Czech Airlines is carrying on in the acceleration of its 2009 Action Plan. The individual parts of the restructuring project were discussed by the Czech Airlines Supervisory Board on Monday. The Board unanimously adopted all of the proposed resolutions. The measures respond to the unfavourable situation in the aviation business, which is still not improving, and to the need to adapt as flexibly as possible to the external circumstances. The goal is to ensure that the Airline would get through the crisis year of 2009 and enable its growth in the years to come.
“These measures, if they are carried out immediately and thoroughly, will adapt the company permanently to the new market conditions and ensure Czech Airlines a profit as early as in 2010 and 2011, in the order of hundreds of millions of crowns,” said Radomír Lašák, the President of Czech Airlines, and added: “It is more than clear that there is no other way to reach the goal. Other airlines are struggling with the same task.”
The plan is based on an adaptation of the flight schedules for the 2009/2010 winter season and another four seasons, when Czech Airlines will operate on a market that has been reduced by the crisis. For its operations, Czech Airlines will use 44 aircraft in the upcoming period. That is why it is proposing the sale of three Boeing 737 aircraft, which will also help the company to obtain sufficient cash for the winter, so-called low, season of 2009 and 2010. In the spring, two A310 aircraft will be returned after the completion of their operative leasing. Connected to this change is a personnel reduction of the company in the following ratio: management minus 20%, and other personnel costs minus 15%.
The network effect and long-haul carriage retained
The restructuring plan involves more than just the downsizing of the Airline and cost cuts. The measures also include pro-income projects and the responses of Czech Airlines to the new market conditions in this sphere. Czech Airlines will focus even more on the growing market of “sixth freedoms” in Europe, and is planning a new approach to market segmentation and a corresponding product adaptation. The Airline will also enhance the use of alternative sales distribution channels, and focus on obtaining new markets and on an expansion outside of the Czech Republic, primarily in charter carriage.
By the discontinuation of the New York service, Czech Airlines is not ceasing to be a long-haul carrier. It continues to operate six long-haul routes to the East and is planning to carry on in this development, which is the most advantageous both geographically and in terms of sales. Czech Airlines naturally remains a network carrier. The Airline is not ridding itself of any key slots, whether at Prague Airport or at other destinations. But it will fly less frequently to certain destinations.
Yield per passenger dropping globally
According to Czech Accounting Standards, Czech Airlines reported a loss of CZK 1.826 billion for 1-6/2009, and the drop compared to plan is entirely due to income from carriage. According to international accounting standards, its loss as at the end of June amounted to USD 99.6 million. The worsened result, as compared to the original plan, was caused primarily by the crisis in aviation and the decline of income from carriage, by over one billion crowns compared to plan. A significant cause is the drop in prices due to competition and changes in passenger behaviour. There has been a shift in passengers to lower booking classes. In the summer months, the so-called yield, i.e., income per passenger, therefore dropped significantly, both as compared to last year and to the plan for 2009. Although in summer months, the number of passengers carried grew temporarily, and in terms of figures, reached the planned values, the number of passengers carried since the beginning of 2009 dropped by 9.6%. It is therefore evident that the relatively optimistic numbers of passengers carried cannot stop the falling revenues.