Czech Airlines is facing a difficult economic outlook, with a loss exceeding CZK 2 billion (about €76 million) expected for 2009. The airline’s poor outlook is attributed to a dramatic drop in the number of passengers and lower price air tickets. As a result, pay and job cuts have been implemented at the company. Moreover, in a dramatic move, the management of the company resigned and have been forced to forego the receipt of bonuses.
The Czech Republic’s national airline company, Czech Airlines (České aerolinie, ČSA), is currently facing an economic crisis, recording a loss of CZK 1.8 billion (about €68.5 million as at 12 January 2010) in the first quarter of 2009 and with losses exceeding CZK 2 billion (€76 million) expected for the entire year. In previous months, the company had been preparing for privatisation; however, this did not occur due to a government decision. The current economic crisis is attributed to a dramatic drop in the number of passengers and lower price air tickets. As a result, the company has considerably reduced its flight schedule and is considering major job cuts – possibly in the region of 3,700 dismissals.
Efforts to resolve crisis
Negotiations to resolve the adverse economic situation at ČSA have been taking place over a number of weeks, leading to a dramatic series of events. Among other outcomes, the Supervisory Board and Board of Directors of ČSA have been replaced. A significant role has been played by the trade unions, with the most influential trade union operating at ČSA, the Czech Airline Pilots’ Association (České sdružení dopravních pilotů, CZALPA), announcing an unlimited strike alert of ČSA pilots on 27 August 2009.
Meanwhile, ČSA’s Board of Directors offered their resignation, on condition that amendments to collective agreements would be signed by the trade unions. The amendments were to include a reduction of 30% in pilots’ salaries, along with a 15% pay cut in other staff salaries and a freeze on employee benefit payments. The average salary at ČSA is CZK 62,000 (€2,361), while the average salary of pilots is CZK 212,000 (€8,073). This compares with an average wage of CZK 22,941 (€874) in the Czech Republic in the first quarter of 2009. However, representatives of eight trade unions within ČSA did not accept the proposed salary reduction.
Personnel and structural changes
In November 2009, all of ČSA’s management resigned from their posts. The post of the ČSA’s Chair of the Board and President was taken over by Miroslav Dvořák, the existing Chair and Chief Executive Officer (CEO) of the joint-stock company Prague Airport (Letiště Praha) – a prosperous company whose privatisation was banned by the Chamber of Deputies of the Czech Parliament. Both companies – ČSA and Prague Airport – have become connected through their personnel. On 18 November 2009, the extraordinary general meeting of ČSA’s shareholders approved a plan for long-term stabilisation of the airlines – which, unlike the previous plans, does not envisage the sale of key assets for the core business of the company. As the new Chair and President of ČSA, Mr Dvořák, outlined: ‘We are arriving at a significantly more comfortable position, when we will not have to get rid of some assets related to our core business, such as handling or aircrafts, under the pressure to obtain cash immediately.’
After the change in the company’s management, the trade unions agreed to the abovementioned requirement to reduce employees’ salaries. By the end of 2010, ČSA is therefore expected to save CZK 1.6 million (€60.9 million). At the same time, structural changes are underway at the airline. As early as October 2009, approximately 400 employees were dismissed. About 30 out of total 530 pilots are leaving or have already left the company, receiving a severance pay equivalent to 12 months’ salary.
Non-payment of management bonuses
With respect to the former members of ČSA’s management, the trade unions supported the plan by the Minister of Finance, Eduard Janota, not to pay bonuses to these members of the company’s statutory body. According to the Chair of the Trade Union of Aviation, Technicians and Engineers (Odborová organizace leteckých techniků a inženýrů), Petr Voldán, to pay such bonuses would be an insult to the employees who have already agreed to a salary reduction on two occasions in 2009 (CZ0905029I).
Furthermore, the current President of ČSA, Mr Dvořák – in response to the concluded agreement with the trade unions on the reduction of employees’ salaries – offered to forego his managerial salary at ČSA until the company regains its operating profits.
Jaroslav Hála, Research Institute for Labour and Social Affairs (RILSA)