The Slovenian branch of the multinational PricewaterhouseCoopers (PwC) is being scrutinised by the Slovenian Agency for Public Oversight over its auditing of Adria Airways' 2018 financial results, which are yet to be made public. The financial report was referred to the Agency by the country's air regulator, which also monitors the financial sustainability of airlines registered in Slovenia, under the suspicion that Adria's financial statements do not accurately reflect its financial state. "We've been informed about the audit and we do not see any problems. We're convinced our auditors have conducted a fair and professional audit of our financial statements", the Slovenian carrier said.
According to Slovenian media, one of the main points of concern is Adria Airways' absorption of the STBE company through a merger and acquisition last year. The move increased the airline's share capital and changed its ownership structure. STBE, which is closely linked to Adria's owner 4K Invest, purchased the Slovenian carrier's brand name back in 2016 for just over eight million euros. Overall, it is speculated the carrier will post a loss of between fourteen and fifteen million euros for 2018. The airline, which has been dealing with a range of issues over the past month, said it was intensively seeking a strategic partner and has held talks with concerned employees.
Earlier this year, Adria's CEO, Holger Kowarch, noted that following a four million euro capital injection in late 2018, the airline has financially stabilised. "While there were still some liquidity problems last winter, the prospects for the summer season are good. The plan for this year is to get out of the red. Last year's loss is a result of several factors, among them damages Adria incurred for cancelled flights and delays, increased fuel prices, lack of staff and the delay in introducing Saab 2000 aircraft", the CEO said at the time. The airline's 2018 result will mark the company's second consecutive year in the red, following a loss of 5.4 million euros in 2017.
They just don't seem able to catch a break.
ReplyDeleteYes, like the Adria faboys will tell you it's all the media's fault not Adria's. The cancelled flights, the merged flights, the late flight, the unpaid compensation claims, the nonexistent customer service. It's all the media's fault who have come together to destroy such a world class company lol.
Delete4K enjoyed a honeymoon period of several years. Slovenian media did't even write about Adria at all. So blaming their issues on the media is stupid. The management is squarely to blame.
DeleteAgree with anon 9.44. When you read all the dodgy things 4K has done at Adria, I'm still shocked many leap to their defense.
DeleteThey don't defend 4K. They defend the brand, the pilots, the stewardess, all of the staff. Not those Germans.
Delete"Said it was intensively seeking a strategic partner"
ReplyDeleteThere is a rumous that the new strategic partner will be SAS Scandinavian Airlines.
What would they have to gain from buying a near bankrupt business?
DeleteAnd SAS also has huge losses. Just doesn't make sense.
Delete@9.09 even if they do come I doubt they will buy anything. They will probably be paid to take over Adria. Like 4K was, although their expertise has been in full display.
DeleteI also don't see what SAS would gain from Adria. It can't use it as a feeder, the Slovenian market isn't huge so it's hardly going to give them access to some huge new area of interest, they are struggling themselves with losses and they would have to throw quite a bit of money to keep Adria afloat.
DeleteI guess the rumor is related to the fact that they will have a Scandinavian line maintenance provider.
DeleteNo airline will buy JP.
DeleteI hope 4K sells 100% of Adria to someone not involved in any way with 4K.
DeleteIn my opinion the best solution is still to merge JP and OU.
DeleteMerger with Croatia won't happen.
DeleteHighly doubt these baseless rumours about SAS which I have heard as well. 4K tried to scam Sukhoi to buy a 49% stake and failed and suddenly SAS is interested. Please.
DeleteSAS is very interested. And so are some other airlines, Korean, Qantas, maybe even Delta. Lufthansa is very jealous of the huge Slovene market so they are trying to torpedo Adria
DeleteAs have I predicted: now that the end is in sight all sorts of theories will pop up. And when JP goes bankupt, probably in the following weeks, there will be even more theories about new Slovenian airline, about a secret rich guy who wants to finance a Luftgansa competitor, but from the almighty LJU airport, there was a theory a couple of years ago that Trump will bring his Trump airiplane to LJU, maybe no Melania will want a private airline etc.
DeleteThe financial hole is now the only quesiton. And given the fact that 4K was doing business for much longer than it was expected, the hole must be monstrous. That's probably the reason for all the media coverage. Quite a few heads will role.
Adria and Ljubljana will make it. To the very top, mark my words. Lufthansa will be left in the dust and crying. Heathrow will send their best to learn from Ljubljana. Not even the sky will be the limit
DeleteSo much for these auditing companies being transparent. They play with the books just as the company that pays them asks for it.
ReplyDeleteAuditors have no means to play with their clients' books and there is no way in which they can do that. Only companies play with their books, which is why a third party audit is obligatory. Companies that go bust very often have their books in perfect order, it's about time the conspiracy theorists accept this. Or, if you want to insist on conspiracies, try one in which the government wants to shift the blame and responsibility for the sad fate of JP and so they blame the media, the auditor, the climate change, and so on - while at the same time a shady fund with connections to the very same government finishes off the victim.
