The Nov. 14 announcement could mean that the revitalization plan set by current ČSA President Radomír Lašák's management is working and the ailing airline could soon return to profitability. It also means that the jobs of several high-level managers should be safe — for now.

ČSA slashed the 773 million Kč ($35.2 million) loss recorded in the first half of this year to a 324 million Kč loss over three quarters of this year.

The airline's cumulative loss still exceeded 1 billion Kč, but the third-quarter results boosted the company's faith in a three-year restructuring program that the management introduced in June in response to the mounting debt. The restructuring process aims to return ČSA to profitability by 2008.

Lašák said these most recent results were a major step toward that goal.

"It's the first time that we've actually gotten ahead of the plan," he said, presenting the company's financial results.

According to the strategy, this year's loss should amount to some 500 million Kč at the end of December.

The turnaround occurred despite the ongoing decline in the prices of tickets due to heavy market competition, Lašák said.

"The key to the improvement is the increased effectiveness of our operations, with the exception of personnel costs," he said.

ČSA's revenues rose thanks to a 3 percent increase of regular lines and, more importantly, a 35 percent increase in charter flights, said ČSA's Vice President for Economy Luboš Černý.

ČSA charters flights to 50 destinations worldwide, and has added the Bank of Scotland and the Irish national soccer team to its client roster.

Inherited debt

The bright forecast comes with some clouds.

Lašák admitted that the management's effort to cut personnel costs has not met with success so far. Wage-related costs rose 13 percent over the past 12 months — the second-biggest expense in the company after fuel costs, which rose 16.6 percent over the same period.

In 2005, the average wage at ČSA was 42,344 Kč per month, against the national average of 19,030 Kč. Meanwhile, pilots earned on average over 110,000 Kč per month.

In 2007, the wage burden is scheduled to increase 8 percent, due to an agreement made in 2005 between the company's trade unions and the previous ČSA management — led by Jaroslav Tvrdík, who stepped down in January. Lašák said the current management failed to agree on cutting the pay increase in half, so ČSA will need to cover an extra 400 million Kč in additional costs.

ČSA employs 5,300 staff, but Lašák said about 300 should leave by the end of the year.

Management said that the biggest problem ČSA needs to deal with is the major expansion of its fleet under Tvrdík in 2003, which now poses a burden to the company's budget. ČSA had 33 planes, but the number grew to 50 under Tvrdík, and leasing agreements for new aircraft reached 200 million Kč a year.

The expansion lowered the efficiency of ČSA flights due to decreased occupancy. The seat-load factor — the percentage of occupied seats on flights — was 70.1 percent in 2005. Meanwhile, ČSA's 50 planes averaged just 8.9 hours per day in the air. Lašák said that increasing the efficiency of using the fleet was a crucial factor in the development program.

The airline has kicked off the sale of its cargo terminal and catering services. The transaction should be completed in February 2007.

In 2005, ČSA suffered a 496 million Kč loss, a decline from 324 million Kč profit in the year before.

ČSA transported 4.2 million people over three quarters in 2006 — 5 percent more than the same period last year.