The Croatian government has reversed a 2016 order to remove the national carrier from a list of strategically important companies, which paved the way for its privatisation. Instead, Croatia Airlines has again been listed as being of state value and not for sale, thus putting a potential privatisation on the back burner for the time being. The Minister for State Property, Goran Marić, noted that the carrier is of vital importance to the country's infrastructure network and that "the Republic of Croatia must continue to be its owner". Croatia Airlines was put up for sale in 2014, however, no interest was expressed during an international tender. Last year, the carrier's CEO noted that an investor would be required in order for the company to grow faster. By mid-2017, a proposal was drafted for the privatisation process and several airlines across the world had been contacted.
Since completing its restructuring process in 2015, Croatia Airlines has seen its passenger numbers and profit margins grow. It has also expanded its destination network, with more routes to be added in 2018 for a third consecutive year. On January 1, the airline completed the two-year monitoring of the implemented restructuring plan and the company is soon expected to announce to have handled over two million passengers last year, as well as post positive financial results. Croatia's Centre for Enterprise Restructuring and Privatisation (CERP) recently conducted an open call in order to select the carrier's new CEO, the second such attempt in the past six months. The previous effort was declared void after the Croatian government named Jasmin Bajić as the carrier's new head in November 2017. The terms of the second open call were slightly modified compared to the one before as interested applicants were no longer required to have a background in the aviation industry. The new CEO will be selected for a five-year term with a decision expected in May.
The former Minister for Sea, Transport and Infrastructure in the Croatian government, Siniša Hajdaš Dončić, previously said that a total of six companies had expressed interest in buying a stake in the national carrier and has urged the country's current Prime Minister to resume Croatia Airlines' privatisation process. "A total of six parties had expressed interest. Among them was Lufthansa, as well as a company from Cyprus and Greece each. We also held talks with an Indonesian (Garuda) and Chinese (Hainan) airline and there was initial interest from both. It was up to Croatia Airlines to decide which path they would take. Usually, the sale of a company and the search for a strategic partner lasts four to five years. This is not a priority for the government", Mr Hajdaš Dončić said.
It's an interesting decision since Croatia Airlines is now in a much better position than a couple of years ago and with a little effort I think they could find a strategic partner.
ReplyDeleteNetwork and fleet wise they are doing well. But financially the profit has been generated through asset sales. Anyone who wants to buy Croatia Airlines will look at their books are realize that immediately.
DeleteOU has a lot of potential. A right investor with a vision could do wonders for the company.
DeleteThe Croatian government should organize an international tender again and see who is interested in Croatia Airlines.
Deletewasn't 2016 profit achieved without assets sale? (heathrow sale was accounted for in 2017)
DeleteI think it is much smarter to go into direct talks with companies. Especially in Asia where many don't take part in tenders but try to make a deal through direct talks.
Delete@ Petar Čelik some assets were sold, including engines.
Deletenot it was without any asset sales. engine sale was 2014/2015, plešo in dec 2015.
DeleteThis is from their annual report
"While in 2014 an Airbus 320 CTJ and three CFM56-5B engines were sold, in 2015 only an CFM56-5B engine was sold, for the purpose of reaching the
required own contribution amount. "
"...in December 2015 its business premises at Zagreb Bus Terminal and its share in the associated company Pleso prijevoz were sold"
my feel is that croatia is the only company who can break even thanks to the coastal tourism.
Deletehowever, i don't think its financial can support this a320neo orders they placed
our ex-yu companie can only sustain 10-20 year old aircrafts that are up for lease
Completely agree with Petar. I think OU has the best chance of being a profitable airline but I do not understand how they will support the NEO payment. Sure, they will get loans but they have to repay them. And as far as I am aware payments for these planes have already begun.
DeleteAdvanced payments for neos are required now but this is a small portion. The majority will be payed after the aircraft's delivery and that won't be until 2022.
DeleteIf you look at their financial reports, they didn't make profit from core business, which is passenger and cargo transport for years. It's mostly so called other profits that are simulating earnings.
