In this week's Business News: Czech Airlines to shakeup its flights for the winter season; Komerční Banka reports an increase in profits; household earnings fall for first time since 1993; the country's anti monopoly authority upholds a fine against a local water company; the Czech National Bank revises its economic forecast and the ČNB also keeps interest rates at 0.5%
Czech Airlines to shakeup flights in winter season
Photo: ČSA
Czech Airlines (ČSA) is to reduce its numbers of flights and the number of destinations it travels to during the upcoming winter season, the company has announced. Last year ČSA travelled to 54 cities in 34 countries; this year, the number will be 41 cities in 30 countries, according to the newspaper Právo. The move is designed to better respond to demand – Athens and Beirut, as but two examples are out; while popular destinations, particularly for business travellers, to nearby European cities, such as Budapest and Brussels, will be increased in numbers. Flights to Britain were already suspended in 2010. Meanwhile, the company is also set to add the twin-engine short-haul propeller plane the ATR 72 to its fleet from September. ČSA has been plagued with financial difficulties in recent years – in 2010, a 2.5 billion debt to the government was renegotiated on highly favourable terms; the Belgian-born businessman Philippe Moreels has served as chairman and president since late 2011.
Komerční Banka reports increase in profits
Komerční Banka, majority owned by the French bank Société Générale, posted half year profits of 7.6 billion crowns in 2012, a 38.8% increase against the previous year. The increase is reportedly partially down to the devaluation of Greek government debt bonds. The company also saw the volume of loans provided to clients rise by 8% to 456.2 billion crowns, while deposits climbed 6.5% year on year to 582.4 billion crowns. As of the end of July, the KB Group had 2.5 million customers, with 1.3 million Czechs banking at this company. The numbers for the bank mirror the resilience of the famously prudent Czech banking industry. Parent company Société Générale, conversely, saw a roughly two-fifths fall in profits down to €433 billion. Rival bank Česká Spořitelna, meanwhile, saw first half profits of 8.22 billion crowns.
Household earnings fall for first time since 1993
Photo: Barbora Kmentová
New figures from the Czech Labour Ministry have revealed that last year, household earnings fell for the very first time since the founding of the country in January 1993. Average wages in 2011 were 12,902 crowns – or about €510. The figure represented a fall of 146 crowns against the previous year. The numbers underscore the impact of the 2008 global financial crisis, which led to Czech wage increases decelerating, stagnating and finally reversing. One factor for the 2011 figures according to the Labour Ministry, are freezes and reductions in wages in the public sector as part of austerity measures. Meanwhile, inflation and increases in the costs of food, transport and rent have all affected purchasing power, the ministry added. In 1993, the average wage for a household member was 3,571 crowns, climbing to 7,234 by the year 2000. Meanwhile, the average price of goods and services has risen fivefold since 1989.
Anti monopoly authority upholds fine against water company
The Czech Republic’s anti-monopoly authorities have succeeded in an appeal case in which they levied a record 9 million crown fine against the Pardubice based Vodovody a kanalizace (VaK), a company dealing with water management and waste water issues. The fine, issued last December, came after irregularities were found in a 300 million crown tender for the modernisation of a biological water treatment facility in Semtín, just outside the city of Pardubice. The company was accused of not revealing just how it managed to present what the authorities described were extremely low costs in the bidding process. Anti-monopoly authorities argued that the tender was deficient in terms of transparency and openness. Vodovody a kanalizace have already signed a contract with the company they selected in the tender process and said that they were shocked at the fine and denied any wrongdoing. In light of the authorities upholding the fine, the company says it may now turn to the courts.
Czech National Bank revises economic forecast
Photo: Štěpánka Budková
The Czech National Bank has revised its forecast for the Czech economy. On Thursday, deputy governor Vladimír Tomšík announced that former predictions of stagnation this year and growth of 1.9% next year had been supplanted by an expectation that the economy will shrink by 0.9% this year and grow by a mere 0.8% in 2013. The Czech economy has been hit by falling demand at home as fell as falling demand in Europe, strongly hitting the country’s crucial export market. According to the ČNB, meaningful growth will not arise until 2014, when it forecasts a 2.5% expansion.
ČNB also keeps interest rates at 0.5%
Czech National Bank, photo: Štěpánka Budková
And staying with the Czech National Bank, the institution has also announced that it will maintain record low interest rates at 0.5%. The move comes amidst concerns of a stagnation, and concerns also abound over Europe’s ability to decisively address the debt crises affecting the eurozone. On the plus side, the ČNB’s decision not to further reduce rates – which were last cut from 0.75% to 0.5% at the end of June - is viewed by analysts as a sign that the Czech economy is not in such a troubled spot that a rate reduction is viewed as necessary. European Central Bank interest rates, meanwhile, are being held at 0.75%.
