State-controlled carrier Czech Airlines (ČSA) outlined a slight improvement passenger occupancy rates following savage cuts in services through 2011 as the troubled carrier sought to curb losses and become attractive to a potential strategic airline partner.
A savage reductions in services helped cut the overall number of passengers on scheduled flights by 7.5 percent to 4.241 million last year compared with 2010.
At the same time, the number of destinations was cut by 11.8 percent (to 60), the number of aircraft in service by 20.5 percent (to 31) and the number of flights performed by the airline by 17.4 percent (to 28,075). ČSA pilots — in a dispute sparked in early December by cutbacks in services and transfers of aircraft — warned that there would soon be nothing left to sell if the downsizing continued.
Meglomania
The sharp downsizing from what ČSA president and board chairman Philippe Moreels described as “the meglomaniac expansion of previous years” was rewarded with a slight improvement in the state airline’s load factor, the relationship between seats and distances flown by aircraft and the number of passengers in them.
ČSA’s overall seat load factor improved during the past year to 69.3 percent from 69.1 percent for the overall airline and to 71.8 percent from 70.7 percent for cross-border flights within Europe. “The load factor is gradually approaching the average for the Association of European Airlines (AEA) even though in 2011 this trend slightly slowed down.”
Going into 2012, the struggling Czech carrier will continue to develop its strategy of placing itself as a bridge between Eastern and Western Europe, with flights stepped up between Prague and major destinations in Russia and other parts of the former Soviet Union.
‘In Russia we are quite well known and are often one of the first choice airlines for passengers.’While cutting many West European destinations where it cannot turn a profit, Prague is continuing to hold onto flights to its main West European targets (Amsterdam, Paris, Barcelona, Madrid, Milan and Rome), which it believes are attractive to Czech domestic customers and transfer passengers from Eastern Europe. Geneva will be added this year.
Altogether the former Soviet Union and the six main western European destinations account for 48 percent of ČSA’s overall earnings. Passenger figures to the former Soviet Union, apart from the Baltic States, jumped by 8.4 percent in 2011 with all principle west European destinations, with the exception of Paris, experiencing growth of at least 6.0 percent.
“In Russia we are quite well known and are often one of the first choice airlines for passengers. In western Europe, we are not very well known and are often the second or lower choice,” commented ČSA’s head of marketing, Jiří Marek. Two new Russian destinations, Ufa and Nizhny Novgorod, will be added in March against a backdrop of more destinations being slashed that do not fit into the East-West model.
In a news conference Thursday, Moreels admitted that the strategy of focusing on Russia and the former Soviet Union carried risks. “Concentration is risky, but there is no alternative for us. If we concentrated on western Europe, the situation would be a lot worse. At the moment there is no other variant that for ČSA makes any economic sense,” he said.
ČSA gave no financial results to accompany the carrier statistics. Moreels repeated earlier predictions that with the help of asset sales over 2011 the final losses for the year would come into “several hundreds of millions of crowns.”
‘By reducing, we make ourselves more interesting to a buyer.’Seeing a cloud to the current gloomy passenger and economic outlook and fact that ČSA has no easily offloadable assets that could blunt further poor results, Moreels said the airline’s dramatic downsizing would make it easier for it to find a strategic partner.
“By reducing, we make ourselves more interesting to a buyer,” Moreels told Czech Position. “A buyer does not want to purchase an airline that has huge administrative offices or hangers or whatever: a buyer only wants a business that is profitable.”
The ČSA boss repeated the previous prediction of Miroslav Dvořák, chairman of the holding company that now covers both the state carrier and the country’s main airport operator, Český Aeroholding, that a strategic airline partner for ČSA might be found this year.
Moreels admitted the partner is unlikely to be European. “There is lots of money in the world — but not in Europe,” he said following the news conference. Speculation has centered on the likelihood that ČSA could be an interesting commercial proposition for an Asian or Middle East airline. Qatar Airways and China’s Hainan Airlines surfaced in past media reports as possible suitors.
The airline boss underlined that it cannot expect any bail-out from the Czech state if negative results continue for the airline and no partner is found. “Our first priority is to survive and find a strategic partner; if we cannot find a strategic partner, we still have to survive,” Moreels added.
