Ceské Aerolinie, A.S.

views updated

Ceské aerolinie, a.s.

Letiste Ruzyne
160 08 Prague 6
Czech Republic
Telephone: ( +420) 220 104 310
Fax: ( +420) 224 81 04 26
Web site: http://www.csa.cz

Private Company
Incorporated: 1923 as Ceské Statni Aerolinie
Employees: 4,455
Sales: CZK 14.65 billion ($517.50 million) (2002)
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 488119 Other Airport Operations; 488190 Other Support Activities for Air Transportation

Ceské aerolinie, a.s., also called Czech Airlines or CSA, flies to approximately 70 destinations in more than 40 countries. Its fleet numbers about three dozen Western-made aircraft. Since 2001, CSA has been a member of the Delta Airlines-led Skyteam alliance, which gives its passengers easy access to two dozen international airlines. In addition to scheduled and charter flights, CSA provides an array of aviation support services, including cargo handling, catering, and aircraft maintenance. CSA is controlled by a number of government institutions.

Origins

CSA was founded on October 6, 1923, as Ceskoslovenska Statni Aerolinie, or Czechoslovak State Airlines. The first passenger flight, between Prague and Bratislava, occurred on October 29 with an Aero A-14 Brandenburg biplane piloted by Karel Brabenec.

The airline joined the International Air Transport Association (IATA) in 1929. On July 1, 1930, the carrier used a Ford 5AT to add its first international route, from Prague to Zagreb, in the former Yugoslavia (Croatia). CSA carried about 9,000 passengers during the year, according to Airlines of the World by R.E.G. Davies, who also reports that CSA's early fleet included Savoia-Marchetti S.M. 73s, four Airspeed Envoys, and one Saro Cloud, the latter two types made in Britain. Flights to Romania, Austria, and the Soviet Union were added in the early 1930s.

CSA moved to the new airport at Prague-Ruzyni in April 1937. Brussels, Paris, Rome, and Budapest were added to the network within the next two years. However, operations were curtailed on March 15, 1939 due to the Nazi occupation of Czechoslovakia.

Another airline, Ceskoslovenska Latecka Spolecnost (CLS), in which the Skoda Works had a significant interest, had provided domestic and international service after being founded in 1927. It was merged with CSA in 1945.

Cold War Ambassadors

Flight operations resumed on September 14, 1945. After the war, CSA rebuilt its fleet with both the Douglas DC-3 transports of the Allies and their German counterpart, Junkers Ju52s. The route network was restored and the first intercontinental flights—to Cairo and Ankara—added in 1947.

After the Communist coup of 1948, CSA shifted to Russian-made Ilyushin Il-12 airliners. Il-14s made locally under license by Avia were the next upgrade. Seventy-seat, twin-engine Tupolev Tu-104 jets were put into service in December 1957 and used on routes to Moscow, Paris, and Brussels. This aircraft facilitated the expansion of the intercontinental network to Bombay (Mumbai) in 1959.

The international network grew in the 1960s, extending south to Jakarta, Havana, and Africa. Long-range Ilyushin Il-62 aircraft were added in 1969. The next year saw the introduction of service to Montreal and New York. Of the airlines of the Soviet satellites, Czechoslovakia's was perhaps the most visible to the Western world. Another Russian-built airliner, the Tupolev Tu-134, was added in 1971, followed by the Tu-154M in 1988.

New Challenges in the Early 1990s

The "Velvet Revolution" that ended communism in Czechoslovakia in the early 1990s meant CSA had to survive on its own. It was a difficult time to go it alone. During a major global recession, even Western European governments were bailing out their flag carriers.

At the same time, CSA was switching its fleet to Western-made equipment. The Airbus 310 was added in 1991, followed by the ATR-72 turboprop and Boeing 737 medium-range airliner the next year. (These were all leased.) The number of destinations continued to proliferate.

As president and board chairman Jiri Fiker told the Journal of Commerce in 1992, management was aware of the challenges ahead of surviving in a deregulated environment as the European Union's air market was being liberalized. CSA sought an alliance with a larger airline and found a partner in Air France, which in 1992 led a group acquiring 39.5 percent of the company's stock in a capital and assistance deal worth $60 million. This equity arrangement lasted only a couple of years, however.

At the same time, Czechoslovakia was being partitioned into two separate countries, effective January 1993, necessitating negotiations between the Czech Republic and Slovakia over ownership of the airline. Ceskoslovenske aerolinie, or Czechoslovak Airlines, was renamed Ceske aerolinie, Czech Airlines, on March 26, 1995.

