Croatia Airlines will likely need financial support if existing negative effects such as the Covid pandemic and the ongoing war between Russia and Ukraine continue. According to analytics company Credit Analyst, which reviewed Croatia Airlines’ recent financial reports, the carrier’s business outlook remains negative. “Should the negative trends continue, it is likely that the company will need more external support to stay afloat. This year, it will likely have to invest more, as we think that capital expenditures of approximately 2.3 million euros, as in 2020, will not be enough to cover the whole fleet. One of the Covid loans was supposed to mature in January this year, but it remains unclear whether the loan was refinanced or repaid”, the analytics firm noted. It added, “Liquidity will likely remain stretched during this year, absent of any additional external support. Unfortunately, the company is running out of acceptable collateral, as only one Airbus remains unencumbered. This could significantly limit the company’s future access to capital, in addition to the likely near-term end of the Covid support schemes for the airline industry by regulators”.
Croatia Airlines, which registered a 38-million-euro loss in 2021, warned at the end of last year that, “The company continues to face reduced demand, resulting in low levels of revenue which may raise issues of maintaining liquidity in the coming period". The company will post results for the first quarter of 2022 at the end of this month. “The outlook on Croatia Airlines’ business remains negative. The pandemic started to ease with the omicron variant, however, the Ukraine - Russia war could severely impact bookings for this year. Uncertainty remains a common denominator for many industries, including airlines and tourism, which is another relevant aspect of Croatia Airlines’ business due to its high seasonality linked to the Croatian tourism season”, Credit Analyst said.
The Boston Consulting Group (BCG) was hired last year with the aim of turning around Croatia Airlines’ business. BCG’s post-Covid strategy will be the foundation of the airline's development for years to come. “We continue to take all the necessary measures to safeguard liquidity and optimise the business, as well as undertake rigorous cost cutting measures. In 2021, we worked with the leading international strategic consulting company BCG to develop a post-Covid strategy in order to define strategic initiatives, the implementation of which, with prior consent of the majority owner - the government of the Republic of Croatia - will take three years to enable a sustainable business. In 2022 our focus will be on greater rationalisation of costs and the implementation of the company’s defined post-Covid strategy”, Croatia Airlines’ CEO, Jasmin Bajić, said. The post-Covid strategy is yet to be adopted by the government. It foresees fleet renewal, improvement in efficiency and competitiveness, implementation of new software, as well as the optimisation of Croatia Airlines’ year-round route network. Faced with strong competition from low cost carrier Ryanair at its home base in Zagreb, the airline has announced five new seasonal routes from Split this summer, all of which it had previously served out of Zagreb.
Not surprised
ReplyDeleteI doubt the government can give anymore money.
ReplyDeleteThey will find a way.
Deletethe EU is,watching Croatia Airlines and the endless govrrnment help. Covid was one thing but this was happening long before pandemic start March 2020.. and if agsin.. mow in 2022?? we will see
DeleteA new Berlin airport is in trouble again and it will be requesting a financial help from EU.......there's always a gray area in EU which most of the EU countries use it to get help......
DeleteUntil Croatian Gov and the OU management gets it in their heads that they lost monopoly on many of the routes, nothing will ever change.
The only way to survive this storm is to lower they prices and go after the transfer passengers from East, ME and Africa. Until this scenario isn't implemented, they are as good as dead.
I would rather pay £80, hand luggage only ( that's more than enough) to fly with OU from London then getting up at 5 AM to catch Ryanair flight for £40 and wonder if I'll be left stranded..
This guys should rename themselves to PanBalkan airlines or something, open a few bases with their Dashes in Slovenia, Croatian coast, maybe even Sarajevo. With current fleet and basically being under Lufthansa its impossible for them to be at net zero and even harder to be profitable. Not to mention management...
ReplyDeleteAnd with what money? They barely have to cover their expenses in Zagreb. Expanding left and right costs money.
DeletePanBalkan does not sound well to me, I propose to rename it to Adria airlines. :-)
DeleteOr Pan Adria :)
DeleteOr RealBalkan Airways!
DeleteThey even educed SJJ from double daily to 4 per week. That's their Pan Adria strategy.
DeleteThere probably simply isn't enough demand.
DeleteI was always wondering why did they let FR in ZAG. One should preserve own economy not predators like FR.
DeleteHow they plan to purchase more planes in such financial state?
ReplyDeleteThe whole story about purchasing new planes seems to have been just media spin.
DeleteOU is placing all of its bets on tourism and SPU. If bookings go soft then their gamble won't pay off and they will lose even more money.
ReplyDeleteInflation in the EU is the biggest threat to OU as more and more Europeans can't afford to travel this year. Just look at the heating expenses in the UK!
This is the most worrying part:
Unfortunately, the company is running out of acceptable collateral, as only one Airbus remains unencumbered.
