ECONOMIC RESULTS

In 1994 - 1997, CSA's economy followed the consolidation programme adopted by the government of the Czech Republic which was aimed at leading CSA out of a rather grim 1993 where the company fell into a disparaging period which culminated with the former Air France shareholder leaving the company and with a shake-up in the company's management. The results of 1997 are a positive reflection of the measures which were adopted by the shareholders, Board of Directors and the management of the company both inside the company and in relation to the surrounding environment. Earned profit to the amount of 89.3 million CZK translates to an improvement of 296.3 million CZK as compared to 1996 when the company finished with a loss of 207 million CZK. The trend in the economy of CSA, in the period of the consolidation programme's fulfilment, is evident in the following graph:

T o t a l     P r o f i t  /  L o s s    a n d     O p e r a t i n g    R e s u l t s
o f    C S A    i n    1 9 9 3 - 1 9 9 7
400 Graph
200
0
200
400
600
800
1000
1200
1400
1600
1993 1994    1995        1996           1997
=  1993 -  Total profit/loss before consolidation programme
=  1994 - 97 -  Total profit/loss in the course of the consolidation
programme after exclusion of the so called
unrealised rate of exchange losses
=   Operating profit/loss

The failure in the 1996 economy was to a great extent caused by the escalation of fuel prices in the latter part of the year due to tensions in the Persian Gulf, which ultimately negatively influenced the economy of CSA to the sum of 175 million CZK.

The analysis of results according to international accounting standards indicates similar positive development. The results (where the so called unrealised rate of exchange losses are excluded) are developed as follows:

1000 Graph
800
600
400
200
0
200
400
1993 1994 1995 1996 1997
=  Operating result
=  Total profit/loss

Measures adopted by the company's management were targeted at both costs and revenues. The company succeeded in keeping costs under control and the cost growth rate was lower than the revenue growth rate. In the area of revenues in air transport, the effort to increase total revenues was particularly focused on quality - a year-to-year increase of 8.4% (1997/96) in the total direct rate of costs per unit of transport activity stated in CZK, increasing the utilisation of the total available capacity by 0.8%. In spite of this, the rate of aircraft capacity utilisation remained, especially in Europe, below the level which was reached by our competitors. Here it is necessary to see the reserves of further development of CSA. At the same time, it is necessary to state that CSA profitability was also influenced by the development of the CZK's rate of exchange, where devaluation prompted more favourable economic results. CSA, as an important exporter of services with a surplus economy balance in foreign currencies, positively contributes to the overall state balance of trade.

CSA continued to successfully operate business activities in areas other than actual air transport (particularly in service activities at the airport, i.e. aircraft, passenger and goods handling, catering production and on board supplying, fueling, duty free goods sales, aircraft maintenance and other activities) and reached a surplus trading income in these non-transport activities. This development of non-transportation business opportunities has thereby helped to stabilise the financial results of the company.

Labour Productivity Development

Intense pressure to right size the number of employees and increase labour productivity characterised development in 1997. Operation revenues per employee increased to 2 310 thousand CZK in 1997 as compared to 1 970 thousand CZK in 1996 (17.3%). Labour productivity stated in numerical indicators also shows a positive trend.

D e v e l o p m e n t     o f     t h e    N u m b e r     o f    E m p l o y e e s
a n d    W o r k    P r o d u c t i v i t y     p e r    E m p l o y e e
6000 Graph 80
5000 60
4000 40
3000 20
No. of
emp.		 1989 1990 1991 1992 1993 1994 1995 1996 1997 in tkm per emp.
in thous.
=  Number of employees
=  Productivity in tkm per employee