SA is continuously innovating and improving the offer of its services to clients - whether it is the extension of distribution services, or of passenger handling at the airport or on board CSA airplanes.

Ÿ PRODUCT DISTRIBUTION AND SALES Considering the fact that CSA offers and sells its product not only in the Czech Republic but also on many diverse markets abroad - it uses several different methods to distribute its services. CSA uses its own commercial representations, and also travel agencies and GSA (General Sales Agents). 55 commercial representations on five continents, work within the CSA network. Besides seven offices in the Czech Republic, there are 22 offices in Western Europe, 13 in Eastern Europe, with the same number, 13, outside Europe. The majority of these representations functions on-line in the cities where CSA aircraft fly, only five offices in the Czech Republic, and three outside of Europe, work off-line. In 1998, CSA opened new commercial representations in Nice and Oslo. Great Britain, Germany and the United States of America were the most important production areas in 1998.

The role of IATA agency sales has been strengthened, through the Billing and Settlement Plan and Cargo Accounts Settlement System accounting systems, as well as through the American ARC system. It has resulted in faster accounting between CSA and the individual agencies, in the wider distribution of the CSA product to IATA agencies, and in the reduction of financial risks and outflows. In the course of 1998, 3 172 375 864 CZK were accounted through the above mentioned systems, representing a growth of 19.4 % in comparison with 1997.

To improve the quality of information about CSA pricing policy for agencies on the local market, and to improve the quality and speed of passenger service, CSA introduced so-called "Nego Fares" in Scandinavia and France. Additionally, CSA established a "call centre" in Frankfurt for the territory of Germany - where all telephone calls are automatically directed when other commercial representations happen to be closed.

Ÿ 1998 CSA revenues, in thousands CZK Ÿ Regular transport

EASTERN EUROPE 1 629 936 NORTH AMERICA 1 204 884 FAR EAST 276 622 MIDDLE EAST 868 342 WESTERN EUROPE 4 652 536

Ÿ TECHNICAL MAINTENANCE AND REGULARITY OF FLIGHTS CSA pays serious attention to operational safety and the regular technical maintenance of its aircraft. Based on the fulfilment of conditions determined by the European regulation JAR-145, the Civil Aviation Authority of the Czech Republic issued for CSA, as the first company based in the Czech Republic, a licence to carry out maintenance according to this regulation. This licence also enabled CSA to compete for the aircraft maintenance of Western European carriers. The first customer was the largest German charter company, Hapag-Lloyd Flug, for which CSA carried out a series of "C-checks" on five Boeing 737-400 aircraft during November and December 1998. These were detailed maintenance checks, usually carried out after eighteen calendar months of an aircraft's operation, and in regards to their degree of necessary expertise, only overhauls are above them.

The Boeing 737 aircraft of Hapag-Lloyd Flug, thus joined three Boeing 737 aircraft operated in the Czech Republic by private charter companies, which have been CSA customers since April 1997.

CSA also carried out the huge and technically demanding installation of the most modern of navigational systems into four new Tupolev Tu-154M aircraft belonging to Slovak Airlines and the State Fleet of the Slovak Ministry of Internal Affairs. Furthermore, regular maintenance continued on Czech Ministry of Defence aircraft, on the State Fleet of the Czech Ministry of Internal Affairs and on the aircraft of a Slovak company, Air Transport Europe.

Additionally, at the end of the year, CSA also gained an appraisal from CFM International for 200 thousand flight-hours for the reliable operation of the engines of this company. CFM International produces the CFM 56 engines, which are used on all CSA Boeing 737 aircraft.

