A meeting between the leaders of CSA Czech and Malév Hungarian Airlines on issues of closer co-operation has paved the way for the latter to become an associate member of the SkyTeam alliance.

As a full member of the alliance, the Czech airline is acting as sponsor to the Hungarian flag carrier, which sees participation in SkyTeam as central to its long-term survival. Associate membership, yet to be fully developed, has been created to enable smaller airlines to benefit from alliance membership and CSA is acting as a pioneer to test and fine-tune the concept.

While associate participation will be on a more limited level, Malév will, nevertheless, have to work hard to make the grade. "CSA has created a fast-track programme incorporating 123 tasks for Malév to fulfil by the end of October this year," says Jaroslav Stepanek, CSA director of airline development. The SkyTeam governing board will meet in early November to consider Malév's fitness to join.

It is a tough task for struggling Malév, but Stepanek says the carrier's management is fully committed to meeting the deadline. Among the major areas highlighted where changes are needed are reservation systems, emergency management, inflight service quality and information technology. Safety is also a priority and a special team will undertake an operational audit to ensure the high levels of current Skyteam members are met.

Stepanek is aware that some within CSA see the link-up with Malév as added competition and of advantage only to the Hungarian carrier. While he accepts that there are overlaps in the network, he says the benefits outweigh any reservations that may exist. Malév's specialisation in southern Europe would be complementary and CSA would help build Budapest into a small hub.

Technical co-operation is also being considered, and although CSA will issue a tender to Airbus and Boeing for a renewal of its medium-range fleet, this could well be overtaken by a future policy on joint aircraft purchases.

If there are concerns over the partnership with Malév, CSA is facing far greater competitive pressures from low-fare airlines such as easyJet, bmibaby and others, which have been descending on the airline's Prague hub. However, with the Czech Republic's open sky policy, CSA has been exposed to competition for some time, says Jan Vana, executive director strategic planning and development, adding that most routes out of Prague are complementary rather than competitive.

CSA's strategy is to "remain a first class product," says Vana, "but if the market demands, we will use our current charter strategic business to launch a new low-fare brand, clearly separated from CSA." He says this could be achieved through organic growth by first expanding the charter business and regain marketshare it once had, or through acquisition.

Discussions for the takeover of privately owned tour operator Travel Service to act as CSA's low-fare arm have been discontinued, at least for the time-being. According to Vana, the talks reached a deadlock when no consensus could be found on due diligence, which was not acceptable to Travel Service.

The establishment of Travel Service's Smart Wings low-fare airline brand has not helped. Vana says there are other companies in the region CSA could take a closer look at, if it decides to buy into the low-fare market. But until a firm decision is made, CSA plans for 2004 include more capacity on mainline services and charters, adding up to a 23% increase. Vana says that this increase would result in an 11% rise in costs, but that revenues are expected to outstrip these and grow by around 19%.


Source: Airline Business