Czech Airlines is responding to the economic crisis. Last December, it introduced its 2009 Action Plan, which includes measures aimed at generating additional revenue and cutting costs, thereby reducing the impact of the crisis and reduced passenger interest in air travel. The measures that the management has prepared and implemented will ensure an increase in revenue or, on the other hand, bring savings, in the order of one billion crowns overall. The positive impact of the projects will become evident primarily in the second to fourth quarters of this year.
The first three quick-win projects have been successfully implemented and are already generating their first revenue. Their aim is to realise sources of additional revenue without having to increase ticket prices. Projects such as the supplementary in-flight sale of refreshments, beyond the scope of the standard complimentary menu, or the sale of advantageously priced insurance, along with that of a ticket, are already bringing in money. The management has also ensured the profitable use of aircraft that would have otherwise been difficult to employ in Europe during this period of reduced demand, by putting two Boeing 737 aircraft out on lease to Libya.
Making use of every business opportunity
During this difficult time of economic crisis, Czech Airlines is striving to exploit every single advantageous business opportunity. An example is the obtaining of an agreement with Nayzak Air Transport, for the one-year lease of two Boeing 737 aircraft, including crew, maintenance, and insurance, to Libya. Czech Airlines is also endeavouring to work operatively with its flight schedule. For the summer season, the Airline has prepared a flight schedule in which it will boost flight frequencies to those destinations and markets that have not been as seriously affected by the crisis, and where there is therefore higher revenue potential. Czech Airlines will obtain the capacity for these new flights by taking it from routes with lower revenue. Ticket sales are also being successfully supported through promotional events; most recently, tens of thousands of passengers took advantage of the favourable prices available as a part of the Valentine event. Czech Airlines is also preparing a similar event for the summer.
The recently implemented supplementary sales on board Czech Airlines flights have a revenue potential in the order of tens of millions of crowns. Since mid February, passengers on all international flights have been able to make purchases from a supplementary range of beverages and snacks, in addition to the regular refreshments that continue to be provided free of charge. With this project, Czech Airlines expects to generate a profit and savings of an aggregate of CZK 40 million this year.
Czech Airlines expect further funds to be brought in by the introduction of the sale of supplementary services through the Internet booking system. Since March, Czech Airlines has offered its passengers the opportunity to purchase preferentially priced travel insurance along with a ticket, with the reputable insurer AIG Europe. The project is expected to yield additional revenue of CZK 15 million.
Since the beginning of April, passengers have encountered the new possibility of purchasing selected services at check-in at Prague Airport. For example, passengers can try out an upgrade to a higher travel class or VIP lounge access. The sales have been made possible by the equipping of all Czech Airlines desks at Prague Airport with payment terminals. Thanks to that, it is also possible to collect charges for overweight baggage more efficiently, something which is carried by about three percent of passengers. Previously, in many cases, Czech Airlines had not been able to collect a fee for overweight baggage efficiently, and thus often carried the excess weight for free. On average, an aircraft burns an extra 2 kg fuel per flight hour, to carry 100 kg of additional baggage. In addition, the installation of check-in kiosks at Prague Airport is being prepared in cooperation with Prague Airport, for later in the year. The sale of services at check-in points should yield revenues in excess of CZK 200 million this year.
Czech Airlines also has great expectations for the modern O&D pricing system that it intends to implement this year. The Airlines will thereby be able to optimise prices according to the initial and final points of trips, and not just in relation to individual flights. The revenues achieved with this project could reach up to CZK 200 million in this year alone.
In addition to measures that strive to bring in additional revenue, the Airline has also persisted in putting pressure on costs, in spite of the fact that in the last three years of restructuring, Czech Airlines’ costs have noted fundamental cuts. The aim of the 2009 Action Plan is to achieve overall costs savings in excess of CZK 300 million this year.
Last year, CZK 559 million were saved by the re-tendering of contracts with suppliers; this year, there is potential to reduce the costs of outsourced services and work by a further CZK 443 million.
This year, the Airline is looking for savings in operating costs primarily in its Technical Division. The Division has realised fundamental improvements in the efficiency of maintenance administration and management in recent years, and a modern integrated maintenance management system has been launched there. For example, savings of approximately ten million crowns over the next four years will be brought by switching to a single supplier of a virtual private network, which constitutes the foundation of data communication between the head office and dozens of Czech Airlines sales and operational offices in Europe, Asia, and America. The Airline also expects a significant reduction of costs, in the order of many tens of millions of crowns, from continuing to use real estate more efficiently. But Czech Airlines has also started saving, for example, in the use of office supplies, etc.
Wages on the 2008 level
Personnel expenses will not be exempt from savings, either. The airline’s management has reached agreement with eight of the nine union organisations on a wage reduction, to last year’s level. With respect to the profession united under the Union of Aircraft Mechanics, where agreement was not attained, Czech Airlines has resorted to lay-offs that will ensure the relevant five percent reduction in salary costs.
Czech Airlines’ management had already responded to the crisis in aviation last December, when the members of the Management Board and the Supervisory Board reduced their salaries by 15 percent. In addition, the salaries of about one hundred managers were frozen at the 2008 level.