Czech Airlines sells headquarters to Prague Airport

National carrier Czech Airlines (ČSA) may be expecting a forecast that remains in the red for 2010, but recent events, including a huge asset sale announced Dec. 30, have given reason to hope that the troubled airliner could avoid bankruptcy and even post a profit in 2011.

ČSA spokeswoman Hana Hejsková told The Prague Post that 2010 will predominantly be about restructuring the company for the long term.

"Czech Airlines' plan for long-term stabilization of the company is already under way," she said. "It embodies a great many measures."

At the end of December, ČSA announced and started projects that included centralizing aircraft and passenger handling activities into a subsidiary, selling non-core related practices such as its Duty Free operations. Its biggest move came with a sale, announced Dec. 30, of the company's administrative building to Prague Airport for 607 Kč million, a move aided by Miroslav Dvořák, who is both chairman of the board at ČSA and CEO of Prague Airport. The airline will now lease the space from the airport, while putting the cash toward other areas.

"These steps will give Czech Airlines the capital needed to significantly strengthen the company," Hejsková said. "The proceeds of the sale will be put completely toward further stabilization measures."

Petr Kováč, chairman of the board at Patria Corporate Finance, agrees that ČSA has a long way to go, but recent strategies he's observed from the company promise a better long-term forecast.

"2010 will be full of hard work for ČSA on the improvement of its core business," he said. "I expect there will be decisions regarding disposal of selected ČSA assets."

Part of that will depend on ČSA's cooperation with Prague Airport, which last month purchased ČSA's headquarters building, otherwise known as APC. The sale of the building, which contains crew and administration facilities, was seen as a positive step that will inject much-needed funds.

Marek Hatlapatka, an analyst at Cyrrus, said the building's sale makes sense, as there is no reason for an airline to own its office space.

"The headquarters sale was a positive step. Changes such as this, plus further changes to management and help from Prague Airport, will help make ČSA's restructuring plan more efficient," Hatlapatka said.

Other analysts, who generally see the winter season as a low-point for the travel industry, say ČSA's comeback efforts, and the entire sector, will depend on the future development of the economy to revive demand.

"2010 will be challenging not only for ČSA but for the whole sector," said Milan Vaníček, head of research at financial group Atlantik. "That's due to the economy and rising unemployment, which means individuals hold on to their money and spend less. Pre-sales from travel agencies show that the new season could be challenging, even down 10 percent to 15 percent. Since people have started booking last minute rather than planning ahead, we won't know the exact numbers until later."

Philip Heijmans can be reached at
pheijmans@praguepost.com