Croatia Airlines and the Croatian government are still searching for a model within the European Union regulatory framework, which would allow the state to provide aid to the carrier to cover losses incurred thus far during the coronavirus pandemic. Complicating matters is state aid the company received in 2012, as well as the government loan it took out last year. “We are in a complex situation. It is easy for Germany to help its airlines when it can become a shareholder in return. In Croatia, the government can no longer do that”, Slaven Žabo, the carrier’s Chief Commercial Officer, said. He added, “We are still looking for an appropriate model for aid within EU rules”.
By mid-October, Croatia Airlines had paid compensation to passengers for unused tickets amounting to over 600.000 euros. The airline has also spent some 118.700 euros on the disinfection of its aircraft, 158.240 euros for the purchase of personal protective equipment and almost 11.000 euros on pens and entry forms. The company has drafted three different scenarios as to how the ongoing pandemic may affect its business, with estimates ranging between a loss of thirty million to 73 million euros by year’s end. The Croatian Chamber of Economy now estimates Croatia Airlines will register a 52.5 million euro net loss this year, while it predicts losses during the first half of 2021 will amount to 25 million euros.
Croatia Airlines has reiterated its importance for the country’s economy. “We are and remain the wings of Croatia’s tourism and economy, creating a better tomorrow for all of us. By purchasing goods and services from local suppliers, Croatia Airlines, as well as the entire sector, supports an additional 3.000 jobs. Through the salaries of its employees, some or all of which are spent on consumer goods and services, it is estimated the sector supports yet another 3.000 jobs. Foreign tourists arriving in Croatia by air also contribute to the local economy, with their spending, which is estimated to support an additional 19.000 jobs. In total, 35.000 jobs are connected with the air transport sector, as well as tourists coming to Croatia by air, making the role of each participant in the sector even greater. The air transport industry, including airlines such as ours, and the entire supply chain, is estimated to contribute $456 million to Croatia’s GDP”. It added, “The role of Croatia’s flag carrier is indisputable because each of our flights connects Croatian destinations and Croatia with the world, making the inaccessible accessible and sets new standards for all of us. If we take into account the exceptional seasonality in demand for airline services, with competition being fierce in summer, yet almost non-existent in the winter, our role as Croatia’s flag carrier is truly important because Croatia Airlines enables Croatian airports to stay open all year round and provides passengers with excellent connections 365 days per year”.
Bravo Hrvatska!
ReplyDeleteI wonder if we'll see similar comments if Slovenian government really invests 76 million eur into establishing a new national carrier.
DeleteWonder if we will ever get such detailed financial information on the other carriers in the region- especially Air Serbia and Montenegro.
Delete+1
DeleteWhy it is so important to have national airline, especially when we from Croatia know that the CA always suffered from 30% excess staff. First cut the staff, and sell shares to some promising private airline.
DeleteVery bad leadership, very bad decisions...selling the London slots??? Excess of people, too many official cars, not splitting the company to an Airline Ops and Technical Services? Always counting on State so the commercial plans can be a non-controlling crap? Building the house on credits over the credits?
DeleteThis state company was always without any reasonable financial state control and it is not the only one state company which was just let to suck themoney endlessly.
DeleteCan't the government just offer another loan?
ReplyDeleteThe issue is the loan from last year.
DeleteWith what money? Best they can do is guarantees
DeleteThe Croatian goverment can borrow a lot of money from the ECB. Hundreds of billions of new Euros are being pumped into the markets.
DeleteYes but you do realize it will be you and me who will have to pay it back eventually.
DeleteOf course but those are loans with almost zero interest rates. If they are invested in a smart way they will be a huge benefit to the country.
DeleteInvesting smart is the problem, it's not there. Money would be used to keep status quo.
DeleteAnd when would OU pay back such loan? OU's largest net profit in last 15 years was in 2017: 26.4m HRK = 3.5m EUR.
DeleteSo if they get a loan of 100m EUR, it would take almost 30 years for them to pay it off, assuming every single year is as good as 2017 was.
Or do you mean "loan" that is state aid classified as loan and will be written off in 10 years time, as soon as EU forgets about it?
No need to pay it back. With so low interest rates they can just service it in perpetuity.
DeleteWhat would be put as colatteral?
DeleteNo bank would just give out interest-only cash loans.
The ECB is not a bank but a money printing house ...
DeleteIt's interesting how there are certain rules for airlines like Alitalia who can receive unlimited and then other rules for the rest.
ReplyDeleteYep, AF and LH too.
DeleteThere were also the rules for Malev, Cyprus Airways, Estonian etc...As OU can't be compared to AZ it is obvious it belongs to the smaller groups of EU airlines and we all know how they finish...