CSA was reborn as a joint stock company on August 1, 1992, with Ceské aerolinie, a.s. being created out of the former state-owned entity Ceské aerolinie, s.p. Air France, one of the original shareholders, sold its interest to state-owned Konsolidacni Banka for $27 million in March 1994.

Mid-1990s Alliances

Prague grew in popularity as an international tourist destination in the mid-1990s. CSA carried nearly 1.5 million passengers in 1995, up 20 percent in one year. Cargo saw a similar increase in business. After several years of losses totaling more than KC $1 billion, the airline was again showing a profit. Turnover was CZK 8.5 billion in 1995. The same year, CSA began a marketing alliance with US carrier Continental Airlines.

Cargo became more important in the mid-1990s. The airline had no dedicated freighters but relied on the belly hold capacity of its passenger airliners. CSA opened a 5,000-square-meter warehouse at Prague's Ruzyne Airport in 1994, which was partly used for third party storage. CSA was one of only two cargo-handling companies there.

ATR-42 turboprops entered the fleet in 1996. The Tupolevs were grounded in 1997, at least as far as scheduled services, though the Tu-154Ms continued to perform some charters for another several more years.

To keep up with capacity demands, CSA placed a $350 million order for ten new Boeing 737s. In 1997, CSA and Boeing created a joint venture (90 percent owned by Boeing) to invest $30 million in Aero Vodochody, the Czech Republic's largest aircraft manufacturer.

Low-Cost Competition after 2000

Under international accounting standards, in 2000 CSA earned $29.5 million, ten times the previous year's figure, on revenues of $436.9 million. The carrier was required to post a loss under Czech accounting standards, which treated leases differently. The company had just under 4,000 employees. International business accounted for more than 80 percent of revenues, reported Air Transport World. CSA joined the Skyteam global alliance led by Delta and Air France in 2001.

CSA's transatlantic traffic fell by one-third following the September 11, 2001 terrorist attacks on the United States, prompting the carrier to cut the number of weekly flights from six to four. CSA also canceled orders for three new aircraft as the industry endured a worldwide crisis, and the carrier's planned privatization was delayed. Heavy flooding in August 2002 discouraged international visitors to the Czech Republic.

Company Perspectives:

In the beginning nature was all. It gave us sustenance, it warmed us and provided us with homes. When it revealed its laws, it bestowed upon humankind a vast gift of knowledge. Its apparent simplicity and innocence were exposed, and humankind peered into the depths of the world's complicated, but perfectly functioning laws. It became enough to stir, to choose one of the many laws of nature and to fulfil one's desires. And so it was that man (not only once) soared heavenward, like a dandelion seed. But nature sent forth greater mysteries and elicited further questions. Why do flocks of birds stay aloft? Why do they always head for their nest? How much patience and work goes into a flowering meadow? What washes up on shore with the ocean's breakers? And why does the intelligent dolphin only guide ships in large pods? Man looked closely at a petal and found that if the perfect network of links is damaged in its structure, the entire flower may wilt. Utter perfection created from myriad superbly functioning, interconnected features, one element complementing the next, patience while awaiting the outcome: add to this the ancient and overwhelming desire of man to overcome time, shorten distances, to fly. From all of this was born an airline. Nature and its fascinating laws attended its birth. To his own benefit, man assessed the speed of the cheetah, the strength of the elephant, the purity of an iceberg, the structural perfection of a leaf and the method and order of the tiny ant, and thus did airplanes take wing with the elegance of a dandelion seed or bird. For the first time—at the threshold of the third millennium—more than three million passengers were borne aloft on the wings of CSA.

Turnover rose to $517.5 million (CZK 14.7 billion) in 2002, as pre-tax operating income increased to $26.2 million. CSA carried three million passengers during the year, a figure which rose to a record 3.6 million in 2003. London was its most popular as well as most competitive route. Cargo volume was also up. CSA ended 2003 with 35 aircraft in its fleet.

As low-cost carriers continued to appear in the Czech market, CSA announced plans to build its own low-cost unit. To do this, it attempted to acquire up to 50 percent of Travel Service, a Czech charter operator with subsidiaries in Hungary and Spain. However, acquisition talks fell through in 2003.

CSA management had an optimistic outlook as it grew steadily in the face of a global industry downturn. Airline management aimed to increase the fleet to 50 aircraft by 2006 as CSA expanded operations in both Western and Eastern Europe.

Principal Subsidiaries

Amadeus Marketing CSA S.R.O. (65%); CSA Airtours A.S. (ATO); CSA Services S.R.O. (CSS); CSA Support S.R.O. (SUP); Slovak Air Services S.R.O. (S.A.S.) (Slovakia); Slovenská Konzultacná Firma S.R.O. V Likvidácii (SKF) (Slovakia).