This means that any loan they get will be more and more unfavorable. I fear that the end is near for OU.
There will definitely be more requests for aid. The question is will the government be able to provide it.
ReplyDeleteSack half the back office staff for a start.
ReplyDeleteHow many employees are there at OU?
DeleteAround 1000
DeleteThis is crazy for its size. What do all those people do?
DeleteMany of them are just on the payroll and are considered as "inactive staff".
DeleteThe government is just as clueless about OU as OU management itself
ReplyDeleteThis is terrible.
ReplyDeleteI hope EC will react. If they could close Malev, Estonian and Cyprus Airways they can do it with OU as well.
They were requesting aid even before covid and Ukraine. This is just another excuse to cover their incompetence.
ReplyDeleteOU is negatively impacting BCG`s credibility on devising business strategies...
DeleteEven BCG will suffer from Croatian incapability!
How much does Croatia depends on Russian tourists? Because with all those economic sanctions, only if Croatia accepts payments in rubles, Russians can do their vacations not only in Croatia but I think anywhere!
ReplyDeleteOU did not rely on Russian tourists since they didn't even fly to Moscow from Zagreb!!
DeleteLED was terminated before covid so it's not such a big problem for them. They are relying on Germans, Dutch and Brits to survive so let's see what happens especially with Germans where prices are exploding like a Ukrainian oil refinery after a Russian rocket attack.
Accepting rubles or not, Russians have no transport options to visit Croatian beaches...
DeleteI highly doubt transferring through Serbia or Turkey are valid options...
Why not?
DeleteRussians before war in Ukraine used JU to fly to Montenegro massively, why not to Croatia?
I think most Russians will go for holidays to Turkey and Egypt. Montenegro will have demand because Russians have property there. Russia-BEG right now has barely enough capacity to cover O&D demand.
DeleteDon't forget that close to 400 new Russian companies were opened in Belgrade and over 2.000 of them moved to Serbia. Most of these locals will fill seats on JU flights.
Dead man walking.
ReplyDeleteWonder how they will perform this year
ReplyDeleteFull force of Ryanair will be felt this year.
DeleteCroatia, pls. ban FR (Ryanair) from ZAG and save your assets and flight personal. For your own sake.
DeleteNot good.
ReplyDeleteWhere is BCG? Where is the grand revival plan?
ReplyDeleteThe revival plan can't be put into action without money and a steady steam of funds.
DeleteSplit is receiving the additional capacity despite the overall decrease in bookings at the coast, so let Split (because they receive the capacity unnecessarily) and national (because the government is behind this illogical tactic) tourist boards advertise in Croatia Airlines heavily and cover its losses.
ReplyDeleteThings are only going to get worse with Ryanair in Zagreb.
ReplyDelete:(
ReplyDeleteGood luck OU! I hope they get out of this stronger and the government has a more clearer vision of what it can do.
ReplyDeleteAre you for real?
DeleteThe government = Adeze = convicted criminal organization = care about nothing except own benefits, financial and other = not interested for OU except as good Uhljeb place = it has nothing to do with luck, they are ones who DESTROYED OU
DeleteLOL!
DeleteIt was Kresimir Kucko who destroyed OU. Before he came along OU operated flights from Gatwick to Pula, Split ,Dubrovnik and Zagreb. Heathrow to Rijeka, at least daily to Zagreb, Split. Manchester to Dubrovnik, and Split. Now they only have four flights a week from Heathrow and if we're lucky Gaatwick to Split twice. All the above mentioned flights used to be 100% full most of the time.
DeleteAnd how much money OU made when they operated all these routes?
DeleteMore money than they do today.
Delete@An.15.33
DeleteNo decisions about OU are made in OU. OU is tool in hands of corrupted politicians. Kresimir Kucko was just an aparatchik, like all other "CEO's", who obediently follow orders from sredisnjica adezeja and LH. The only exception being Misetic, still in charge, who came to the position directly from Franjo Tudjman chief of staff. He is the one who sold OU to serve LH for his position in Star Managing Board, he is the one earning on double leases, he is the one will actually decide, not without compensation of course, about future fleet unification (220) in order for Plenkovic to get his armchair in Brussels. Kucko was just a pawn, real Godfathers are way above his league
Big mistake not selling this company years and years ago.
ReplyDeleteThere was no one to sell it to. It's not like they didn't try.
DeleteThere was Garuda.
DeleteAegean too.
DeleteAegean would have save OU , they would understand the situation and the advantage of the Croatian coast as they do have the same with greek islands and they would make OU a really good player.
DeleteI don't understand why people keep on going on about the same thing. It is obvious that the Govt has NO intention to sell OU. If they did, they would have done it long ago. They keep it for all the reasons that have been shared here and elsewhere - amongst them, employment for party loyalists and ways to pump out money . You get rid of that and you lose a golden goose for all who live off that supply chain ....