DeleteWe are in a different era now and OU just like any other state owned airline in the EU IS getting aid and it IS allowed by the EU.
DeleteHope non EU countries don't get too upset about it.
But then again there is nothing they can do.
Why do u think that someone doesn't have same opinions as your, that person is from non eu country. It doesn't say under anonymous- Croatia, Montenegro, Serbia, Spain... i agree with prev anon and i m from eu
DeleteOne way or another it's the taxpayers who will foot the bill, either through direct state aid or government guarantees for a loan.
ReplyDelete+1
DeleteSame story with every ExYu airline.
Croatia Airlines belong to EU and should follow EU rules and some other ex-Yu airlines do not have that benefit, but also do not have that obligation to follow EU rules. So, far from being the same.
DeleteYou can't simply say I will take all the advantages of being EU airline, but when it comes to the strict rules we need to obey we suddenly become Balkan or "ex-Yu airline".
It does not work that way.
@Anon 09:20
DeleteApparently though it does work that way. Almost all state owned EU airlines and quite a few privately owned received state aid.
I hope it isn't very upsetting that they also are getting the benefits of EU membership. ;)
@Anon 09:26
DeleteApparently not despite your hopes.
EU airlines receive either help from Governments getting in return shareholders positions or get a loan that needs to be paid back with interest in clearly provided period of time.
We all know that companies like FR, U2 or W6 have financial strength to pay that money back, but Croatia Airlines? Right.
And all of it after receiving huge cash injection in 2012 and receiving before pandemic loan of 33 mil EUR at the end of last year and beginning of this one.
Take off your pink glasses and get serious. Nobody in EU will cry after OU.
The only ones crying are those that see OU getting money from the state AND enjoying all the benefits of being in the EU.
DeleteYour concerns are taken very seriously though, be sure! :)
Getting money is easy, paying back ooppss.
DeleteI am sure it will be the fault of EC once OU can't pay back its debt.
After all, isn't it logical? :-))
OU hasn't paid back to the state any of the money it has received so far and yet it is fully allowed to fly!
DeleteNot only that but is about to get a whole lot more money. And EU is perfectly OK with that. Sorry, not sorry for hurt feelings! :)
Being an EU member is great! ;)
"EU is perfectly OK with that"
DeleteLOOL
Ask Malev and Cyprus Airways if they are also OK as they had to pay back the money they got only because they were "enjoying EU membership"...
:-)))
Malév was lost but look what BUD got in return following EU membership. Open EU-US skies and hundreds of new routes not reachable even in Malév's wettest dreams. The same goes for Cyprus Airways. Was just another useless airline.
DeleteWe are in 2020 now and EU is very happy that member states are helping their companies!
DeleteIn fact they are giving billions of Euros of aid to EU countries in order to do just that.
That is why OH continues and will continue to fly.
But I agree with you that they should have taken into account the hurt feelings of concerned neighbours who seem super unhappy about OU receiving state aid!
How dare they? :D
*OU
DeleteOH OH OU!!!
Delete:-)))
Don't get me wrong...I got no beef with OU...but to me its a little bit over the top when you mention pens and forms as expenses that everyone needs to know publicly. I get it, they are legitimate expenses...but seriously..keep it to your self.
ReplyDeleteMy thoughts too :D
DeleteWell this is called transparency. If you do not report all, where would you draw the line on what to report??
DeleteThese are quite high amounts for such a small carrier
ReplyDelete"and almost 11.000 euros on pens and entry forms"
ReplyDeletethey really want every cent
They certainly like state aid, don't they?
ReplyDeleteEVERY state owned company loves it!
DeleteMore than anything else
DeleteTheir management and their employees can't get enough of them and always complain that they need a lot more of other people's money.
DeleteAt least it seems that in all three ex-Yu countries with national carriers there is a consensus that the national airlines must survive.
ReplyDeleteIt's unfortunate OU didn't get privatized on time.
ReplyDeleteI think if there was another 6 months before corona started, they would have been sold and would basically be someone elses problem.
DeleteEven if they were sold just before corona, the government would have ended up giving some sort of a loan.
DeleteThey had so many chances to be sold and nobody wanted them.
DeleteIt doesn't matter it didn't get privatized. What's important that each time there were "privatization advisers" with big fees.
DeleteSuch a shame Aegean didn't buy them. Would have been fantastic.
DeleteNot so much for A3 who would now have to cover OU's loses as well. :D
DeleteThey played with fire and got lucky.
Delete"Through the salaries of its employees, some or all of which are spent on consumer goods and services, it is estimated the sector supports yet another 3.000 jobs"
ReplyDelete-they get those salaries from the state budget anyway (since they make ZERO profit), so it is iz šupljega u prazno kind of a situation.
