Czech Airlines in trouble

23-08-2006

State-run Czech Airlines posted a 773 million crown loss in the first half of the year, bringing its overall debt to half its basic capital. The company's management said on Tuesday it could not weather the storm without a massive financial injection from the state.

Radomir Lasak, photo: CTKRadomir Lasak, photo: CTK A recent dramatic surge in capacity would suggest that the state owned carrier, a member of the Sky Team alliance, is doing good business. In reality the airline has been going through turbulent times, suffering heavy losses as a result of expensive fuel and fierce competition from low-cost airlines. A decision to boost capacity by more than 50% made by CSA's previous management was allegedly undertaken in the absence of preparation and necessary restructuring, which brought the company to its knees. CSA's president Radomir Lasak who took over the state owned carrier at the start of the year -when it was already in deep trouble- says that he cannot turn around the company's fortunes without a massive financial injection from the state :

"I would say that one and a half to two billion crowns would help us out of this crisis. Even with the steps undertaken to consolidate the airline we are going to need that kind of money."

The steps undertaken include a lay-off of up to 1,000 people, among them 50 managers ie. about 20 percent of CSA staff. The airline is re-thinking its flight plan in view of competition from low cost airlines and considering new destinations. According to unofficial sources, flights to Moscow will be added, while flights to Edinburgh, Split, Cork and Sarajevo may be scrapped. The airline is considering renewing its long distance fleet and is looking at new markets in China, Japan and Thailand. A consolidation of the charter flights market is also deemed essential and CSA managers say that CSA either has to buy the rival airline Travel Service or sell its entire charter fleet. At present the latter option looks more probable and the management is also contemplating selling some of its activities including cargo transport, the operation of duty free shops and CSA's catering unit.

The finance ministry, which holds a 57 percent stake in CSA has not ruled out giving the company the required financial aid. However this decision may well be left to the new government -which could affect the company's future. The right wing Civic Democrats who are now trying to form a minority government are strongly in favour of privatizing Czech Airlines.

23-08-2006

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