A. Accounting methods and accounting principles

1.      Purchased supplies are valued at average costs, internally produced inventory is valued at a cost representing the sum of material, wages and other operating expenses and overhead. transportation, duty and packaging expenses are included in the purchase costs of purchased supplies. 2. Tangible and intangible fixed assets produced at internal costs, are valued at a cost comprising the sum of material, wages and other operating expenses and overhead. 3. CSA investments are valued at acquisition cost, according to CSA accounting - the consolidation of the results of subsidiaries has not been included, due to the fact that they represent an insignificant amount in the total turnover and capital of CSA. 4. The company uses straight-line depreciation rates for individual types of assets, based on stated depreciation policy. 5. The company uses so called IATA Clearing House exchange rates to convert foreign currencies into CZK - at the end of the year the ÈNB rate of 31 December 1998 was used to convert receivables, payables and funds. Updated IATA Clearing House rates were used at the end of the year, only where the ÈNB does not publish the exchange rates of those currencies in which CSA conducts transactions in foreign currencies.

B. Additional Information to the Balance Sheet and Profit and Loss Account

1. SUMMARY OF TANGIBLE AND INTANGIBLE FIXED ASSETS OF THE COMPANY, IN THOUSANDS CZK

1998 1998 1997 1997 DESCRIPTION ACQUISITION COST ACCUMULATED DEPRECIATION ACQUISITION COST ACCUMULATED DEPRECIATION Land 38 003 38 004 Buildings, halls, constructions 581 864 199 250 532 823 22 382 Power equipment 40 953 17 181 40 203 1 609 Machinery and equipment 87 335 47 630 84 578 8 264 Appliances and special tech. equipment 392 126 297 922 393 936 51 938 Rotables 484 337 248 653 449 652 54 433 Aircraft 781 992 717 564 776 064 26 413 Other means of transport 387 289 187 402 363 078 40 407 Other assets 22 836 854 854 Equipment 66 524 37 945 66 826 5 795 Low-value tangible fixed assets 76 071 75 768 59 474 17 968 Total tangible fixed assets   2 959 330   1 830 169   2 804 638   230 063 Software 70 368 47 378 65 766 12 672 Other intangible fixed assets 12 416 12 416 8 329 4 086 Total tangible and intangible fixed assets 82 784 59 794 74 095 16 758

2. SIGNIFICANT INCREASES AND DECREASES IN ASSETS IN 1998, IN THOUSANDS CZK

1998 1998 DESCRIPTION INCREASES DECREASES Buildings, halls, constructions 53 319 4 277 Machinery, appliances and equipment 38 048 36 351 means of transport, including aircraft and rotables 170 765 83 151 Low-value, tangible fixed assets 34 014 17 720 Software 4 602 Other intangible fixed assets 5 124 1 038

3. AIRCRAFT FINANCIAL LEASE

3.1.      A310-300 aircraft, including equipment - acquisition in 1991, contract valid until 2003, with leasing instalments to be paid by 2001 3.2. ATR 72 aircraft, including equipment - acquisition in 1992, contract valid until, and instalments to be paid by, 2002 3.3. Boeing 737-500 aircraft, including equipment - acquisition in 1992, contract valid until, and instalments to be paid by, 2004 3.4. ATR 42 aircraft, including equipment - acquisition in 1996, contract valid until, and instalments to be paid by, 2006 3.5. Boeing 737 aircraft - acquisition in 1997, contract valid until, and instalments to be paid by, 2009 3.6. Boeing 737 aircraft - acquisition in 1998, contract valid until, and instalments to be paid by, 2010

Payables related to finance leases, analysed by due dates CURRENCY AMOUNT IN THOUSANDS Purchase costs USD 745 335 Settled by 31 Dec. 1998 USD 322 772 - out of this, in 1998 USD 55 033 Payables due within 1 year USD 64 853 Payables due over 1 year USD 357 710

4. AIRCRAFT OPERATING LEASE

LEASE PERIOD AMOUNT OF RENTAL IN 1998 IN THOUSANDS CZK AMOUNT OF RENTAL IN 1997 IN THOUSANDS CZK Boeing 737/400 WGF until 2000 117 710 113 679 Boeing 737/400 WGG until 2000 106 610 100 187 Air Via, SVK and SLÚ summer season 53 827 Total 224 320 267 693

5. TRADE RECEIVABLES AND PAYABLES, IN THOUSANDS CZK

RECEIVABLES 98 ADJUSTMENT 98 RECEIVABLES 97 ADJUSTMENT 97 Due 730 470 685 274 Overdue 90 593 88 145 87 684 85 647 - domestic 48 963 48 963 49 855 47 818 - foreign 41 630 39 182 37 829 37 829 PAYABLES 98 PAYABLES 97 Due 771 202 808 418 - domestic 228 657 300 937 - foreign 542 545 507 481

6. VALUE OF INTER-COMPANY BALANCES BETWEEN CSA AND ITS SUBSIDIARIES AT THE END OF 1998, IN THOUSANDS CZK

SUBSUDIARY CSA RECEIVABLE CSA PAYABLES Amadeus Marketing CSA s.r.o. 115.3 24.0 Slovak Air Services s.r.o. 1 653.0 CSA Airtours a.s. 351.9 311.6 CSA Services s.r.o. 378.3 CSA Support s.r.o. 947.0 3 939.0

Information on CSA investments in subsidiaries and their economic results in 1998, are stated in an individual chapter.