Deletelet's call 2016 "a clean year", since they didn't sell nothing substantial in that period
Deleteoperating revenue: 1.561 mil HRK
total revenue: 1.610 mil HRK
--------------------------------
meaning additional revenue is ~50 mil HRK
their EBITDA is 100 mil HRK
so even with out this additional income they are still having cash generating business
and some part of that additional revenue is most likely happening each year (leasing business space to others etc...), so they should be okay
Keeping it as a state-owned company is a big mistake, as if someone is trying to ruin it (Lufthansa).
DeleteSpeaking of profits, is there an estimate how big the profit will be for 2017?
DeleteCurrently OU is repaying around 80-90 million kuna per year for old planes and loans it took.
DeleteRunning costs are around 1.1 billion kuna, pays are 220 million kuna with
72 million - cost of amortization - cost of maintaining planes not likely to be included in this figure
85 million for old loans,
120 million for new a320 neos.
Total cost 1.592 billion kuna,
Total revenue 1.61 billion kuna.
And this is after selling slots and what not.
This is shambolic way to run the business.
Yes, in 2018, the total loan repayments will be halved, down to 40 million, but even if these go down, OU will need to increase revenue to cover any increases in other costs.
OU already paid deposit of €20 million for 4 A320 Neo, and by the time 4 aircraft arrive in 2021/2, OU would have paid additional 1.1 billion kuna, for total of 1.23 billion kuna.
The final payment in 2023, of 120 million kuna for A320 NEO should reduce costs of beyond that by 120 million kuna. No idea if there are future plans to purchase more aircraft, but OU simply can't afford to buy brand new aircraft, it is no longer supported by Croatian state and must rely on market forces.
Clearly airline is run by morons or incompetent people, for airline managed to reduce it revenue from 2012 to 2017.
In 2012 airline had 1.76 billion kuna revenue.
I just don't understand how they got themselves into a position of paying for aircraft that they don't physically have and thus can't usilise so the payments they make here is basically dead money. This should never have been aloud to happen.
Deletethat's normal when getting a new plane.
Deletefor example JU has pre-delivery payment of 20+ mil€ from their order made back in the day
This is different because this order has been deferred a number of times. These planes were initially supposed to be delivered in 2012. This isn't a deposit they are paying but are paying now for the planes like they have them.
DeleteCould be a smaller amount but they are making payments on the planes.
DeleteLOT Polish Airlines would be interested in buying the majority of shares in Croatia Airlines. LOT Polish Airlines wants to consolidate the aviation market in Central and Eastern Europe. LOT Polish Airlines has already begun to do so by taking over half of the shares of the national airline of Estonia. LOT Polish Airlines also has a plan to take over Adria Airways
Delete@anon 4:12PM
DeleteWas it LOT Polish Airlines you were talking about?
:D
DeleteLufthansa/Eurowings will eventually take over OU.
ReplyDeleteI see Lufthansa Group buying Croatia Airlines and integrating it into Eurowings but retaining its own brand.
DeleteIf OU were to be taken over by LH I think we would see it develop its eastern network, especially the region. To the west I don't think we would see any major development except maybe in Germany.
Deleteright "eventually",
Deleteand they are happy that it is not up for sale right now, as there are much more important things to get right at the moment (Italy, Austria, PMI, DUS)
This decision gives them at least two additional years to set up a local and lean structure (RJK?) and it does not look like that they get ready this year.
If they do not have a local efficient structure on the day that OU is for sale, they will pay real money for it, otherwise they will take selected parts for a symbolic kuna.
If our government expects to get any LH money, they should sell it soon.
I think LH is waiting for OU to fall apart, which won't take long. They don't have to buy it, just wait and, when OU bankrupts, just introduce Eurowings routes to Croatia.
DeleteSmart thinking for once.
ReplyDeleteWhy? Without a partner the company will progress much slower than it should.
DeleteIt's doing fine as is. A potential partner also carries with it a lot of risk.