"Foreign tourists arriving in Croatia by air also contribute to the local economy, with their spending, which is estimated to support an additional 19.000 jobs"
- foreign carriers carry the vast bulk of passengers.
Naive fallacy, that is what this is.
You really do not understand finances at all....
DeleteGood luck. Hopefully they find some sort of solution.
ReplyDeleteAt least they will cancel the A320neos. That would be a huge financial burden.
ReplyDeleteYes, it would have been unfeasible. It's only a shame they spent 8 million on it.
DeleteTrue dat but with airplane values having crashed they would be better off leasing aircraft. Even NEO's are currently cheap let alone CEOs.
DeleteThere is a small airline in Greece called SKY express who is flying old ATRs between the islands and they are now getting brand new A320NEOS from Airbus.
There are opportunities now that will greatly help smart airlines grow when the Covid situation gets fixed.
Why not? If the Italians and Germans can do so without any repercussions from the EU, then Croatia should do the same
ReplyDeleteThe same rules don't apply for all countries. You should be aware of that by now.
DeleteThe air transport industry, including airlines such as ours, and the entire supply chain, is estimated to contribute $456 million to Croatia’s GDP”.
ReplyDeleteFinally a figure of the contribution of the aviation industry to a national economy, something proponents of JU constantly use in their arguments to defend it.
Now, it would be interesting to know how much exactly OU contributes to this and we could get a clearer picture if these carriers make sense or nonsense.
But still, airlines should be made to make their own money and expand by their receources. Not as JU with goverments money.
DeleteWho made that estimation about OU contributing $456 million to Croatia’s GDP? Some independent organization? If so, publish the source.
DeleteThat number is so high it looks like Croatia Airlines just invented that number or paid someone to come up with astronomical number like that.
Croatia Airlines stated it. Read the article.
DeleteLast anon and anon before him/her, you both need to read the article: article says the WHOLE aviation sector contributes $456 million to Croatia's GDP, it does not says that only OU does.
DeleteNo one is disputing air traffic is very important contributor to tourism in Croatia. It's just that OU's piece doesn't seem very big. In other words, foreign airlines are more important contributors to Croatian tourism and OU is not that critical. Tourism will go on without them.
DeleteI would give them the money but something DRASTIC needs to change at this company. The last time they were given huge amounts of money they had to restructure and in my opinion it was a complete failure because the restructuring didn't lead to a healthier business. It led to the airline asking for more money last year.
ReplyDelete+1
DeleteTrue but unrealistic.
DeleteA whole paragraph to excuse the importance of having a flag carrier! Give me a break!! I fed up of those excuses just to receive money for nothing. Every year it's gonna be loses, loses, loses! We all know that. There is no reason to hide behind our finger.
ReplyDeleteAnd what will happen next year if they produce loss again. How will they cover it?
ReplyDeleteLet us all first survive this year.
DeleteFrom Government help.
DeleteThe current corona situation in Croatia won't help OU at all.
ReplyDeleteThe situation is bad everywhere in Europe.
DeleteJust give them this aid like every other airline and after that make them independent.
ReplyDeleteIf Lufthansa, Air France and Wizz Air can get state aid, so should OU. If not then Croatia should leave the EU as there is no benefit being member of the EU if it's so corrupt
ReplyDeleteCroatia will be getting 22 billion from EU. So I don't think they are in any hurry to leave.
DeleteExactly, those who want HA to exit EU are those most upset that the country will receive this massive aid package.
DeleteCOVID stat aid is not a problem. It' clearly indicated in the text "Complicating matters is state aid the company received in 2012, as well as the government loan it took out last year". LH, AF, Wizz are in totally different situation as the text above clearly stated. On the other hand in Italy much more innovative approach has been needed: Alitalia will be liquidated and new Italian airline ITA was established, that will use the flight operations of the failed national carrier.
DeleteIt will get much worse before it gets better. Swiss media is reporting that LX has money until the end of the year and it's unlikely the government will give them more. LH Group is collapsing all around. OU needs to start distancing itself from them.
ReplyDeleteOS and SN are in even worse shape.
DeleteWinter is indeed coming!
Everyone is in the same boat.
ReplyDeleteKroacija Erlajns je, da se potsetimo, zapravo i starija od sadašnje države Hrvatske te kao takva neformalno uživa status spomenika državnosti i nezavisnosti od neprocenjivog značaja. Za tako nešto se novac ne žali.
ReplyDeleteProblem Balkana i jeste što se novac nikad ne žali za jeftinu nacionalističku patetiku.
DeleteSvaka država kojoj je aviokompanija stub državnosti treba da nestane.
Name of the model is: Taxpayer is f***ed
ReplyDelete+1000
DeleteModel for state aid is called: Taxpayer is f***ed.