7. EMPLOYEES

The average number of the companys employees was 3 795 in 1998, out of this - 78 in management positions.

TOTAL PERSONNEL EXPENCES (IN THOUSANDS CZK) OUT OF THIS - MANAGEMENT (IN THOUSANDS CZK) Wage costs 860 014 41 256 Bonuses to members of statutory bodies 1 920 Social security expenses 223 467 10 720 Other social expenses 112 424 4 750 Total 1 197 825 56 726

8. EQUITY

The company reported previous years' accumulated losses in total value of 1 391 103 thousand CZK at the end of 1998.

The Board of Directors has confirmed the following distribution of the profit reported for the year 1998:

a)      5% allotment to the company's Legal Reserve fund, in the amount of 20 677 thousand CZK b) decrease the accumulated losses of the company by the amount of 392 874 thousand CZK

At the same time, the Board of Directors has approved the use of "Other capital funds" in the total value of 27 537 thousand CZK to reduce accumulated past losses of the company. If accepted, the total value of accumulated losses carried forward will be 970 692 thousand CZK, which is 35.48 % of the registered capital of the company. When compared to the year 1997, there is a significant improvement of 15.37 percentage points.

9. RESERVES RECORDED IN THE COMPANY'S ACCOUNTING, IN THOUSANDS CZK

9.1. Legal reserves for aircraft maintenance

OPENING BALANCE ADITIONS 1998 UTILISATION 1998 CLOSING BALANCE 624 848 295 915 89 799 830 964

9.2. Other reserves for repairs and maintenance

OPENING BALANCE ADITIONS 1998 UTILISATION 1998 CLOSING BALANCE 32 037 32 037

9.3. Other reserves

OPENING BALANCE ADITIONS 1998 UTILISATION 1998 CLOSING BALANCE 22 578 92 986 8 052 107 512

10. BANK LOANS

In connection with the arrival of Boeing 737 aircraft, which were acquired through foreign financial lease - the financing banks provided bank loans totalling 44 977 thousand USD, at the end of 1998.

11. REVENUES FROM REGULAR ACTIVITIES, IN THOUSANDS CZK

TYPE OF REVENUES 1998 1997 Revenues from sales of goods 464 620 411 358 Flown revenues 9 109 367 8 478 395 - international transport 8 497 121 7 606 893 - domestic transport 6 111 32 235 - charters 606 135 839 267 Revenues from sales of services 724 454 526 717

Ÿ COMPANY'S CASH FLOW IN 1998 IN THOUSANDS CZK IN THOUSANDS CZK P. Opening balance of cash, and cash equivalents, at the beginning of accounting period   864 755 Z Book profit (loss) from regular activity, before taxation 381 769 A.1. Non-monetary transaction adjustments 587 137 A.1.1. Depreciation of fixed assets 253 957 A.1.2. Change in balance of adjustments, reserves and change in the balance of temporary accounts of assets and liabilities 333 532 A.1.3. Profit (loss) from the sale of fixed assets 11 927 A.1.4. Revenues from dividends and shares in profit -5 309 A.1.5. Accounted expense and revenue interest -6 970 A * Net cash flow from operating activity, before taxation, changes in working capital and extraordinary items 968 906 A.2. Change of need in working capital -76 971 A.2.1. Change in operating activity receivables -102 666 A.2.2. Change in operating activity short-term payables 40 707 A.2.3. Change in inventory -15 012 A ** Net cash flow from operating activity, before taxation, and extraordinary items 891 935 A.3. Expenditure related to the payment of interest, except capitalised interest -53 498 A.4. Received interest 60 468 A.5. Tax paid on revenues from regular activity, and tax arrears for previous periods -6 201 A.6. Revenues and expenses related to extraordinary accounting events, including tax paid from revenues from extraordinary activity 37 236 A *** Net cash flow from operating activity 929 940 B.1. Expenses related to acquisition of fixed assets -612 201 B.2. Revenues from sale of fixed assets 12 349 B.3. Loans and credits to related parties B *** Net cash flow related to investment activity -599 852 C.1. Change in the balance of long-term and/or short-term payables 278 471 C.2. Effects of net equity changes on cash C.2.1. Increase in cash, due to increase in registered capital C.2.2. Payment of shares on net equity to partners C.2.3. Cash gifts and subsidies in net equity, and other contributions of shareholders C.2.4. Compensation of losses by partners C.2.5. Direct payments to funds debit C.2.6. Paid dividends or shares in profit C.3. Received dividends and shares in profit 5 309 C*** Net cash flow related to financial activity 283 780 F. Net increase/decrease in cash 613 868 R. Closing balance of cash and cash equivalents 1 478 623

The full wording of the notes to financial statements is filed with the company's Chief Accountant.