This week in business news: Travel Service Airlines to buy 34-percent stake in Czech Airlines; Developer Metrostav files arbitration suit against Prague over Blanka tunnel payments; Nominal average wage has risen by 322 crowns, but real wages stagnate; GDP has fallen in Q3 by less than was expected; Mining company OKD will have a new director starting January; Industrial space is the fastest growing sector of the Czech real estate market.
Travel Service to become second biggest shareholder of Czech Airlines
Travel Service Airlines has announced that it will purchase a 34-percent share in Czech Airlines (ČSA), becoming the second largest stakeholder in the company after Korean Airlines, which owns 44 percent. The sale will be realized through a purchase of the stake by Korean Air – which was an option in their contract – which it will then re-sell to Travel Service. Since Travel Service is a Czech airline, ČSA will be able to officially remain a national carrier, though the state will now have a share of less than 20 percent in the company. Given the changes in stockholders, Czech Airlines’ president Philippe Moreels has announced that he will step down. Travel Service operates the only Czech low-cost carrier Smart Wings and provides charter flights to vacation destinations.
Metrostav files arbitration suit against Prague
The developer company Metrostav has filed an arbitration suit against Prague City Hall this week for failing to pay invoices worth more than 2.1 billion crowns for construction work on the Blanka tunnel. The company also announced that it will stop all work being done on the tunnel on Saturday. In late November, the City Hall said it had stopped payments after it found that the contract on building work that was signed with Metrostav by a previous administration was legally invalid. The two sides made an unsuccessful attempt to reach an out-of-court settlement of the matter during the past weeks. The tunnel was set to be opened in the spring of next year and the city has already paid for around two-thirds of the 36-billion-crown project.
Average wage increases, but real wages still stagnant
The average monthly salary increased by 322 crowns in the third quarter to 24,836 crowns. Adjusted for inflation and living costs, this is actually an increase of only a tenth of a percentage point, which means that real wages are stagnating. Around two thirds of people employed in the Czech Republic, though, receive a lower salary than the average, with the median currently at around 21,000 crowns. Long-term stagnation and slight decreases in real wages is leading to a decline in household spending, which the Czech National Bank was hoping to thwart with its recent intervention against the crown. Analysts from PricewaterhouseCoopers expect wages to increase on average by around 2.8 percent for the whole year.
GDP decreased in Q3, but by less than expected
The quarterly decline of the Czech GDP in the third quarter was less than expected. Economists originally predicted a decline of 0.5 percent from the second quarter, but the Statistics Office reported this week that it was actually 0.1 percent. ČSOB’s analyst Petr Dufek has said that although this is somewhat encouraging, the downward trend of the economy is disappointing in comparison to the rest of Europe. Year-on-year, the Czech economy shrunk by 1.3 percent, while in November the Czech Statists Office predicted a contraction of 1.6 percent.
OKD changes directors
American Dale Ekmark has been named to the post of director as of the new year at the Ostrava-based black coal mining company OKD, owned by New World Resources (NWR). The current director Ján Fabián has also stepped down from the executive boards of OKD and NWR, but will stay on at OKD as a consultant in 2014. He took over the company management at the beginning of the year and has carried out a number of steps to optimize OKD’s operations and minimize its losses. Mr. Ekmark has worked as mine manager and director for a number of large international mining companies, including DeBeers, where he ran a diamond mine in Botswana. OKD is the biggest private employer in the Moravian-Silesian region, with more than 12,000 workers on its payroll. The company has been recently criticized for its decision to close down the Paskov mine.
Industrial real estate market may hit yearly record
The industrial real estate market in the Czech Republic has had a successful year, with experts expecting the amount of rented space this year to beat the record set in 2007. The demand for industrial spaces in the past year makes it the most vibrant sector of the local real estate market, with around 1 million square meters of industrial spaces having been rented out in 2013. With the financial crisis easing worldwide, foreign companies are starting to either move their operations to the Czech Republic or expanding already existing plants here. Most of the companies are either from the automotive or electronics sectors.