DeleteI think the government as an owner is not a good thing. OU definitely needs a change, their website is terrible, their magazine as well, and they should definitely modernize their livery and interior.
DeleteWhat's wrong with the website? They just refreshed it last week too.
DeleteLooks anything but modern, unfortunately. There are many great young web designers in Croatia who could refresh the page!
DeleteThe government is cooking up something. Fist they annual tender for new CEO and name Bajic behind who is Misetic. Then the new tender does not require aviation knowledge and now this.
ReplyDelete+1
Deleteelections are on their way ...
DeleteIn the long run I do think OU needs a partner.
ReplyDeleteSeeing as relations between China and Croatia have improved a lot perhaps they can pitch OU to Hainan. It was interested in them after all.
ReplyDeleteHainan has paused foreign acquisitions at the moment.
DeleteWasn't Turkish Airlines and Aegean also interested?
DeleteI do believe the company "from Greece" Doncic is referring to is in fact Aegean.
DeleteAegean + Croatia Airlines - that would have been a strong airline. Their fleets are perfectly uniformed plus they have similar local market trends with both being tourist destinations and competing with a lot of other airlines. Would have been a good match.
DeleteAegean would have been an excellent choice. Pity that nothing came of it.
DeleteBeing purchased by any carrier from the east, be it Greece, Middle East, Asia would have been a win because OU would not feed western European airlines. It would be fed passengers from the east and this would give it a much bigger chance to go long haul to the US.
DeleteAsian carrier would have been best for OU. The government should have done more to secure a sale to them.
DeleteThey missed all the possible chances in the world and the current government has absolutely no strategy in aviation! Bye, bye!
DeleteTaxpayer from Croatia
It is/would be very sad that a National carrier of the country that has almost 15 million international tourist arrivals a year operates with a loss. Enough said.
ReplyDeletes-e-a-s-o-n-a-l-i-t-y
Delete15 m-i-l-l-i-o-n (and a strong growth expected to continue)
Delete99,8% of any increase in croatia tourism comes in summer season
Deletein order to capture more share of that increase croatia would need to lease/buy new metal
what to do with that added capacity during winter season?
Lease out planes you do not need during winter?
DeleteLike there isn't bunch of other airlines that try to do the same and most of them can't lease them out.
Deleteit is one of the hardest question in business.
Deletethere is too much excess capacity in entire northern hemisphere during winter to catch that market
here are some examples of what companies do
http://www.anna.aero/2012/07/04/grounding-planes-in-winter-improves-profitability-the-new-network-planning-reality-explored-among-europes-airlines/
Haha there are thousands of planes on lease in winter no one would lease them
Delete16.7 million foreign visitors to Croatia last year, 18.5 million predicted this year.
DeleteOU need to try to change the NEO order to the CSeries which could be possible with the new partnership between Airbus and Bombardier. A fleet of at least 6 CSerier type planes would be perfect for the winter and summer months along with the Q400's. They could than just park the current airbus fleet during the winter and fly the crap out of them in the summer. Would give them a lot of flexibility in dealing with seasonality.
DeleteBankrupt OU and subsidise charter companies to fly tourist routes in the summer? I know, not a popular opinion.
Delete@Q400January 26, 2018 at 2:04 PM
DeleteWell plan does exist to lease 4 hundred seat jets, ideally CS100, but when this will happen, your guess is good as any. OU needs a fleet of 20 aircraft in summer, 8 in winters. Seasonality is so bad.
Wow, just realized, my comments need to be approved, clearly heated debate on future of OU, lol.
DeleteWhat ideal future is, I mean in say 4-5 years time, for OU to fly to say all summer destinations it flew in 2017, add Dublin, Milan and Budapest, and fly all these, i guess 42 destinations in winter months as well, but at reduced number of frequencies, from 5 down to 3 or 2 per week.
That would keep lets say 12-16 aircraft in the fleet quite busy even in winters. Ideally OU should be flying to 50 destinations to keep fleet constantly in the air.
