BMI's Executive Summary

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The government announced that in June it would sell its full stake in Prague International Airport (Letiste Praha) during the course of 2008. Local media quoted deputy transport minister Jiri Hodac as saying that the sale of the profitable airport operation could generate as much as CZK70bn (US$3.49bn) for the treasury, which could be reinvested in highway construction and maintenance. Separately, Letiste Praha CEO Miroslav Dvorak said the airport was to be transformed into a joint stock company as a necessary step before privatisation. Dvorak said that the number of passengers using the airport had soared as a result of growing tourism and the Czech Republic's economic boom. Letiste Praha reported CZK1.33bn (US$66.4mn) in pre-tax profits in 2006. Revenues were up by 14.3% to over CZK5bn. Meanwhile, ÄŒeské Aerolinie AS, or CSA Czech Airlines, is also in line for potential privatisation. CSA, the smallest member of the SkyTeam alliance led by Air France-KLM, posted a net loss of CZK397mn (US$19.3mn) last year, reduced from a CZK496mn loss in 2005. The Czech government, which controls the state's 91.5% stake in the airline, aims to return the company to profit by 2008, at which point it is likely to privatise it. The airline says it expected to get back into the black ahead of schedule, posting a net profit of CZK42mn in 2007. It has operated in the red since 2005. Even taking into account the squeeze on margins and tougher competition, BMI believes the Czech aviation sector is facing reasonably strong growth. In our latest Czech Republic Freight Transport report, BMI concludes that air cargo traffic will grow by 9.3% per annum on average over the next five years.

Our optimistic outlook is based on a number of factors. The Czech Republic is set for continued strong economic growth (4.8% per annum on average to 2011, according to our forecasts). European Union (EU) membership has placed the country near the centre of gravity of Eastern European logistics. Although we earlier trimmed back our airfreight forecast, in view of CSA's financial difficulties, the outlook remains for strong growth in this sector, based on solid fundamentals such as the low-cost carrier (LCC) boom.

In fact, BMI is bullish on freight across most modes in the Czech Republic. We expect freight carried by road to be one of the most dynamic sectors over the next few years, with annual growth averaging 6.4% in 2007-2011. This incorporates the negative effect of high petrol prices in 2006 and a small downwards ‘blip' in the road haulage growth rate in 2007-2008, when the electronic tolling system is being introduced. Oil shipped by pipeline should grow at around 5.5% a year, ahead of GDP. However, we expect rail freight to lag as investment in the rail system takes time to have an effect; the average growth for 2007-2011 will come out at a more modest 3.0% per annum. Freight carried by inland waterways will grow slowly at 2.1% per annum. The result is that we now forecast total freight carried across all modes, measured in million tonne-km (mntkm), to rise by an annual average of 5.6% per annum in 2007-2011. Under our freight transport business environment ranking the Czech Republic earns a composite score of 46, out of a theoretical maximum of 70. This places it at the upper end of its European peer group (and above the average of just over 41).

The total value of transport and communications GDP will rise to US$25.9bn in nominal terms by 2011, representing 11.5% of the Czech Republic's GDP. The transport and communications sector employed 368,000 people, or 7.8% of the labour force, in 2006. We see that figure falling slightly to 361,000 by 2011, although it will remain unchanged as a proportion of the total labour force.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Czech Republic Road Haulage Industry SWOT

Czech Republic Political SWOT

Czech Republic Economic SWOT

Czech Republic Business Environment SWOT

Chapter 3 - Business Environment Overview

Europe Business Environment Ranking

Business Environment Ranking

Economics – Long-Term Risk

Politics – Long-Term Risk

Freight Transport Growth

Transport Infrastructure Growth

Regulatory Environment

Competitive Environment

Transport Intensity Index

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Red Tape

Labour Force

Chapter 4 - Industry Trends and Developments

Road

Rail

Air

Pipelines

Chapter 5 - Industry Forecast Scenario

Macroeconomic Environment

Table: Growth And Output

Chapter 6 - Country Snapshot: Czech Republic Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Transport Outlook

Table: Transport & Communications Sector Data Forecasts

Freight carried (domestic and international):

Chapter 7 - Trade Environment

Foreign Trade Regime

Overview

Trade Agreements

Tariffs

Table: Czech Republic – Value of Imports By Category (US$mn)

Table: Value of Exports By Category (US$mn)

Table: Top Export Destinations

Table: Export Trade, % y-o-y

Table: Top Import Sources

Table: Import Trade, % y-o-y

Chapter 8 - Market Overview

Multimodal

Infrastructure

Competitive Landscape: Multimodal

Company Profiles

Road

Competitive Landscape: Road

Competitive Landscape: Rail

Company Profiles

Air

Competitive Landscape: Aviation

Company Profiles

Chapter 9 - Appendix: Regional Demographic Data

Wages (ave labour force per annum), US$ PPP

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Europe Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of European Freight Sources

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BMI's European Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: