The Croatian government has approved a 79.7-million-euro injection into its national carrier in order to mitigate the effects of the coronavirus pandemic. As previously announced, the state recapitalised the airline with 46.5 million euros yesterday but will also provide 33.2 million euros as an equity loan. As a result, Croatia Airlines has issued 35 million new shares which have been acquired by the state in order to “return the carrier’s capital to pre-Covid levels i.e. to the same levels as on December 31, 2019”. The Croatian government already holds a 99% stake in the national airline. These funds are on top of the 11.7 million euros in direct aid provided by the state earlier this month to compensate the airline for its losses between March 19, 2020 and June 30, 2020.
Commenting on its decision to grant the aid, the Croatian government said, “The funds are being directed towards settling low liquidity and capital at Croatia Airlines, which have been caused by the coronavirus pandemic. This measure is aimed at strengthening Croatia Airlines’ capital and mitigating urgent liquidity problems caused by Covid-19. The aid will secure the continuity of the airline’s business during and after the pandemic”. It added, “The government identified Croatia Airlines would be short on funds over the next twelve months in order meet its regular operations and maintain flights. Through the equity loan, the company will be stabilised, which will prevent a negative knock-on effect on the Croatian economy and its people”.
Croatia Airlines registered a net loss of 32.1 million euros during the first nine months of the year, up from its loss of 6.5 million over the same period in 2019. The company has drafted three different scenarios as to how the ongoing pandemic may affect its business, with estimates ranging between an annual loss of thirty million to 73 million euros by year’s end. It previously said, “In order to secure liquidity and sustainability, the company is in urgent need of additional financial resources that would cover the damage caused by Covid-19, in the form of subsidies or donations on behalf of the owner - the Republic of Croatia”.
So the equity loan will have to be paid back?
ReplyDeleteA business equity loan uses the assets you have acquired for your business as collateral for financing. This is a form of secured debt financing designed to help you grow your business, overcome a slow business cycle or meet other financial demands.
DeleteYes it has to be paid back. But the government gave no details on the terms.
DeleteHopefully they use the money wisely.
ReplyDeleteIt says what they are using it for. Daily liquidity. Meaning paying wages and suppliers.
DeleteMeaning that once they burn through it they will have to get another loan with government guarantees. Demand won't recover until at least summer 21. They won't have enough until bookings pick up again especially since the Pfizer China virus vaccine is showing troubling signs and isn't as reliable as initially expected.
DeleteI see now have the "China virus" troll that is very active! As far as I know, the virus in Europe was spread by a European Union member state starting with the letter "A" whose gross disregard for public health safety in one of its "prestigious" (ha) ski resorts.
DeleteIt originated in Wuhan, China hence the name.
DeleteAgain taxpayers money goes to save bad and corrupted management their friends and relatives employed without expert background.
DeleteDid anyone perform a thorough OU analysis and propose reorhanisation? Of course not, as all other promised reorganisations in Croatian society. Shame and sad, very sad.
This is disastrous especially when you think how Romania gave Tarom €60 million and while RO is much bigger, has a wider network than OU does and even faced tremendous amount of competition in its home market.
ReplyDeleteOn the other hand, OU is protected like a polar bear, there is minimal real competition in ZAG and they have been obliterated on the coast.
This is true. The amount is quite high for a small carrier.
DeleteYou contradict yourself. You say that OU is protected in ZAG and at the same time that it was obliterated on the coast. Can't you accept the fact that no lcc wants to fly to ZAG, and all of them have clientele to the coast and fly there as much as they only want? Pax on lcc want to go to the sea, not to ZAG.
DeleteThe amount is not high. It is 34% of their 2019 income. The airlines until now have been receiving by way of aid some 40+% of their income. And more is to come, as there will certainly be another round of state aid for some.
DeleteStop dreaming. This is a capital heavy industry.
Good that Croatia can afford.
Croatia cannot deny to pay, if others pay their airlines, as it would put OU at a disadvantage.
And obviously, no ex-Yu airline is and will be profitable and stop dreaming it can be. It is only a matter of putting a reasonable level to the losses.
+1 last anon
DeleteIn Q1 2020 so just before covid hit, Croatia had 74% debt in relation to its debt, they were 8th in the EU. I don't think it's too smart to take out more loans and to issue guarantees like this because even if OU goes bust it's the taxpayers that will have to pay.
DeleteAnon 09.18
DeleteToday we are not talking about the rest of ex-YU but Croatia alone so please stick to the topic.
@An.09.10
DeleteI worked for Transavia. Network development manager told me personally they had interest to fly to ZAG, had talked to ZAG, and were literally "chased away". Not to mention Easyjet which even started ZAG, and had to quit, despite excellent LF's and growing number of destinations. It is just uhljeb's mantra that no LCC's want to fly to ZAG, it is exactly the opposite - they are either not let in or chased away in order to protect position of OU. That's why the old terminal, ideal for LCC traffic is staying empty and losing money instead being operative and making money. But, hey, who cares, taxpayers will take care of everything, they are rich enough
re anon 9:22
Delete74% debt to GDP is not much in EU standards. The main reason is actually stagnation of Croatian economy for many, many years in the past. And without real GDP growth there will be no positive change in debt to GDP.
re anon 9:23
My comment was on topic. This is called comparative analysis of OU.
Experience of others may be taken into account to learn and avoid making false assumptions or steps.
It is terrible "pozdrav iz Rijeke"!
DeleteI can't understand some so called experts saying that there is no corruption in Croatia
re poster 9:25
DeleteIf you really want to believe, that a privately owned French business will fend off business opportunities (like Transavia) to protect a Croatian OU, well... Let me put it this way: you are not realistic.
The airports in EU have publicly available tariffs that apply to all airlines. In UE they are by law prevented from subsidising through those tariffs a local carrier. Check the tariff in ZAG and compare with other airports in ex-Yu, and you will see that there is no protection, you are talking about.
Maybe they were "chased away" because ZAG did not want to agree to their demands. LCC can easily have same conditions as any other carriers. I was hearing same stories about LJU, how Adria was the reason why LCC did not fly to LJU. It's a nonsense.
Delete"LCC can easily have same conditions as any other carriers."
DeleteWill they also get 79m EUR from the government, like OU?
If you have a heavily subsidised airline at an airport covering a relatively small market, there is unlikely to be a lot of competition around.
Anon 10:42
DeleteAs long as the aid is indeed covid related, ie. limited to losses generated only due to covid, i see no problem.
"This is disastrous especially when you think how Romania gave Tarom €60 million and while RO is much bigger, has a wider network than OU does and even faced tremendous amount of competition in its home market."
DeleteThis is not true. Tarom is not signifacantly bigger then OU, it is on level of JU. And TAROM will get far mor then 60 mil.
RO is much bigger but gets so much less than OU not just during covid but also before it. Like many wrote OU is extremely protected in ZAG while RO isn't in OTP. that makes these subsidies even more tragic.
DeleteIt literally carries 700.000 passengers more, and RO will propably get around 300 mil. in next few years. OU is not protected by anyone in ZAG. Just the concract makes flying to ZAG expensive so there are no any LCC. And OU needs to pay that price also. Also you forget that ZAG has only 30% of a share in overall passengers in Croatia, so OU really has competition, strongest in the region.
DeleteSo you are basing your argument against RO based on a hypothesis that they will get €300 million? OU is actually not far from that number: €102 plus €33 and not €79.
DeleteThat's a lot of money in my opinion.
Also just because ZAG has 30% of the HR market doesn't mean it's the most competitive market in the region, it just means ZAG is among the most incompetent airports in Europe. After all it's the only larger European city (and capital) not to have an LCC link with London.
So...
...and now €79.
DeleteTypo.
Anyone know how many passengers they are handling now. What are the load factors?
ReplyDeleteJudging by ZAG passenger numbers, not a lot. Which is normal considering the situation.
DeleteSo in total over 90 million.
ReplyDeleteIt seems OU won't be resuming any of the new routes it launched over the last 5 years except Mostar next summer.
ReplyDeleteDisappointing considering the aid they just got
DeleteOMO is subsidized so they probably have a contractual obligation to resume it.
DeleteThey have 10 departures today which isn't bad.
DeleteIt's sad that 5 years of growth are wiped out in 5 years. But that is the reality in the aviation industry at the moment.
DeleteBravo Hrvatska!
ReplyDeleteKako da ne
DeleteOU is a big contributor to the tourism industry. This summer the season would have been even worse without them. They deserve for the losses to be covered. They could have easily parked planes to save costs but then many other industries would have struggled even more.
ReplyDeleteIf they parked their planes how would they pay salaries?
DeleteGovernment, help! We do not want to fly but we want to be paid.
Right.
"If they parked their planes how would they pay salaries?"
DeletePut people on short work, part time, unpaid leave, like any other business, which sees an enormous and sudden decline in their demand.
And still what will be the source of income if they don't fly at all? How to pay employees with part time job? How to pay leasing of the planes?
DeleteWill this new purchase of shares impact on the future privatization process?
ReplyDeleteNo
DeleteWhat difference would it make if the airline is already 99% state owned?
Delete"Future privatization process"
DeleteLOOL
After corona, i don't think anyone would be interested in buying OU.
DeleteNot gonna happen for at least a few more years.
DeleteAgree
DeleteAre there any conditions for this aid?
ReplyDeleteThey just need to promise they will be good
DeleteMost governments have made certain requests from their airlines in return for aid.
DeleteOnly requirement will be to vote for the political party in the next election. Lol
DeleteThe amount of money OU needs just to cover their operations is getting bigger and bigger.
ReplyDeleteWell as this virus drags on it is getting bigger and bigger for all airlines.
DeleteCompared to what other airlines are getting it is not that much.
ReplyDeleteYou should also compare the aid proportionate to the size of the company.
DeleteWell someone above wrote the amount TAROM got which is larger than OU.
DeleteOU also got €33 million last year before China virus appeared.
DeleteGood. The government being its owner should care much more about what's theirs.
ReplyDeleteAnd up to now it was not theirs? :-)
DeleteBotovi
It was, but they didn't care as much.
DeleteButkovic should have sold the airline in the past 4 years.
ReplyDeleteAnd Hajdas Doncic before him.
DeleteThey tried. No one was interested.
DeleteAegean and Air Nostrum were interested before corona. I think had the virus not happened it would have been privatized right about now.
DeleteIt's unfortunate OU didn't get privatized on time.
DeleteYes, we know that story...
DeleteLufthansa is interested .
Turkish is interested.
Garuda is interested.
LOT is interested.
And now pandemic is the excuse why it was not privatized. Get real.
Well Aegean confirmed its interest in a statement to Athens Stock Exchange in December last year. So it was not made up.
DeleteIt is no doubt that the virus would have tipped anyone against buying OU.
DeleteAegean just notified the stock exchange that they were looking at the documents. They probably got terrified after they saw the real numbers.
DeleteGive it a rest.
DeleteSeems like Aegean gave that idea a rest, an indefinite rest.
DeleteCorona is a nice excuse to continue with state control and pumping tax payers money in this airline. I don't see any visible contribution from OU for the economy.
ReplyDeleteYou really think OU does not contribute to the economy? Who brings tourists to Croatia? Who maintains flights to Croatia on a year round basis when many airlines don't fly in winter?
DeleteWith only 18% share in Croatia air traffic OU is certainly not the main contributor to country's economy.
DeleteFollowing that logic CRO Government should sponsor all the other carriers as they bring much more tourist to the country than OU.
Plus the government would have a lot of issues with the Zagreb concession if OU went bust.
Delete@10.06 it does support a lot of them. OU has a share of almost 70% in winter. Also during this covid crisis its share has been much greater in summer too, which shows it was important for bringing at least some tourists during these crisis times, which will continue.
DeleteFirst you say that OU brings tourists and therefore they shoul get money.
DeleteAfter it you say their biggest share in Croatia is during the winter.
FYI there are no tourists during the winter. Just have a look on SPU figures before pandemic in January or February.
So, money lost.
70% in winter but what's the base from which you are making the calculation? ;)
DeleteWhen they have 70% in summer then we can talk.
If they had 70% in summer it would be a near monopoly situation and no one should have such share in summer. Even Wizz in Skopje doesn't.
DeleteThey dream to have 25% in summer!
Deleteall balkan airlines are a failure
ReplyDeleteNot really. The Balkans aren't such a small region.
DeleteAegean isn't.
DeleteThe current situation of OU and many other Euro carriers is in jeopardy. OU must utilise the money they get to the last eurocent and try to get back to growth.
ReplyDeleteAnd what will happen next year if they produce loss again. How will they cover it?
ReplyDeleteThey will get more money. Like all other airlines across the world will get.
DeleteOU should increase its presence in the local market with more regional flights offering good connections via ZAG, especially now when connectivity in the region is poor.
ReplyDeleteI would say that connectivity in BEG is not that poor at all taking in consideration all the circumstances. Yesterday BEG had something like 37 departures.
DeleteBEG is not the only airport in the region... and it has 10 flights today btw.
DeleteToday is the weakest day in the week. All the other days BEG has the most departures in the region.
DeleteIt is not the only airport but it certainly belongs to the "region". So therefore talking about connectivity in the region without taking BEG in consideration is not serious.
Calm down and try not to create something out of nothing. Connectivity in the region is generally poor. No one said anything bad about BEG so just calm down.
Delete"All the other days BEG has the most departures in the region."
DeleteWell that's not true. It doesn't have most departures tomorrow either.
Sure. You are right for tomorrow.
DeleteAll the other days are not significant
Just pointing out that your statement is incorrect.
DeleteYesterday it had 36 departures. Tuesday and Wednesday are the worst in the week, even Saturday is better.
DeleteMuch better than Budapest for example.
It doesn't change the fact that what you said was false.
DeleteWow that's 97 million USD!
ReplyDeleteCan anybody propose some predictions for the number of passengers carried by Croatia airlines for 2020?Thanks a lot!
ReplyDelete