Nadam se da ce se Adria, Croatia i Montenegro (sta god zdravo pretekne) jednoga dana ujediniti pod okriljem Lufthanse - Eurowings Adria?. Ne volim DLH, ali sto vise razmisljam to je jedino dugorocno resenje. Samo od letnje sezone bi mogli lepe pare da navuku na celoj obali Jadrana, a mnogo je lakse prezimiti kao deo velike grupacije.
ReplyDeleteSo what happened with the money that was given to IFC to find a strategic partner for OU?
ReplyDeleteNothing, they took the money. 'Smart' investment by the government.
DeleteGood luck OU! They are doing well on their own. No need to bring in foreigners.
ReplyDeleteThis kind of thinking got many EX-YU giants to bankruptcy. #NoForeigners
Deleteright, because we are the smartest...
Deleteif "we" can not make it neither profitable nor prosperous for decades, shouldn't we try to get some help before it is to late?
Sure we don't need foreigners.
Deletehttps://direktno.hr/razvoj/sindikat-pilota-plenkovicu-croatia-airlines-propada-zbog-nebrige-vlasti-111289/
Of course they put them back on the list of strategic companies. That means they won't sell them but also the government will collect 60% of the profits. Since OU had a respectable profit in 2017 because of the slot sale, the government found a way to get their hands on OU's money.
ReplyDeleteAnd some people still think it should be state owned.
DeleteEverybody has to pay tax on profit.
DeleteNot 60%. Only "companies of strategic interest" pay that much. Also there is some catch with the managerial structure of these companies when they are put on this list.
DeleteThey put them back on the list because no one is interested into buying OU, especially now after they sold LHR slots, which is what Hajdas Doncic said last year would happen.
DeleteThe real test for Croatia Airlines is 2018 in terms of profitability. There are no more assets other than planes which I doubt they will sell. So it will be interesting to see the real financial performance this year. That said, I don't necessarily think they need to be privatised. They just need a smart management in place.
ReplyDeleteAnd to add, the management should look to winter as a key factor. This is when profits and liquidity go down. Adria has found a solution and entered ACMI market. Maybe Croatia Airlines should focus on that during the winter.
DeleteACMI is not an easy business, especially during European winter.
Delete"There are no more assets other than planes which I doubt they will sell."
DeleteYou are forgetting that they still have another 4 slots at Hethrow which will only gain in value as time passes.
And if they sell those slots they will be out of the UK market for good. I don't think that's an option for them.
Deletewhich planes to sell?
Deletethey own a single a320 and 4 a319 with a combined age of almost 100 years;
Don't they have 2 a320s?
Deletethe second a320 is leased
DeleteIf airports have been listed of strategic importance then it makes sense that the national airline is too.
ReplyDeleteMali Losinj Airport has been taken off the list.
DeleteWhat did happen with Garuda? They went publicly on record to say that they wanted to buy OU. They even outlined some plans for the company... and then nothing.
ReplyDeleteHajdas Doncnic should be asked that since he is full of advice and wisdom. Why didn't he seal the deal if there was so much interest while he was in power?
DeleteGaruda deal needs to be reactivated as they would turn ZAG into their European hub.
DeleteAgree. This is what their CEO said few years ago which I found on this site.
Delete“The Indonesian market is developing rapidly and Indonesians are travelling more and more which is why we are looking to expand our business into Central Europe, in a country which has solid connections to the rest of the European Union. This is why Croatia and Croatia Airlines are a logical choice for us”, Garuda’s President and CEO Emirsyah Satar said.
With the heathrow slot money at least 4 years have been secured. But the government should use that time to find a buyer or someone willing to buy a minority stake.
ReplyDeleteNext 4 years secured with $18 million?
DeleteYes. They do have revenue you know to support their day to day business.
DeleteThe majority of the slot sale cash is being used (will be used) for engine overhaul which is quite expensive.
DeleteI don't understand that it is that hard to get interest for OU. Fleet is relatively modern, new ordered jets coming in the next decade, you have a nice domestic network which is partially supported by the government and a huge market during the summer. The biggest issue to overcome is seasonality. But still, OU isn't a bad investment. I don't understand that they haven't managed to find anyone.
