Croatia Airlines reported mixed financial and operational results for the first nine months of 2024, impacted by an ambitious fleet transition to Airbus A220 aircraft. The substantial costs associated with the fleet upgrade, coupled with inflation and increased operational expenses, resulted in a net loss of nine million euros, a sharp contrast to the 7.1-million-euro profit reported for the same period in 2023. The airline's total revenue reached 206.1 million euros, close to 2023 levels. However, operating expenses rose by 9% to 215.1 million euros due to increased maintenance, leasing, and personnel costs. Croatia Airlines engaged in additional short-term leases to cover maintenance schedules, which, combined with inflationary pressures, led to an 11.6 million euro increase in operating costs.
Among the factors contributing to the airline’s increased costs was maintenance, where expenses grew by 8% to 33.9 million euros, primarily due to the transition of aircraft types and the operational challenges of managing two different fleet types during the transition. Additional aircraft leasing was necessary to maintain service reliability, adding to the overall expense. Passenger and airport service costs increased by 7%, reaching 44 million euros, attributed to increased passenger numbers, higher airport fees, and extended flight schedules. Croatia Airlines implemented a 10% salary increase beginning in April 2023 to offset inflation and attract skilled labour. A new five-year Collective Agreement signed this year further solidified these adjustments, impacting the company’s general and administrative expenses, which increased to 9.6 million euros.
The national carrier achieved growth across most operational metrics from January to September 2024. During the nine-month period, Croatia Airlines handled 1.424.916 passengers, representing an increase of .5.5% on last year, or an additional 74.679 travellers. However, the figure is still down 16.2% on the pre-pandemic 2019 or 276.655 fewer travellers. During the first three quarters of 2024, the carrier welcomed 1.046.208 passengers on international flights, up 6.9% year-on-year and 333.096 customers on domestic services, an improvement of 6.3% The remaining 45.612 passengers were handled on charters, down 21.7%. The average cabin load factor stood at 64.7%, down 1.2 points on last year and 9.1 points below 2019 levels.
Looking ahead, Croatia Airlines anticipates a period of financial stabilisation once the A220 fleet is fully operational, projecting lower maintenance and fuel costs. The increased passenger capacity and lower operating costs of the A220 are expected to improve profitability in the medium term. Additionally, the company’s expanded network and improved service offerings, such as digital boarding tools, baggage tracking, and in-flight e-media options, are anticipated to drive customer satisfaction and loyalty.
Again the same, old story.
ReplyDeleteOU in red.
Actually this is a new story. They were always profitable after summer, not this year.
DeleteThat's a big concern
DeleteOperating expenses up 9% and a net loss of 9 million euros is no small number! I hope the airline can recover, but it seems like they underestimated how costly this transition would be. Maybe more gradual implementation could have helped manage costs better?
DeleteCroatia Airlines is so far behind 2019 levels that it is worrying. Almost 20% less passenger or more than quarter of a million fewer passengers, load factor down almost 10% on 2019. Crazy. And all this on a market that has record traffic.
ReplyDeleteThey will never reach 2019 levels simply because now they have FR which is constantly attacking them. I give OU 2, 3 years before they collapse and declare bankruptcy.
DeletePlenkovic promised they will always get money from the Government.
DeleteNice EU rules.
You really have to be a genius to achieve these results with all the resources/coastline Croatia has.
DeletePassenger numbers are up (Y-O-Y), but their cabin load factor actually dropped. This could be a sign of overcapacity or poor route planning. Hopefully, the A220s allow them to optimize routes and improve efficiency without wasting seats
DeleteThey are losing DH8 so they will be actually in much worse situation effiency wise flying only with A220.
DeleteIn reality 2023 is shaping to be a disaster for OU. Ryanair is eating them alive and with such catastrophic financial results I don't see them doing well at the end of the year.
ReplyDeleteIf they lost €9 million after summer then we can expect the loss at the end of the year to be close to €20 million. Costs have gone up, revenue flatlined and Ryanair keeps on growing their network out of ZAG.
Quo vadis OU.
They have 80 million in the bank so they can sustain losses. Plus the gov will give them money too. The only way they will fail is if they get sold badly like Adria did.
DeleteMany Airlines are still under 2019 passenger levels. Ryanair have done a lot of damage in Croatia, like other countries that they try and sneak into. I admire Serbia protecting their national carrier from Irish invasion.