Perfect technical maintenance played a significant role in the low rate of delays of CSA aircraft. In flight regularity, CSA ranked third among the European carriers associated in the AEA (Association of European Airlines). A disadvantage for companies flying to and from Prague is the fact that many flights are subject to air traffic flow control. To minimise the risk of CSA being assigned a slot (a short time period alloted to individual airlines for take-off by the Brussels-based company EUROCONTROL) not corresponding with the timetable - in 1998 CSA adopted the following measures: if the difference between the departure time according to the timetable and the allotted slot is less than 45 minutes, CSA handles and prepares the aircraft for departure, including passenger boarding, for the time stated in the timetable. Once passenger boarding is finished, Operations Control sends a message to EUROCONTROL that the aircraft is ready for immediate departure and is waiting for a better slot. At the time of preparing the aircraft for departure, in cooperation with Flight Dispatching, other possibilities of pushing the departure time forward are considered, e.g. redirection of a flight via different airways.

Ÿ Departures without delay, up to 15 minutes, in the entire CSA network Ÿ - short and middle-distance routes

in % 100 95 90 85 80 75 70 65 60 1 2 3 4 5 6 7 8 9 10 11 12 1998

AEA average   CSA

Ÿ ACTIVITIES AT THE CSA HUB IN PRAGUE CSA has a considerable share of the number of passengers handled at Prague-Ruzynì Airport. In 1998, 4 629 013 passengers were handled at the airport, which represents an increase of 6.17 % over the previous year. Out of this number, CSA handled almost three quarters of the handled passengers (exactly 72.1 %) on its own flights, and on those flights of airlines which use CSA handling services. In absolute numbers, it represents a total of 3 337 619 passengers handled by CSA. The increased interest of customers was also apparent in the use of the services of the Airline Business Club.

Ÿ Share of Prague-Ruzyne Airport operation in 1998 Ÿ

Passengers Cargo and load OTHERS 22,6% CSA 42,7% OTHERS 30,0% CSA 41,6% PASSENGERS OF COMPANIES HANDLED BY CSA 34,7% CARGO AND LOAD OF COMPANIES HANDLED BY CSA 28,4%

Ÿ NON-TRANSPORT ACTIVITIES In addition to the main activity, which is the transport of passengers and cargo, non-transport activities, especially catering and duty-free sales, constitute a substantial part of CSA's activities.

Duty-free sales showed a progressive trend in 1998, as it has in recent years. Passengers were buying duty-free goods especially on board CSA airplanes, where sales increased by 4.8 % in comparison with 1997. Sales at Prague-Ruzynì Airport showed a certain stagnation which was caused by the increased costs of goods but mainly because of the impact of the commission imposed by the Czech Airport Authority (the airport operator) and by an increase in the rental of shop space, all of which was reflected in the prices of goods.

In 1998, CSA Catering, which covers 95 % of the catering market at Prague-Ruzynì Airport, produced more than 2.5 million meals in 150 combinations. 75 % of the production was for CSA flights and the remaining quarter was bought by fifteen airlines which have flights to Prague.

Moreover, cooperation with CSA Services, a subsidiary company, in providing the catering services for social events grew successfully.

At the request of the company, new tenders for the supply of beer, wine and soft drinks were submitted in 1998. As a result, new contracts were signed with the Plzeòské pivovary, Bohemia sekt and Coca-Cola companies.

At the beginning of November 1998, a huge reconstruction of the Catering building and an overhaul of its technical equipment were begun, and work was completed in March 1999. The reconstruction's goal was the creation of better conditions for the further extension of production and the improvement of current hygienic conditions during this production, to meet European Union requirements. All production areas are now air-conditioned and cooled to temperatures of around 15oC and the Hazard Analysis Critical Control Point (HACCP) system has been introduced to maintain the necessary hygienic requirements. After renovations, the current technical equipment and the layout of CSA Catering is of top European standards.

Ÿ CARGO In the transport of cargo and mail, CSA offered better services to its customers in 1998. This was especially due to increased storage capacity for air cargo consignments, the building of a new shelf system for the loading of Europalettes and the introduction of a completely new technology for the storage of complete palettes and containers.

CSA Cargo also initiated safety checks of all consignments transported from Prague, not only for certain destinations as used to be the case in the past.