Flights to Russia and China are threatened by politics, says the head of Prague Airport, Jiří Pos
The airport used to try to become a European transfer station instead becoming a final destination for tourists from all over the world. Then came a pandemic. What strategy do you want the airport to lead to when the aviation situation calms down?
We are the gateway to the republic. We define the catchment areas that we are able to address, whether for arrivals or departures. In parts of the country, we overlap with Vienna and Munich. I do not see Dresden as a major competitive risk. In particular, the potential to exploit the natural Czech Republic, which stems from the attractiveness of the republic as a tourist destination and the ability to properly present it abroad. We cooperate with the Czech Tourism and Prague City Tourism agencies.
So you tend to resign at the lucrative position of the European crossroads?
Unfortunately, we cannot help ourselves if we do not have a partner who would have sufficient capacity at the airport as a network carrier. For a long time, we will be more of a final destination than a European crossroads. We are in the same situation as Milan’s Malpensa Airport. From there, Alitalia relocated its base to Rome. The number of transferring passengers then dropped to almost zero in Milan.
If not transfers, then what do you give priority to now?
Go back to where we were before the covid. In terms of number of destinations and aircraft capacity. But we see certain problems that may persist longer than the pandemic itself.
For example?
Geopolitical difficulties. This applies, for example, to the connection to China. We can also consider the future development of air capacities on the Czech-Russian route as a certain risk. A long-term problem with the capacity of consular departments and the ability to issue enough visas may begin, given last year’s turmoil in Czech-Russian relations. If there is limited capacity in the number of visas issued, airlines will not run the risk – they will not deploy more capacity that they would not fill. The same story once threatened air connections with China, but then it was solved by cooperating with visa centers in China.
Compared to the previous cabinet, the government of Petr Fiala (ODS) emphasizes more human rights issues in communication with China. Ukraine is once again facing a war. How can these factors affect flights from Prague to both countries?
We all want the situation in Ukraine to be resolved diplomatically. If this did not happen, it would certainly affect air capacity. At the same time, more and more tourists and workers are flying between the two countries. The new routes of SkyUp and Bees Airline clearly show this. Everything depends on the degree of possible escalation of the conflict. You are right that politics plays a more important role in connecting with China than in other regions. Of all the destinations that flew from Prague to China, the biggest business potential is the route to Shanghai. If decisions were made purely on the basis of business and not politics, I would see this connection with China as one of the first that could be renewed within two to three years.
The mass of almost eighteen million passengers handled in 2019 shrunk to 3.7 million passengers last year and 4.4 last year with the advent of the pandemic. But you are expecting the first big jump from this year, a limited double of passengers. What is the optimism about?
From negotiations with the management of companies and from their demand for slots (space for take-off or landing – editor’s note). Since last September, most companies in the European region have been returning to pre-target capacities. So far, everyone believes that the omicron will disappear and from the summer flight schedule – that is, from April – aviation will return to growth. We are optimistic based on the currently reserved slots, aircraft types and their average load. That is why we also plan to hire new employees, especially part-time – a total of 250 full-time employees. We mainly want to strengthen security controls.
Will higher passenger numbers improve economic performance?
Last year, we also achieved a positive EBITDA (operating profit) of slightly over one hundred million crowns. Thus, we achieved a balanced operating economy, but due to traditionally significant depreciation, we ended up in a total loss. Last year’s turnover was about 3.2 billion. This year, in terms of EBITDA, we should approach the result plus one billion. We expect about 4.6 billion revenues. However, we will not achieve a balanced economy this year yet, we plan to lose about three million people this year. But I believe that we will achieve a good economic result next year.
Do you already know how much of the future profits the new government or the state as a shareholder will want to take out dividends?
There is an agreement that the airport should pay one-fifth of its net profit to the state. That doesn’t change.
The profits will go not only to the state, but also to significant investments. Is it taken?
We have set a limit of 1.5 billion for this year’s investment and next year, excluding development projects. These are often repairs and maintenance of the infrastructure in the necessary condition. We can draw on a seven billion credit line, last year we used nine million to refinance almost two billion in debt. In the first half of this year, additional investment funds will be needed – for example, the completion of the third terminal for private flights, which will be important during the Czech Presidency of the Council of the European Union.
While the expansion of the airport’s second terminal has been postponed, preparations for a new runway are still underway. What stage is it in?
It’s such an Indian run. He runs for a while, he stands for a while. We are waiting for the verdict on whether the EIA environmental impact assessment will be extended for another five years. We don’t have it yet, the Ministry of the Environment promised us that by the middle of the year at the latest. The second condition is that the cassation complaint, which concerns the principles of territorial development of the Central Bohemian Region, be successful.
When it comes to the environment, the strength of the impact of European “greening” on airports?
It’s getting stronger. It feels like all aviation. Until they did a lot. But it is necessary to confront it. The airport has been involved in reducing its carbon footprint for eight years now. We are already reducing the footprint of our partners – for example, the fact that Prague will connect the airport with the trolleybus center will help us. We want to be carbon neutral by 2030. We will install photovoltaics on the roof of the third terminal. We will focus on projects similarly due to rising energy prices. We also research various battery storages. I also recommend orienting oneself in the new European subsidy titles. Even so, in 2030 we will have to help ourselves with offset – planting trees or buying allowances.
Will you intensify the purchase of electric cars for your fleet?
The first step is electric cars for the Czech Airlines Handling subsidiary, which handles aircraft that are already cheaper than diesels. We also want to compete with management cars in a smaller tender to test how it all works.
Back to green Europe: will this trend somehow affect the price of tickets?
they will be more expensive. However, the increase in prices is partly hampered by newer and more economical types of aircraft.
How do you view the European debate on the possible reduction of very short years, which have relatively the greatest impact on the environment?
There are territories where the restriction makes sense. In France and Germany, where high-speed lines are being built, flight restrictions make sense. That someone would like to ban shorter flights from Prague to Munich or Frankfurt, but there is no danger. There is no effective alternative in the foreseeable future.
You will be leaving Prague from April as part of the summer flight schedule – what news is worth paying attention to?
Restore two long-distance lines to New York. United will offer Newark, rival Delta will fly to JFK Airport. Negotiations on new routes to Saudi Arabia and Kuwait are well on track. I think we will confirm this in a matter of days to weeks. They would cover the summer season. The iron in the fire is the resumption of the Korean Air route to Seoul, which could return in the autumn – just as Bamboo Airways could launch new direct flights to Vietnam. Of course, we also want the Czech Airlines restructuring plan to be successfully implemented by the creditors’ committee and the carrier to meet the planned capacities for the summer.
You attract carriers to Prague through financial support programs. Will you change them in any way due to the pandemic turbulence in the market?
I will certainly support the existing conservative problems of the structure, which, among other things, proved successful in my previous work at Prague Airport, when there was a period of debt crisis and Czech Airlines first got into big trouble. As then and now, we feel a lot of pressure, especially from the segment, even if only carriers, to be more accommodating in terms of financial support. Whether new lines or additional capacity, we adequately support it. We can also appreciate the total volume of transported passengers. But I definitely want to avoid anyone reaching a high volume of passengers cannibalized by other carriers. That is, for an unnamed carrier – mainly a low-cost carrier – to substantially increase capacity and benefit from crowding out competitors – a typical network carrier.
What are your plans with the subsidiaries Czech Airlines Handling and Czech Airlines Technics?
We need to consider future risks. The time is coming when we will consider a strategic partnership to gain the ultimate stability of both companies.
I.e?
For example, a minority capital connection with an entity that will not cannibalize business, but stabilize. We are not dealing with any yet, we are researching the market.
Were you surprised by the confusion in the US about the launch of 5G networks? The Federal Aviation Administration has warned that the new network could disrupt aircraft altimeters, for example. Some airlines briefly canceled some flights to the US due to uncertainty. Could a similar chaos occur in the Czech Republic?
I don’t know if it was a black swan or a gray rhino, as they say today. The problem in the US is that they have networks in a different frequency band. So much closer to the frequencies of radio altimeters. We actively communicate with the operators and we have created bands in the axis of the tracks. At the same time, to influence the behavior of operators not to place their transmitters there. This is a preparation for the introduction of 5G in the Czech Republic.
Autonomous vehicles that will not need drivers can probably be included in the technologies of the future. A leading Czech expert on autonomous control systems, Professor Jiří Matas from the Czech Technical University, told me last year that the first autonomous cars – in this case buses – could appear at airports. It is said that programming a ride on previously known routes from the plane to the terminal is not as complicated as a ride in normal operation. Do you count on autonomous cars?
We have a very close cooperation with CTU and a signed memorandum. One of the areas deals with the development and testing of these systems. But I’m an older year, and although technology sometimes evolves faster than I’d expect, I don’t think autonomous cars run around the airport in ten years.
Jiri Pos (60)
He has been working in the management of Prague Airport since 2006. He held the position of Chairman of the Board of Directors in 2011 and held it until 2014. He then took over the management of Karlovy Vary Airport. Last year, he won a tender from the Ministry of Finance and returned to the director’s chair of the largest Czech airport in August. He has also been Vice President for Ground Operations at Czech Airlines since 2003. He graduated in aircraft technology at CTU.