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ithout a doubt, the year 1998 was a very successful one for
CSA. |
| The company showed a profit of 413.6 million
CZK, according to Czech Accounting Standards (CAS) and 34.3 million USD, according to
International Accounting Standards (IAS). |
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| Ÿ 1998 - A successful year Ÿ |
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| Antonin Jakubse, M. Sc. |
Chairman of the Board of Directors
and President of CSA |
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The positive trend in CSA's growth continued, documented by a record fifth
consecutive year in the company's "Turnover" indicator - in 1998, CSA showed a
turnover of 11.98 thousand million crowns, which represents a year-to-year growth of 10.3
%. In previous years, turnover reached 10.86 thousand million crowns in 1997, 9.46
thousand million crowns in 1996, 8.54 thousand million crowns in 1995 and 7.29 thousand
million crowns in 1994. The amount of realised turnover in 1998 places CSA among the
biggest companies doing business in the Czech Republic.
If the effectiveness and efficiency of CSA were to be
compared with other international airlines, then those airlines of the countries of the
formerly so-called "Eastern Bloc" create an appropriate basis. These airlines
had the same initial business conditions at the beginning of the nineties, i.e. the
necessity of massive fleet-renewal (the introduction of western-produced aircraft), a weak
domestic market with a predominantly inefficient economy - where the standard of living
could not be compared to countries with more advanced economies, etc. In the last four
years, CSA has ranked among the most successful of the airlines of the former
"Eastern Bloc", by realising a profit on three separate occasions - while the
rest of Central and Eastern European airlines showed financial losses in this period.
In 1998, CSA also received a prestigious appraisal when
it was placed sixth in an evaluation of the most admired firms in the Czech Republic. |
| Ÿ AIR TRANSPORT |
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| The main activity of CSA - air transport - has been developing at a very
successful rate. In 1998, three additional Boeing 737 aircraft were delivered (one each,
in March, April and May according to a contract for the delivery of a total of ten Boeing
737's between 1997 - 2000). This has enabled the company to extend operations within its
current network of destinations and also, to expand the network to new destinations -
Nice, Oslo and Bologna. Revenues of 9.48 thousand million crowns realised through air
transport, were also a record in the history of the company and represented a year-to-year
increase of 10.7 %. In absolute numbers, it meant an improvement of 914 million crowns.
The total available transport capacity, expressed in available passenger-kilometres,
showed a year-to-year growth of 1.2 %, while the year-to-year increase of transported
paying passengers was 3.9 %. In 1998, CSA transported a total of 1.8 million paying
passengers on its flights. |
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| A comparison of CSA's performance growth
in the areas of Western, Central and Eastern Europe (the most important territories from
the company's point of view) with the average growth of European airlines in the AEA
(Association of European Airlines) is very favourable. While AEA members achieved a
year-to-year growth of 7.3 % in available transport capacity on European flights in
1997/1998, CSA showed a growth of 13.7 %. The AEA showed an average year-to-year
improvement of 8.3 % in realised transport activity on European territory, while CSA
showed an improvement of a full 16.6 %. Although CSA still falls short of the average of
European airlines in AEA in the area of utilisation of available capacity of aircraft on
flights within Europe, even this indicator showed a favourable year-to-year development in
