan for 2009 reflects the negative projections of a decline in passenger numbers and adapts the company’s management to it. The primary criterion for success in 2009 will clearly be Czech Airlines’ cash situation. “Estimating the development of passenger numbers and hence also revenue this year, when the economy is violently tossed about by an economic recession, is very difficult,” said Czech Airlines Vice President for Finance, Luboš Černý, adding: “In 2009, Czech Airlines is working with three variants of a plan, which differ depending on the number of passengers estimated. The management is ready to respond flexibly to the current economic developments.”
Czech Airlines Press Spokesperson