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ŽSR still foundering despite turning profit

Despite the fact that management at Slovak Rail (Železnice Slovenskej Republiky - ŽSR) has managed to stave off an employee strike and generate an $18.9 million profit for the first quarter of this year, the national rail company is still in deep trouble.
The firm said April 26 that losses last year were lower than had been forecast, but still stood at 5.2 billion crowns.
The huge loss for the firm comes as company chiefs have been discussing how to implement a programme of transformation and restructuring which, according to ŽSR officials, will also attract more foreign investors which are eager to invest into ŽSR.


Troubled railway firm ŽSR is having to cope with big losses and unions demanding higher wages as it looks to its transformation.
photo: TASR

Despite the fact that management at Slovak Rail (Železnice Slovenskej Republiky - ŽSR) has managed to stave off an employee strike and generate an $18.9 million profit for the first quarter of this year, the national rail company is still in deep trouble.

The firm said April 26 that losses last year were lower than had been forecast, but still stood at 5.2 billion crowns.

The huge loss for the firm comes as company chiefs have been discussing how to implement a programme of transformation and restructuring which, according to ŽSR officials, will also attract more foreign investors which are eager to invest into ŽSR.

Under the scheme, ŽSR would be split into two companies; ŽSR a.s., which will be the main operator of cargo and passenger transport, and Železničná Spoločnosť, which will provide railtrack services such as an Information Centre, Railway Healthcare, Research and Development Centre and others. Both companies will be 100% state-owned.

Appointed by the government, the Ministry of Transport, Postal Services and Telecommunications has been charged with drawing up plans to solve ŽSR's dramatic financial problems and further its development. The split of ŽSR is central to the ministry's plans to solve the company's financial woes.

ŽSR spokesperson Miloš Čikovský explained: "It [the transformation] is based on similar projects which have been put into practice in other European countries. The main idea of this project is to divide a big company into smaller parts which then operate them more effectively," Čikovský said.

Company officials hope the project will be passed by parliament during the first half of 2000, and expect the preparatory stages of the transformation process to be on track in the last quarter of this year, with the restructuring itself to begin on January 1, 2001.

According to Dušan Pajdhauser, head of the railway section at the Transport Ministry, clearer financial inflows and outflows in ŽSR are essential for its succesful development. "The key for ŽSR's transformation is to define these financial flows," Pajdhauser said.

Martin Barto, chief analyst at the state-owned bank Slovenská sporiteľňa (SLSP) said that it was important for ŽSR to split the profitable part from the unprofitable. "This, together with the clearing of inflows and outflows, are the most important tasks for ŽSR management to deal with in the near future," Barto said.

The government has been keen to stress the importance of financial inflows into ŽSR because it is obliged to pay the company subsidies to cover losses on passenger transport.

For this reason, the government's final aim is to turn ŽSR into what it hopes will be a more market-oriented company. "In other words, it means that infrastructure and buildings of course will be state-owned, but various companies can buy trains and pay fees for use of the infrastructure," Pajdhauser said. This, he added, should be the long-term future for ŽSR.

Based on the results of an international audit, the government paid 4.96 billion Slovak crowns ($108 million) to ŽSR for passenger transport for the last two years and is expecting to pay a further one billion ($21.9 million) for this year.

In March the government provided state guarantees for a 45 million euro loan given to ŽSR by Depfa Investment and Citibank Slovakia to roll over old debts.

However, the economic situation in the railways is not the only issue company management is having to deal with.

Trade unions are demanding increased wages for railway workers, and in March threatened to strike for a 10% wage hike. While they then did not gain the 50% support among workers needed by law for the action to go ahead, unions are again calling for discussion on both the wage increases and the future form of the company.

"We don't know who will be in charge of Železničná Spoločnosť. Unions need some guarantees about the future of that company because 18,000 people will work for it," said Vladimír Pikna, vice-chairman of the last union strike commitee and one of the ŽSR union leaders.

The unions are also asking for specification of the economic benefits to be gained from the company's transformation.

ŽSR management promised unions that it would incorporate union objections into the transformation project and review the updated version at the next meeting of its board of directors, set for later this month.

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