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Czech Republic Freight Transport Report Q1 2009

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Report Summary

Despite the effects of the international financial crisis, the Czech government would persevere with its plans to privatise national airline CSA and Prague International Airport, Finance Minister Miroslav Kalousek told newspaper Hospodarske Noviny in October. The paper said the authorities were still aiming to raise CZK100bn (US$5.4bn) from the sale of the airport, with potential buyers including private equity group Penta Investments, which already owns land adjacent to the airport that could be used for expansion. Other groups expressing interest have included Aeroports de Paris, GMR Group and Reliance Airport Developers from India. Kalousek said that a first shortlist of potential buyers of the national airline would identify those considered as ‘safe’ to takeover the strategic company. The newspaper suggested the sale of the government’s 91.5% stake in the airline could raise CZK5bn (US$264.8mn), and noted that interested parties included Russia’s Aeroflot and the Slovak-Czech private equity group J&T.

BMI believes the Czech aviation sector will continue to post reasonable growth. In our latest Czech Republic Freight Transport report, BMI concludes that air cargo traffic will grow by 6.4% per annum on average over the next five years. Our optimistic outlook is based on a number of factors. Despite tough external conditions the Czech Republic is set for reasonable economic growth (4.3% per annum on average to 2013, according to our forecasts). European Union (EU) membership has placed the country near the centre of gravity of Eastern European logistics.

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 5.3% in 2009-2013. This incorporates the negative effect of high petrol prices and a small downwards ‘blip’ in the road haulage growth rate in 2007-2008, which occurred as a result of the introduction of the electronic tolling system. Oil shipped by pipeline should grow at around 4.9% a year, ahead of GDP. However, we expect rail freight to lag, as investment in the rail system takes time to have an effect, meaning that the average growth for 2009-2013 will come out at a more modest 3.2% per annum. Freight carried by inland waterways will grow slowly, at 2.1% per annum. Consequently, we now forecast total freight carried across all modes, measured in million tonne kilometres (mntkm), to rise by an annual average of 4.8% per annum in 2009-2013. Under our freight transport rating, the Czech Republic earns a composite score of 60.3 out of a theoretical maximum of 100. This places it at the upper end of its European peer group. The total value of transport and communications GDP will rise to US$35.6bn in nominal terms by 2013, representing 11.6% of the Czech Republic’s GDP. The transport and communications sector employed 375,000 people, or 7.8% of the labour force, in 2007. We see that figure holding broadly steady in the five years to 2013.

Table of Contents

Executive Summary ....................5
Czech Republic Road Haulage Industry SWOT ................................ 6
Czech Republic Political SWOT........................... 6
Czech Republic Economic SWOT ........................ 6
Czech Republic Business Environment SWOT..... 7
Business Environment Ratings ...............................8
Table: Europe Freight Transport Business Environment Ratings..... 8
Czech Republic Freight Industry Ranking ........... 9
Logistics Performance Index (LPI) ...................... 9
Economics – Long-Term Risk ............................ 10
Politics – Long-Term Risk ................................. 10
Freight Transport Growth ................................. 11
Transport Infrastructure Growth ....................... 11
Regulatory Environment ....... 11
Competitive Environment...... 11
Transport Intensity Index...... 11
Political Risk Summary......... 11
Economic Risk Summary....... 12
Business Environment Risk Summary ................ 12
Corruption ............................ 12
Labour Force........................ 13
Industry Trends And Developments .....................14
Road ........ 14
Air............ 14
Sea ........... 15
Pipelines ............................... 15
Industry Forecast Scenario......16
Quarterly Oil Products Price Outlook ............... 16
Table: BMI’s Long-Term Fuel Price Assumptions, 2004-2012....... 18
Table: BMI’s Medium-Term Fuel Price Assumptions, Q108-Q409 .............................. 18
Macroeconomic Environment ............................ 19
Table: Czech Republic – Macroeconomic Activity, 2006-2013....... 21
Transport Outlook ................ 21
Table: Czech Republic – Transport And Communications Sector Indicators, 2005-2012.......................... 23
Table: Czech Republic – Freight Carried, Domestic And International, 2005-2012 .... 24
Trade Environment....................25
Trade Agreements................. 25
Tariffs ................................... 25
Table: Czech Republic – Value Of Imports By Category, 2005-2012 (US$mn) ............ 26
Table: Czech Republic – Value Of Exports By Category, 2005-2012 (US$mn) ............ 27
Table: Czech Republic’s Top Export Destinations, 2002-2006 (US$mn)...................... 28
Table: Czech Republic’s Export Trade, 2003-2006 (% growth y-o-y) .......................... 29
Table: Czech Republic’s Import Trade, 2003-2006 (% growth y-o-y) .......................... 29
Table: Czech Republic’s Top Import Sources, 2002-2006 (US$mn) ............................. 30
Market Overview........................31
Multi-Modal............................... 31
Infrastructure........................ 31
Competitive Landscape: Multi-Modal................ 31
Cechofracht .......................... 33
Road.............. 34
Competitive Landscape: Road ........................... 34
Rail ............... 36
Competitive Landscape: Rail ............................. 36
Ceské Dráhy ......................... 38
Air................. 40
Competitive Landscape: Aviation ...................... 40
Company Profiles ................. 42
CSA Ceské Aerolinie (Czech Airlines) ............... 42
Pipelines ....... 43
Competitive Landscape: Pipelines .................... 43
Country Snapshot: Czech Republic Demographic Data ..................44
Section 1: Population............ 44
Table: Demographic Indicators, 2005-2030...... 44
Table: Rural/Urban Breakdown, 2005-2030 ..... 45
Section 2: Education And Healthcare................ 45
Table: Education, 2002-2005 ............................ 45
Table: Vital Statistics, 2005-2030...................... 45
Section 3: Labour Market And Spending Power ............................. 46
Table: Employment Indicators, 2001-2006........ 46
Table: Consumer Expenditure, 2000-2012 (US$) ........................... 46
Table: Average Annual Wages, 2000-2012........ 47
BMI Forecast Modelling ............48
How We Generate Our Industry Forecasts ........ 48
Transport Industry ................ 48
Sources ......... 49