CSA Czech Airlines is reinforcing its position of its Prague hub as a major gate for Eastern Europe ahead of the Czech Republic's accession to European Union in May.
February 2004
Prague Ruzyne Airport, which serves the Czech Republic's picture postcard capital city, has perfected the building site look so beloved by airports around the world. But while construction activity may cause temporary inconvenience to passengers and operators, it nonetheless signals one important thing: welcome growth.
Years of enviable traffic increases have seen the Czech Airport Authority commit to Project Europa, the centrepiece of which involves the construction of a new Terminal North 2. The new facility, with a price tag of CZK10 billion ($400 million), is scheduled to open at the end of 2005. Preparations are also being made for the construction of a new parallel runway.
Happily for airport managers, Prague is seeing passenger growth across the board and last year the airport handled seven million passengers for the first time. The forecast is to hit the 10 million mark by 2010.
Prague has enjoyed a particular boom in the low-cost carrier segment as operators continue to serve the seemingly unquenchable thirst among travellers for cut-price tickets to one of Europe's tourist hot spots. The number of passengers travelling on such carriers leapt 116 percent during the third quarter of 2003 and Prague now justifiably claims to be the centre of low-cost carrier operations in the region.
The low-cost segment is led by easyJet, the ubiquitous British carrier that serves Prague from Bristol, Newcastle, London Stansted and East Midland airports. But easyJet is not alone. Last year, Prague welcomed five additional low-cost operators to the market: Germany's Germanwings, Italian carrier Volareweb, the SAS low-cost unit Snowflake, plus the UK's Jet2 and FlyBe.
Given its liberal market, operators can access the city's main airport rather than far-flung secondary sites, and favourable economic conditions, Prague's attraction to low-cost carriers is clear. In fact all airlines at Prague can benefit from an annual 50 percent discount on landing fees in return for the introduction of routes to new destinations from the airport.
With European Union (EU) accession fast approaching, the Czech Airport Authority is determined to cement Prague as the commercial and administrative centre for the eastern region of an enlarged Europe. As such, airport managers believe that the growth of low-cost traffic will ultimately also help boost revenues for full service carriers at the airport, including national carrier CSA Czech Airlines.
"Both low-cost carriers and standard airline companies have recorded a massive increase in the number of passengers," said Martin Kacur, CEO of the Czech Airport Authority, speaking late last year. "The number of passengers has been enlarged by those who have never before considered the option of using air transportation; low-cost carriers have offered an interesting alternative, and when travelling next time these passengers could use the services of standard airline companies."
Eastern promise
Certainly, the opportunity to develop Prague as an important gateway between Western and Eastern Europe, and all points beyond, has long proved equally compelling for CSA.
Understandably, expectations are high at the carrier, particularly following the reshuffling of CSA's board of directors in September. Certainly, the arrival of a new CEO, together with additional member changes, all designed to rejuvenate the carrier's mission, has only served to accelerate plans to extend CSA's operational reach further east.
CSA recently launched a host of new services, including daily services to Sliac (a spa town in neighbouring Slovakia), Yerevan (the capital of Armenia) and Tbilisi (the capital of Georgia). Elsewhere, the carrier has also expanded existing commercial agreements with DBA Belavia on the Prague-Minsk route and with Air Moldova covering the Prague-Chisinau route.
For the summer season, CSA plans to expand even further east with services to Ekaterinburg and Samara (both in Russia), Baku (Azerbaijan), Krakow (Poland) and possibly the Romanian city of Cluj.
In total, from March, CSA will serve 75 destinations in 44 countries, including a particularly healthy Eastern Europe network that extends from St. Petersburg in the north to Sofia (Bulgaria) in the south.
Thumbs Up: CSA is expanding both its fleet and its route network
Such a network is a boon not only for CSA, but also its SkyTeam alliance partners all of which will be able to access these emerging markets.
CSA's route expansion is mirrored by its continued fleet development. Today, and after a comprehensive fleet renewal programme, CSA operates three main types of aircraft: A310-300s for long-haul flights; B737s for European and Middle Eastern routes; and ATR aircraft for short distance flights. This year will see the arrival of an additional five B737-400s and one ATR-42-500 turboprop aircraft, taking the fleet number to a total of 41 aircraft.
Ground operations
Of course, getting the business right in the air depends largely on getting it right on the ground. For Jiri Pos, CSA's Executive Vice President of Ground Operations, the challenge is threefold: to maintain ground handling standards at a time of significant route and fleet development; to develop an already healthy third-party handling business; and to strengthen CSA's position as the leading handler at Prague in the face of growing competition.
As Pos explains, CSA Ground Handling takes care of, on average, 195 movements per day, although this rises to a maximum of 350 during the peak summer season. In 2003, the carrier handled more than 4.7 million passengers on over 71,000 flights.
The majority of aircraft are narrow-bodied, essentially from the B737 and A320 families, although a handful of widebodies such as B767s and A300s also visit Prague. Regional jets and turboprop aircraft account for approximately 20 percent of the traffic handled.
Some 70 percent of CSA Ground Handling's business involves serving the mother airline, although it also has a growing customer airline operation. The division currently enjoys a 50 percent share of the total third-party ground handling market at the airport. CSA's customer portfolio covers more than 20 mainline carriers and includes major accounts with the likes of British Airways, Aeroflot, SAS and Austrian.
"In terms of the third-party segment, the major target of CSA Handling is to cover 100 percent of the SkyTeam operation at Prague," explains Pos. For now, this involves handling Air France and Alitalia, although both will be joined by Korean Airlines in May when it begins operations from Seoul and, in time, KLM following its merger with Air France.
"Revenue from our services to customer airlines is an important part of company income," confirms Pos. "Naturally, it also helps to optimise the cost and productivity of our self-handling operation."
With the low-cost segment so strong in Prague, it is curious that CSA has not yet targeted it for additional third-party handling business. Pos admits that CSA has yet to get too involved in the segment, but confirms that this will be a goal for the coming seasons.
"There is need for product diversification on the ground," he believes. "For example, we could use differently skilled check-in agents to help lower the cost structure and meet the expectations of low-cost carriers. First, however, we need to get a detailed picture of our own cost structure through the customer portfolio operation and then we will be able to really challenge this market segment."
CSA hopes to achieve this during 2004 thanks in large part to a transition from previously manual ground operations planning to a fully automated system. The carrier has contracted German supplier Inform to supply several modules from its Groundstar suite of solutions.
Groundstar's PlanControl, RosterControl and RealTimeControl modules will improve CSA's resource demand planning, shift planning and resource allocation respectively. Each module will also interface with CSA's own FIS and hub information system.
As Andreas Dollhopf, Inform's Project Manager on the work, explains, the project began in November 2003 with the implementation of the RosterControl and PlanControl modules. Both should be ready by the end of March with initial implementation taking place in a pilot area that covers passenger services, check-in and gate planning.
Work on the third and final module, RealTimeControl, will begin in June with full implementation expected by the end of the year, adds Dollhopf. Once the Groundstar modules are fully transitioned, CSA will be better able to optimise its staff and equipment requirements for all self- and third-party handling operations.
"The system will help us get a more detailed picture of our own source needs as well as the cost structure for each customer airline operation at Prague," explains Pos. "We will then be in a better position to support the pricing policy in order to meet break even."
According to Pos, plans are also afoot to strengthen the quality of CSA's actual handling product, with a strong commitment to develop self check-in stands, Internet check-in and general service improvements for loyalty programme passengers.
Meanwhile, back on the ramp, CSA unveiled a spanking new air cargo terminal on 15 January. The new facility, which has a capacity of 60,000 tonnes per year, represents a fundamental change in how CSA conducts its cargo handling operations and is a far cry from the carrier's decrepit old terminal.
CSA's new cargo terminal boasts impressive electronic transfer vehicle technology, essentially an automatic shelf-stowing system for handling and stowing loose cargo & ramp parking for one freighter, a designated terminal leased to DHL, plus dedicated space for Czech Post.
Market competition
Improvements to CSA's handling service and infrastructure are just as well given that the carrier faces stiff competition for third-party handling contracts at Prague. In addition to contending with an arm of UK multinational Menzies, CSA also faces competition from the airport authority following the launch of a handling operation in 2000.
"In my opinion, having three service providers at Prague is more than enough," believes Pos, citing falling handling rates, appreciation of the Czech currency and greater pressure on quality and standards issues as daily challenges for all three handlers.
The good news for CSA is that it continues to hear the right noises from its own passengers and customer airlines. "I am pleased with how our staff continually meet the expectations and the fact that CSA handling continues to be the quality trademark [at Prague]," says Pos.
Air cargo volumes are expected to grow rapidly with the Czech Republic's entry into the EU.
Not surprisingly, he is cheerfully optimistic for the future of CSA and its main hub. Confident that EU accession will attract even more European carriers to Prague, particularly low-cost and charter operations, Pos also points to the growth of CSA and its SkyTeam partners as a clear indication of Prague's developing status as a major gateway to Central and Eastern Europe.
"I also believe that Korean Airlines' launch of direct flights from Seoul will attract other Asian carriers to utilise Prague's unique geographical location as a gateway," he adds.
If the current rate of growth can be maintained, Prague Ruzyne may not have to wait until 2008 to reach the milestone of 10 million passengers per year.