ReplyDeleteIt also depends if there is interest on the market to purchase airlines.
DeleteHave you been around the last couple of months. Airlines are competing to buy Niki, Alitalia, parts of Air Berlin. Seems like there is sufficient interest on the market.
Delete@10:26: in fact the problem was that there was no real interest in any of those companies; lots of companies would buy the metal and the slots, but not the airlines as companies; only LGW was bought as company out of Air Berlin and it was only bought as a company after it was beefed up before with slots and metal; niki is a pure asset deal; and nobody was buying monarch either
DeleteThe OU privatisaion saga continues.
ReplyDeleteThis really is turning into a saga. The government has to cut the cake and decide what to do with OU and not flip flop every other year as the administration changes.
DeleteBetter to flip flop now then realize they made a mistake once a deal is sealed.
DeleteAnd here I was hoping we would finally see Croatia Airlines privatization completed in 2018.
ReplyDeleteIf you read between the lines you would know that Misetic is behind all of this. He is coming back. With help of the same party which set him up for life of course
ReplyDeletehttp://objektivno.hr/croatia-airlines-je-li-ministar-butkovic-ponistavanjem-natjecaja-pomogao-interesnoj-skupini-oko-misetica-i-bajica-92699
The company doing well, it's fully operational and it still belong to the people of Croatia. This is what I call strength.
ReplyDelete+1
DeleteUltimately restructuring was successful.
DeleteWhat are you smoking anon 11.00?
DeleteU kompaniji nema promjena, ona tone, zaostaje za konkurencijom i kopni na sve načine. Odavno je prijeđen rub održivosti, a rukovodeća garnitura se 20 godina ne mijenja. Vlada se mora početi voditi poslovnim, a ne političkim načelima u biranju nove uprave CA', poručuju piloti premijeru.
And that's what the company's pilots said today.
I recommend you read what they wrote.
They must act on doing something with their fleet. It is becoming older and older. The Airbus fleet is now almost 20 yrs. Yes, the neos are coming but that's only 4 of them. A strategic partner would definitely help here. They don't have the funds to finance a fleet modernization on their own.
ReplyDeleteWhat about the Dashes. Has there lease been extended?
DeleteYes.
DeleteIf 6 companies were interested in OU like the ex-minister says, then it was such a missed opportunity not to start talks with at least one.
ReplyDeleteSpeaks more of his incompetence then anything else.
DeleteHajdas is an idiot.
Delete2.07 million pax in 2017. Not bad.
ReplyDeleteI think they could hit 2.4 or even 2.5 million this year with all the new routes and increased demand.
Delete2.25 million i predict this year.
DeleteIf they had 2 milion 5. december, and to end of the decembar they had only 65k pax?
DeleteLogical. Why did they delist Croatia Airlines from the list of companies of strategic importance in the first place. I mean it is one of the most strategically important companies in the country.
ReplyDeleteSo they could sell it.
Deletehttps://www.tportal.hr/vijesti/clanak/piloti-pisali-plenkovicu-stanje-u-croatiji-alarmatno-nece-imati-tko-letjeti-foto-20180126
ReplyDeleteReal state in the company. Smells like a new strike is coming.
DeleteI'm wondering who wrote this letter for them. The language used reminds me of Purger.
DeleteThey are just preparing the basis for more corruption and nepotism.
ReplyDeleteSell it, don't sell it.... don't care! Just for whoever is running it, please please please just show some decent initiative!
ReplyDeleteLOT Polish Airlines would be interested in buying the majority of shares in Croatia Airlines. LOT Polish Airlines wants to consolidate the aviation market in Central and Eastern Europe. LOT Polish Airlines has already begun to do so by taking over half of the shares of the national airline of Estonia. LOT Polish Airlines also has a plan to take over Adria Airways
ReplyDeleteAnd what else LOT Polish Airlines...
DeleteWill OU ever launch LIS,MAD or DUB?
ReplyDeleteThey fly to LIS seasonally.
Delete