Press Release
ČSA's Supervisory Board Approves the 2007 Business Plan –
Expects Profits
Prague, December 21, 2006
The Supervisory Board of Czech Airlines (ČSA) approved the company's 2007
business plan, which anticipates a profit for the year of 42 million Czech crowns.
Compared to the current year, in which the company anticipates a loss of 493 million
Czech crowns, it marks a positive difference of more than half a billion crowns. The
2007 financial results could, however, be negatively affected by increased personnel
costs associated with the introduction of a new Czech Labor Code, which could push
up personnel costs by as much as CZK 180 million. The business plan for the new
year anticipates retaining the current size of the company, which includes roughly 50
aircraft and 5,000 employees. However, the company expects to divest itself of its
Cargo Terminal and Catering Services. The company's supervisory board took the
initial steps today in this area by approving the detachment of both divisions from
ČSA and the turning of them into separate standalone subsidiaries.
The key driving force behind the improvement of the airline's financial situation will be
the growth in revenues from regular air service operations. Thanks to the changes the
company is applying in its Sales Division, revenues are projected to increase by CZK 1.4
billion. The increased passenger capacity of the airline in 2007 – as a result of the
introduction of larger aircraft to the airline's fleet and the expected improvements in seat
occupancy factors – is expected to boost revenues by CZK 600 million. Another CZK 800
million increase in revenues is expected to come through improvements in marketing across
all areas of the company.
Management anticipates continuing to maintain its emphasis on cost reduction. This year,
the company was able to save CZK 200 million by centralizing its purchasing activities and
by re-tendering for a number of outsourced services. Management has identified additional
areas in which the airline may be able to save an additional CZK 600 million. 25 percent of
this amount would come from newly signed contracts. Such additional savings would be the
result of changes such as the selection of a new insurance broker, which alone could
represent a saving to the company of up to 80 million crowns per year, along with the
replacement of the contractors currently providing handling services for ČSA at foreign
airports.
On the negative side, the company has been unable to reach an agreement with the unions
regarding limitations on salary increases in 2007. These increases are locked into the
existing collective bargaining agreements. Due to the salary increases stipulated to in the
collective bargaining agreements, the company's personnel costs will move up in 2007 by
CZK 300 million. The new version of the Czech Labor Code may also have a negative
impact on the company's expenses. These could be as much as CZK 180 million. Another
major cost for the airline will be the acquisition of additional new Airbus 320/319 aircraft for
CZK 300 million.
The business plan also anticipates the obtaining of additional financing through the sale of
certain assets. Early next year, the company plans to do a sale-leaseback of five of its
Boeing 737-500 aircraft. Such a move is a standard financing tool used in the airline industry.
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Press Release
Management expects that the sale of the company's Cargo Terminal and Catering Services
divisions will boost the airline's cash flow and significantly improve its financial results.
The new business plan projects a 5.6 percent increase in passenger volumes to more than
5.7 million passengers.
ČSA's management will continue to exert downward pressure on the company's costs
in 2007. However, it will focus primarily on increasing revenues. The company will be
introducing standard management tools such as a sales rep motivation program and an
incentive system for sales agencies as part of its marketing strategies for the new year.
Daniela Hupáková
ČSA Spokesperson
*****
Czech Airlines (ČSA) – the largest national carrier of the new EU member countries according to the number of
passengers carried. In 2005, the airline carried a record of more than 5 million passengers. Since 2001, it has
been a member of SkyTeam, one of the leading global airline alliances. ČSA currently offers connections to 120
destinations in 45 countries worldwide. The fleet contains 50 aircraft – ATR 42’s/72’s, Boeing 737’s and Airbus
A310/A320/A321’s.
For the last three years, ČSA has been selected as the “Best Airline Based in Central/Eastern Europe - 2004,
2005 and 2006”. This title is awarded annually by the Official Airline Guide (OAG) and is based on the votes of
frequent business travellers.
In January 2006, Czech Airlines also won the “Best Airline in Eastern Europe” Award (the Annual GT Tested
Awards) for a second year running. ČSA was also on the shortlist of the eight best world airlines in 2005.
CONTACT: [email protected]; Czech Airlines, Ruzyně Airport, PRAGUE 6, tel.: 220 11 6220,
www.csa.cz
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