ReplyDelete'.... Croatia Airlines has reiterated its importance for the country’s economy' '... - Well, it should be nationalised then and government should run it.
ReplyDeleteIt will be interesting to see if Croatia Airlines pursues expansion in Croatia
ReplyDeleteWith them needing state aid, I just don't see it happening.
DeleteOf course not.
DeleteFor those here advocating for Croatia Airlines' bankruptcy, they should remember that it would be extremely costly. Not only for Croatia's tourism industry but also for the fact that the government would then have to make payments to Zagreb Airport operator as stipulated in the concession agreement.
ReplyDeleteIt will be interesting to see what the conditions for this aid will be. Most countries have made certain requests from their airlines in return for aid.
ReplyDeleteGood. The government being its owner should care much more about what´s theirs.
ReplyDeleteI agree. It's good to see the government finally behind OU. More often than not they seem completely disinterested.
DeleteLet's see what EC will say about it...
DeleteDozens of EU airlines have already received billions of state aid and the EU is perfectly fine with it.
DeleteSorry, not sorry if it is upsetting to some that OU will also receive aid.
Not before pandemic
Deleteall governments across the world are saving their airlines.
ReplyDeleteBest thing is that pilots on Airbus are almost not flying all this year and receiving almost full
ReplyDeletesalary.
Let Government help them to keep all those benefits.
I see quite a number of negative comments about pouring money to OU. Remember how this was done with JP? You were blaming it all the time and now look what happened.
ReplyDeleteAt least OU is the airline that less receives aids compared to others receiving billions since they were created and some not even capable of upgrading their fleet. Lets wish OU prosperity and good luck with their restructuring if needed.
OU revitalization plan should have only 1 point:
ReplyDelete"re-hire kučko"
Joke of the year
Delete“The role of Croatia’s flag carrier is indisputable because each of our flights connects Croatian destinations and Croatia with the world"
ReplyDeleteIt is very much disputable. During the tourist season OU's marketshare among coastal airport has been shrinking for years and OU now has a minority summer role, all while total number of seasonal passengers at coastal airports increased.
That means foreign airlines are more successful at bringing tourists to the coast. Foreign legacy, LCC and charter operators offer far more destinations from the coast than Croatia Airlines. Tourism will continue to grow if OU stops flying and hundreds of millions wasted on OU will be saved.
If OU is not expaning at the coast, it doesnt mean it became usless or worthless for local economy. As DBV and ZAG said, OU is still no. 1 airline there while in SPU is no.2. That isnt isnignificant for local economy. Of course, financial result is not good at all, but when topic is their market share you should know that they did not became usless at the coast or continent.
DeleteWhat, u paid 600.000€ but not to me who booked the flights last year and sent at least 10 emails for refund. Balkan business, f u
ReplyDeleteIf you haven't received any reply from the Croatia Airlines for more then 6 weeks than you should contact Croatian Civil Aviation Agency and submit the complaint form. Once they receive your form they'll deal with OU and you'll get your money back pretty quick afterwards.
Deletehttp://www.ccaa.hr/en/i-want-to-submit-a-complaint-93445
Importance for economy? It is important for pockets of employees doing all kinds of frauds in company and earning for themselves. For example, everyone knows that IT Director is laundering money through different contracts with suppliers and family members. CEO also knows that, or he is really stupid...Or maybe he also has his hands in that bag so he allows employees to do that kind of stuff.
ReplyDeleteMost of us from OU know about that. But nobody is making big deal about what she is doing, it is one of the rare advantages of being director in OU. And she is not the only one...
DeleteThe money that the state gives for OU is negligible compared to the money for HŽ infrastrukturu i HŽ Cargo. Avioni barem lete. https://www.telegram.hr/politika-kriminal/hz-infrastruktura-od-drzave-godisnje-dobije-900-milijuna-kuna-kako-bi-mogla-placati-ljude-da-rucno-dizu-rampe/
ReplyDelete"Foreign tourists arriving in Croatia by air also contribute to the local economy, with their spending, which is estimated to support an additional 19.000 jobs."
ReplyDeleteThis sentence is ambiguous. Does it mean that Croatia Airlines is transporting all foreign tourists to Croatia who arrive by air? Obviously not. Or does it mean that OU is taking credit for all foreign tourists coming by air, and there by "support(ing) an additional 19.000 jobs." I think foreign tourists arriving in Croatia by air will spend the same amount while in Croatia regardless of which airline brings them to Croatia.
Well said.
DeleteGood news for OU is that AF plans 4 weekly flights on HOP! this winter. Reduced competition will help them breate a little bit.
ReplyDeleteAnd how many flights is OU planning?
Delete