Deletesomething DRASTIC needs to change at this company!
ReplyDeleteWell the management has been rewarded and is starting its first full 5 year term next month!
DeleteThey need a reality check. It's not covid that's hurting them it's their inability to compete with FR or at least to find a way to coexist with them.
ReplyDeleteThey had many problems even before FR came to ZAG.
DeleteYes, which is why there recovery is no where in sight. Their results were worse in 2021 compared to 2020.
DeleteThis is depressing
ReplyDeleteOU will have to adopt a completely different approach and strategy if they want to survive.
ReplyDeleteTheir new approach is moving flights from Zagreb to Split...
DeleteDire outlook.
ReplyDeleteNothing better could be expected in these times.
ReplyDeleteMany airlines are performing much better in these times.
DeleteCroatia Airlines has used a total of 0 opportunities during Covid, and some opportunities did arise.
DeleteI don't think they can survive a post-covid world with FR in town. They are already retreating.
ReplyDeleteNot with this sort of response.
DeleteThe government won't let them go bust
ReplyDeletePeople said the same about Malev, Adria, Cyprus Airways...
DeleteAnd people expect them to order new new aircraft in this kind of financial state?
ReplyDeleteThey definitely can't but covid has little to do with it. They wouldn't be able to afford it even during normal times.
DeleteTheir strategy is more of the same.
ReplyDeleteThey don't have a strategy.
DeleteThat is the main problem. They are just waiting for someone to save them.
DeleteI hope things improve
ReplyDeleteSorry, OU. Time to get out of your comfort zone and accept reality. Almost all EU countries face healthy competition and their flag carriers have adapted to LCC. Time to restructure and move on with reality.
ReplyDelete+1
DeleteWhen they had more than ample opportunity and time to build out their business, they didn't. Now with extreme competition and external forces piling on pressure on their business, do you honestly think they are even capable to react in any way - especially if they didn;t when they were able to ?
DeleteA national carrier serving the needs of the state and getting everything pretty much wrong. Such a shame.
ReplyDeleteWhat ever happened with the Heathrow slots??
ReplyDeleteThey sold part of them.
DeleteThe remaining slots they have left, they are still using. Of course maybe they eventually sell those too like Adria did.
DeleteBoston Consulting Group? A waste of money for useless management. That's money thrown out of the window, as all they tell you, you should know yourself, when leading a company. And a big part of amount they tell u to save on labor and customer quality costs, you waste with them and their bill to you as these guys are far away fm being cheap.
ReplyDeleteIf the EU wont allow OU more credits, what I doubt anyway, OU soon will be history. In crises, many lose but a few benefit....
Sad but true
DeleteTheir move to Split makes no sense. I would fully support the move if they actually planned to establish a base throughout summer and build on it. But moving routes from Zagreb for three months it's not logical.
ReplyDeleteTheir entire existence makes no sense. On expense of poor croatian taxpayers, they feed LH which makes money with their feed. Initially they they were supposed to be an airline, but instead they became Uhljeb sanctuary and source of significant unlawful or at least immoral income for few individuals. And it will not change. Sad but true.
DeleteOU should increase its presence in the local market with more regional flights offering good connections via ZAG
DeleteIn a year or two they will no longer be able to get any loans.
ReplyDeleteIt was already becoming difficult in 2019 which you can actually see in their financial reports.
DeleteThey are constantly talking about cost cutting. Where exactly have they cut costs so far, anyone know?
ReplyDeleteWhat amount were they supposed to repay in January?
ReplyDeleteI mean in terms of the Covid loan
DeleteI don't know how much was due in January but they got 80 million euros in Covid aid. The loan amounts to 33.2 million, but they also have loans due from before Covid.
DeleteThis 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.
DeleteI am tired of my tax money going to OU and getting nothing to show for it. The Star Alliance seems to only be hurting us by giving the German carriers access to profitable routes that we could have reserved for ourselves.
ReplyDelete+1
DeleteThey did not use the Covid money wisely.
ReplyDeleteThey used it for daily liquidity. Meaning paying wages and suppliers.
DeleteAnd now when they burn through it, they will ask for more.
DeleteOU is a big contributor to the tourism industry. They deserve for the losses to be covered.
ReplyDeleteOU is big contributor to Uhljeb Industry by the Party Ltd led by Godfathers, local and international. They have 18 percent of Croatian market, majority of which is feed to LH. It leaves some 10 %, if that much, as contribution to tourism. So slight contributor, which definitely does not deserve losses to be covered as precisely unused potentials and lost opportunities in all fields, tourism included, are producing losses
DeleteThe amount of money OU needs just to cover their operations is getting bigger and bigger.
ReplyDelete