The Lufthansa effect

Is Lufthansa holding Croatia Airlines back?

Croatia Airlines holds the title of being the busiest airline in the former Yugoslavia, pushing towards the two million passenger mark this year. However, the Croatian carrier has entered the more competitive single European market unprepared, in the middle of a restructuring program which has enraged employees. While the restructuring program, which should be carried out by 2015, plans to see the airline return to profitability, it will also see a much smaller Croatia Airlines with fewer aircraft, employees and destinations. Many have accused Croatia Airlines’ dependence on Lufthansa and the Star Alliance team for its inability to use the potential of its vast market and passenger base.

Relations between Croatia Airlines and Lufthansa developed in the early years, with the German national carrier leasing out Croatia Airlines its first jet engine aircraft in the early 1990s. Subsequently, Lufthansa sponsored Croatia Airlines’ entry into Star Alliance while the Croatian carriers’ numerous flights to Germany are some of the rare ones operating with a profit. Frankfurt itself was the airline’s first international destination. Last year the Union of Croatia Airlines pilots said the airline was being mismanaged and controlled by Lufthansa. “All of our services are adjusted to Lufthansa as can be seen with flights to Munich, Frankfurt, Vienna and Zurich. Croatia Airlines serves as a classic feeder airline which, through the abovementioned cities, fills Lufthansa’s flights. Croatia Airlines has only eight codeshare agreements, all of which are with Star Alliance members, with four of the airlines owned by Lufthansa and another two are heading in that direction”, the letter from last year reads.

In 2010 it was revealed that the then Croatia Airlines CEO, Ivan Mišetić, was also sitting on the Supervisory Board of Lufthansa CityLine and Eurowings (a 100% Lufthansa subsidiary), in what is a direct conflict of interest as Mr. Mišetić was advising rival airlines while managing a national carrier at the same time. More recently it was revealed Croatia Airlines is considering leasing Embraer aircraft owned by Lufthansa to replace part of its Airbus fleet. Its fleet of six Bambarider Dash 8 aircraft are on financial lease from GOAL Aircraft Leasing, a company owned by Lufthansa.

Many believe that as a result of Lufthansa’s hold on the carrier, Croatia Airlines has never attempted to expand eastwards, particularly to Russia or tried launching longer flights to the Middle East (with exception to Tel Aviv). On Thursday, the Croatian government approved the conversion of 80 million euros worth of Croatia Airlines debt into capital, a move the Minister for Sea, Transport and Infrastructure, Siniša Hajdaš Dončić, described as “vital for the airline’s survival”.