Croatia Airlines awaits new owner

Politics delays Croatia Airlines' privatisation

November marks a year since the Croatian government formally relaunched its national carriers privatisation process, following a failed attempt in 2013. However, Croatia Airlines' future ownership structure will be determined by a new government, with parties locked in coalition talks following close elections earlier this month. Who comes to power could ultimately determine who manages the company and the way it is privatised. The current management, headed by Krešimir Kučko, is in favour of the airline being recapitalised, rather than taken over by another carrier. Recapitalisation would entail changes to the airline’s capital. This may occur, for instance, when a creditor exchanges a loan for a stake in the company. Mr Kučko believes a thirty million euro investment would be appropriate for the airline. “The arrival of a strategic partner won’t generate much money for the state but will allow Croatia Airlines to develop at a quicker pace”, Mr Kučko noted, adding the carrier should avoid similar arrangements made during the privatisation of ČSA Czech Airlines and Jat Airways. However, the CEO believes the airline can survive if it stays in state hands, but warned the company would develop at a slower pace.

In late May, the Croatian government formally selected the International Finance Corporation (IFC), the World Bank’s investment arm, to seek out potential investors by this October. At this point, it is unknown whether the IFC has come up with prospective buyers. The government itself has pitched the Croatian carrier to several airlines so far, but little interest has been shown. According to the head of Croatia Airlines, a strategic partner does not necessarily have to be another carrier, but rather an investment fund which would inject fresh capital into the company. In March, Assistant Transport Minister, Dan Simonić, said the government is prepared to sell a majority stake in the airline, retaining only a 25% share. He added at the time that local pension funds were interested in acquiring a 5% - 10% stake if the government were to find a serious strategic partner that would treat the investment as a long-term commitment.

Croatia Airlines is in the final months of a four year restructuring program, which has seen the carrier return to profitability but also limit its opportunities for growth. The airline plans to expand its operations early next year with the lease of Embraer jets and the development of its east European network. “For quicker growth and a return to the position we once held, but lost due to restructuring imposed by the EU, fresh capital is certainly welcome and it should come through recapitalisation. If we are to go at it alone, we will develop as well, but it will be at a somewhat slower pace", Mr Kučko said. The government has noted that a future strategic partner will be required to expand Croatia Airlines' route network and market share, modernise its fleet, further develop its profitable maintenance division and support the development of Zagreb Airport into a regional hub.