1998. CSA achieved a utilisation of seat capacity of 59.0 %, compared to AEA's 63.9 %.
However, it should be noted that CSA had an improvement of 1.5 %, while the AEA had a
year-to-year growth of only 0.6 %. |
| Ÿ NON-TRANSPORT
ACTIVITIES |
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| In non-transport activities, the company showed revenues of 1.66
thousand million crowns in 1998, representing a year-to-year growth of almost 280 million
crowns. Non-transport activities therefore, were 13.8 % of the entire company's turnover
and significantly added to total CSA profit. |
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| The sphere of CSA's non-transport
activities, which includes, for example, aircraft and passenger handling at Prague-Ruzynì
Airport, duty-free sales at the airport and on board or aircraft maintenance for external
customers - still continues to register high annual growth. In 1997, there was
year-to-year growth of 22.6 % and in 1998, this figure stood at 20 %. |
| It is impossible to omit the fact that
1998 was a historical turning point for CSA and its technical sections, when a Western
European air carrier ordered maintenance of its aircraft from a country of the former
Eastern Bloc - for both the first time in the history of the company and for the first
time in the modern history of civil aviation. In the second half of the year, CSA signed a
contract with Germany's Hapag-Lloyd Flug for heavy maintenance on five Boeing 737
aircraft. CSA successfully completed this contract and since the beginning of 1999 has
begun negotiations with other renowned carriers from abroad regarding their aircraft
maintenance in Prague. |
| Ÿ Results of Restructuring
Programme (1994 - 1998) Ÿ |
| The CSA Restructuring Programme was created at the beginning of 1994 as
a reaction to financial losses in 1992 and 1993 - when the company showed the biggest loss
in its entire seventy-five year history - 1.55 thousand million crowns (about 48 million
USD). The Restructuring Programme set itself the tasks of gradually remedying these
unsuccessful results and of improving the quality of services and CSA's image, both in the
Czech Republic and abroad. For the 1994 - 1998 period, the Restructuring Programme
expected CSA to lose, in total, 1.29 thousand million crowns from revenues of 42.23
thousand million crowns and the transport of 7.14 million passengers. In reality, CSA
achieved considerably better results in all indicators. The loss was only 1.18 thousand
million crowns, revenues totalled 50.3 thousand million crowns (19.1 % higher) and 7.87
million passengers were transported (a 10.2 % overfulfilment). |
| The Restructuring Programme and its main
objectives - the creation of a prosperous company which will be competitive and flexible
toward market conditions, to have an efficient, loyal and professional team of employees,
and to offer excellent services to its customers and be perceived as a respected air
carrier by both the travelling public and its competitors - were fulfilled during this
last five-year period. These achieved results, however, create for us an obligation to the
future. It is still necessary to further increase the quality of CSA services, to decrease
the costs of all activities and to boost labour productivity, all with the aim of the
desirable growth and profitability of the firm. This is simply the only way how to exist
in the highly competitive global market that is civil aviation. |
| Ÿ Strategy for the Forthcoming
Period Ÿ |
| CSA is entering a period which could be defined by, keeping in mind a
certain simplification, three areas that will significantly influence the further
development of the company. The first area is the relationship of CSA toward alliances of
air carriers, i.e. the decision as to whether CSA should join an alliance, and if yes -
when. Secondly, the re-privatisation of CSA as a means to bring in new institutional or
strategic shareholders in exchange for the reduction of capital share, which is currently
directly, or indirectly, under state control. And finally, the third strategic area, which
is the definition of CSA's development from 1999 - 2005 - with a vision to the year 2010,
where the fulfilment of CSA commercial strategy, the plan for fleet development, etc.,
will be an inevitable part of this process. |
| Ÿ AIR TRANSPORT |
|
| To maintain and strengthen its market share in the Czech Republic and to
increase its commercial share on markets abroad, will be the main objective of CSA in the
forthcoming period. It is optimal for the further development of CSA to focus especially
on the Western European market, on markets of selected European countries eastward of the
Czech Republic, and to focus further on the territory of the Middle East (using especially
Boeing 737 aircraft). CSA is aiming to increase its market share in the European Union and
on "domestic transport" in EU member countries, even before the Czech Republic
joins the Union. |
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| The main objective - to maintain and
strengthen CSA's share of the market, both in the Czech Republic and abroad - should be
reached through the creation of a new CSA product to meet the demands of irregular air
transport (charter flights) and the growing demand for regular, so-called "low-cost
transport". This new CSA product may be offered exclusively on regular flights to
tourist destinations, such as, for example, Greece, Spain and Italy, or on flights where a
low-cost carrier starts operation between Prague and a destination abroad to compete with
the classic two-travelling class offer of CSA. Obtaining the appropriate aircraft
technology is the condition for entering the charter transport market and for offering
such a new product. |
| Ÿ NON-TRANSPORT
ACTIVITIES |
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| The development of non-transport activities will depend only on an
analysis of whether a particular activity is effective for CSA or not. If CSA has enough
financial, personnel and other resources and, at the same time, good preconditions for
further business development in the area of non-air traffic activities exist - then it
will be appropriate to support such activities. Diversification of CSA's business may
bring further resources and may also help overcome a period of a global drop in the demand
for air transport. The business environment of the air transport industry is characterised
by cycles, and positive and negative trends take turns. |
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| Ÿ In Conclusion Ÿ |
| All those employees who daily participate in shaping CSA into a
profitable, competitive and respected airline deserve thanks for the successful year that
was 1998. |
| The members of the highest bodies of the
company - the Board of Directors and the Supervisory Board - also deserve thanks for their
contribution, particularly in the area of the long-term strategic management of CSA. |
Antonin Jakubse, M. Sc.
CHAIRMAN OF THE BOARD OF DIRECTORS
AND PRESIDENT OF CSA |
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