Delete@10:05
DeleteThe company that did the third party audit put a stamp on the financial cooking 4K produced. Which is illegal. Excatly the same thing Goldman Sachs did with the 'financial books' of Greece prior to taking euro.
Of course, it would by a major miracle if PWC is sanctioned.
I hope one day it will become clear who in Slovenian politics is behind this give away of Adria to 4K invest.
Delete11:15,
DeleteYou need to understand the difference between audit and forensics. Auditors are not forensics or financial crime investigators. They do a completely different work and are completely dependent on the papers and files the company gives to them. They can of course easily notify an amateur cooking job, however serious and professional cooking requires forensic investigation - which auditors cannot perform. Major issue around their work is what kind of audit report they will issue - will it be 100% 'clean' verdict, or will it be 'dirty' verdict, or will it be 'generally clean' verdict with certain remarks or going concerns. I would be surprised if Adria got a 'clean' report in 2018 - but even that would not automatically imply the auditor's wrongdoing.
13:20
DeleteWell the fact is, that the person who audited JP on behalf of PWC was fired/quit two months after she wrote in her report that the brand sale was shady - even though her verdict in the end was '100 % clean, no findings'.
"The airline's 2018 result will mark the company's second consecutive year in the red, following a loss of 5.4 million euros in 2017"
ReplyDelete4K - the turnaround experts! Don't know who would give them any business to run after their very public mismanagement of Adria.
Don't worry about them. They will rename and rebrand themselves and voila. Just look at the tricks they have been doing to keep Adria alive, with the brand sales, absorbing of companies etc.
DeleteOni su vec obrnuli kompaniju ispraznili fondove i sada cekaju kraj. Nisu oni placeni da osposobe mrtvu kompaniju vec da je rasformiaraju do kraja uz dosta pompe. Darvin i Adria malo li je.
DeleteAnd what happens if they find that PwC played with the books?
ReplyDeleteThey will have to investigate Adria.
DeleteAgain.
DeleteMeanwhile Pristina-Ljubljana and Frankfurt-Tirana cancelled today.
ReplyDeleteBut the situation is much better then it was in the past two weeks.
DeleteBecause they managed to fix the grounded aircraft. So the situation has somewhat improved but they are still cancelling and delaying flights.
DeleteAre they still wet leasing planes?
DeleteYes from Pristina it is still a F100 operating.
DeleteTrade Air or Carpatair?
DeleteTrade Air.
Delete9A-BTE
DeleteThe situation is "much better" my a*s. They have just cancelled more flights dor today.
DeleteLjubljana - Prague
Ljubljana - Skopje
Ljubljana - Munich
Ljubljana - Sarajevo
Tirana - Frankfurt
My main trouble here is that I don't see the end game result here.
ReplyDeleteWhat do those various stakeholders want to achieve? The situations went down the drain so far that it appears virtually impossible to revive Adria to anywhere near "the former glory". So, what do they want?
It is all smoke and mirrors.
Rgds, 8
Some people like a challenge
DeleteWe will see what happens. Collective agreements will be expiring in just over a month.
ReplyDeleteThe management is in a good position because if staff do not agree to new terms and choose to go on strike the company will be gone in a day.
DeleteThe management should demand the flight crews fly for no compensation at all. This is a German company after all, just the gratitude of working for them should be enough
DeleteI thought they already had a strategic partner and it's name was 4K.
ReplyDeleteThey are obviously looking for an exit strategy.
Delete"While there were still some liquidity problems last winter, the prospects for the summer season are good. The plan for this year is to get out of the red."
ReplyDeleteLOL good luck with that.
Typical 4K's empty talk.
DeleteWell to be honest, this was the case when JP was government-owned as well.
DeleteNothing surprises me anymore from JP.
ReplyDeleteThe damage to Adria's reputation inflicted by 4K is long-term. I don't know anyone in their right mind who would have bought a ticket with Adria for the past few weeks. Especially after last year's mess, now they have "prepared" for the summer exactly the same way by doing nothing.
ReplyDeleteApparently they have now hired a professional PR agency to improve their image.
DeleteThey will have a lot of work. Since 2 weeks ago, Adria no longer responds to any queries on social media. In fact they have stopped posting anything completely. Not even a message to apologise to the mess they have made to people's travel plans. On facebook, their last post is from 4th of June - 20 days ago!
DeleteIt makes you wonder what they will do in winter. Summer is when you get all the revenue to cover liquidity issues in winter. I'm certain their revenue and passenger numbers have crashed this summer.
Delete2018 will be their second worst result on record. Worst was 2010 when they had - 63 million.
ReplyDeleteI ask myself what the safety department of JP is doing?
ReplyDeleteWorking under this conditions
and pressure can not be safe.
What's the alternative, bankruptcy?
DeleteI'd put more blame on the CAA. They should have pulled the AOC already, but they never will as this is the Balkans.
Adria seems to be bulletproof to bankruptcy and it will stay with us for a long time.
ReplyDeleteI've been working with many airline CFO's some of them proven industry hot shots. It's probably one of the most demanding businesses and even those heaving clue about it, struggle a lot.
ReplyDeleteFinancial auditing of an airline slightly depends of the country, but EC is clear about it. Slovenia again proved to me incompetent. What does a PWC have to do about it? Is it again foggy spraying? State should ensure competent people being able to monitor continiously the liquidity of an airline. That could fall either at CAA or directorate. An airline should ensure being annual audited by third party BUT - CAA (whatever the state agency) should monitor closely the operator financial worthiness. An operator making turnover like JP should be required to have constantly 2 millions on their account. If not, operating license shall be revoked or highly limited. That how it works.
CAA is staffed by former Adria employees. That's why they look the other way.
DeleteThey would look the other way anyway. Slovenian CAA is full of people who never made it in aviation for obvious reasons and lack practical approach to aviation while on the other hand let some things slide, which ended up getting Slovenia on the bottom of ICAO compliance scale.
DeleteDead man walking.
ReplyDeleteIt all looks very dodgy at Adria.
ReplyDeleteMurkier than the Danube.
DeleteTelenovela.
DeleteAnd what is STBE's primary business? What is it that they do?
ReplyDeleteThey are holding company and a company that manages intellectual property.
DeleteIt is just 4K reshuffling money from one of their entities to the other.
DeleteSTBE is the same as 4K. One of their companies, just not on paper.
DeleteJust another day for aviation in Slovenia
ReplyDeleteUnfortunately this thing with Adria has really become a comedy.
DeleteHow many companies or affiliated companies does 4k have?
ReplyDeleteMeanwhile Nordica which was managed by one of Adria's current managers has announced it is ending its own operations. It will be absorbed by LOT.
ReplyDeleteTo be more correct, only part of operation will be taken over by LOT, part will be just canceled. Airlines are dying everyday across Europe, Adria disappearing will not be a big thing...
Deleteas some of us were issuing warnings, that purchase of AA was money loundering project and a way how to drain the money out of AA, now the truth has come out of the shadow. For instance - AA "sold" its brand to unknown buyer, as it turned out - it was 4K partner, which established his company few days after AA was sold, the only income was the sum, which has been payed by AA for "renting" its brand back. AA never saw 8 mio €. This is typical money-drain operation. Once there is nothing to drain, AA will be shut down and privatisation fanatics just won't shut up.
ReplyDeleteSo what now for JP?
ReplyDeleteBankruptcy
DeleteSurely Ryanair/Laudamotion are waiting in the, ahem, wings, to finally get a foothold in Slovenia when Adria drops off its perch. There is no point these airlines becoming the elusive 'strategic partners' when they can eventually fill the void for far less money.
ReplyDeleteI agree but I think Ryanair/Laudamotion could launch flights to LJU without issue even with Adria around. I don't think Adria would be such a huge competitor.
DeleteHard to compete in a small market where a large part of Adria's passengers are public employees who have no problem spending 500 EUR for a ticket instead of 50, since it doesn't come out of their pocket. And they can even justify it as "supporting local economy".
DeleteThe STBE business was a typical tax evasion scheme.
ReplyDeleteReally unfortunate. I don't know what to think about Adria anymore. Is there a light at the end of the tunnel?
ReplyDeleteThere's always a light before you die.
Deleteto quote Slavoj Žižek: yes there is a light at the end of the tunnel. It's coming from the train that's heading in your way :)
DeleteIs there really hope they will be profitable this year?
ReplyDeleteNo, have you seen what's been happening?
DeleteAnd on top of that oil prices are back up.
DeleteAnd I really hope I'll win the lottery. But the difference is I at least have a theoretical chance.
DeleteI hope things will get better for them in the future.
ReplyDeleteThat's super naive of you.
DeleteAdria's problem is its catchment area. The country is small without any domestic traffic, and LJU is 1 hr driving distance to ZAG, where both no. of flights and passengers are doubled, hence better alternatives offered. TRS and VCE catchment areas are overlapping with LJU too, making life difficult for the base carrier. It would be wise not to try to compete in that squeezed region, but to base aircrafts to other destinations such as Tirana, Skopje, Sarajevo etc. despite the increased cost.
ReplyDeleteSta to pijete kada samo nicu finanijski geniji u avijaciji?
Deletehttp://www.therouteshop.com/wp-content/uploads/2013/09/ljubljana-catchment-large.png
DeleteTRS ima puno manje direktnih linija nego LJU, tako da uz pametan marketing LJU odn. JP mogla bi preuzeti jedan dio iz TRS. Ali eto. To je za njih već viša matematika
DeleteThey do fly charters from TRS... while cancelling their scheduled flights.
DeleteDoubt pwc will face any penalties.
ReplyDeleteOf course not. But Adria might.
DeleteKPMG does the same thing with Air Serbia financial reports. Looks the other way.
ReplyDeleteWhat has Air Serbia got to do with this?
DeleteNothing. Ona im je trn u oku
DeleteAt least Air Serbia is up and flying.
Delete