ReplyDeleteYes, our lifes would be miserable without Ou
DeleteThe issue is, Croatia Airlines hasn't event attempted to compete against Ryanair in Zagreb in any possible way.
DeleteIn Serbia the national airline has had to compete against Wizz Air long before Croatia Airlines had to compete against Ryanair in Zagreb. The difference being is that they actually do something to compete against them. They attack each others' routes, lower fares in an attempt to push the other out etc. In Zagreb, Croatia Airlines couldn't care less, not to mention that they directly compete only on 2 routes.
DeleteWhy would they? They will anyhow get the money from Plenkovic.
DeleteLast year profit came from the effects of the sale-leaseback agreement (Airbus fleet was sold and leased back), so 2023 result is not comparable to 2024. The profit in 2023 included the effect of this transaction (calculated as the difference between the book value of the aircraft and engines and the discounted value of the "assets with the right of use", calculated on the basis of the total contracted fixed obligations until the end of the lease, as provisioned by the international accounting standards).
ReplyDeleteSo, it means they were always in red.
DeleteOnly last year creative accounting helped them to present the situation otherwise.
The comparison to 2019 is not good either. In Q1-Q3 they had net loss of 6 million. Now it is 9.
DeleteAnd they told us the magic starts when the A220 arrives...
ReplyDeleteThis is the magic.
DeleteThey managed to make a loss during the time of the year when all the other companies make profit.
They’re putting everything on the promise of the A220, but what if it doesn’t deliver the savings they’re expecting? This is a risky gamble, and it doesn’t seem like they have a solid backup plan.
DeleteBravo Hrvatska!
ReplyDeleteSo it's official. OU will have a loss at the end of the year. Now we will just see how big the minus will be in Q4.
ReplyDeleteHardly surprising
DeleteThey need to focus more on Zagreb, transform it into a mini hub. Only way they can increase passenger numbers and revenue.
ReplyDelete+1 and only way they can offset competition from FR.
Deleteno they need to copy Vueling and easy jet in costal cites and Ryan in Zagreb. Story with hub is long gone especially now when Croatia enter schengen zone
DeleteWorrying
ReplyDeleteWho would have thought.....
ReplyDeleteQ4 is always bad so a yearly loss could amount to €15 million
ReplyDeleteAs predicted
ReplyDeleteLet someone take over for OU to realize its full potential.
ReplyDeleteOr just get a new professional management.
DeleteThey need to operate more charters.
ReplyDelete+100
DeleteToo late. There are direct flights from everywhere in Europe to Summer destinations. Unless they start charters from Asia which they don't have airplanes for.
DeleteWhat is the passenger yield, based on revenue passenger kilometers?
ReplyDeleteCan someone predict what are realistic and possible outcomes for OU?
ReplyDeleteThe will stay alive as long as the government wants and can/may support them covering the losses.
DeleteAccording to me, the best would be what Malta did with Malta airlines that went bankrupt, just for KM Malta airlines to be opened the day after taking over the planes, employees, lines and leaving the losses behind. Until v.3 comes in 10-15 years.
From this year Croatia Airlines eligible again for state funds if they undertake restructuring. I am quite sure that in a year or two they will announce restructuring process. Last time it did not bring any results. We will see about this time.
DeleteHrvatska saka u hrvatskom slajpiku.
DeleteDefault, sale to Mutti, end of ops (just to name three)
ReplyDeleteNone of these will happen, but thanks for your paranoia.
DeleteSince the fleet transition will take until 2027, are they telling us all the years in between will be loss making?
ReplyDeleteWhen they have a larger fleet of A220s, one would assume all these magical savings they have announced will start.
DeleteThey’re sinking money into the fleet while their load factor is dropping and expenses keep rising. Maybe focus on filling seats first before splurging on a whole new fleet
DeleteThey should fly to warmer destinations in winter.
ReplyDeleteThis just proves how bad the management is.
ReplyDeleteComplete basket case of an airline.
ReplyDeleteI find these results worrying, especially the lag on 2019.
ReplyDeleteNot good.
DeleteThe passenger numbers and LF really need to be improved.
ReplyDeleteThe prices are too high. It's a stupid policy that they have. All prices are always too high.
DeleteThings are only going to get worse as Ryanair expands in Zagreb.
ReplyDeleteWell this is the only quarter where they usually make money, so this is disappointing. Some radical changes needed at OU.
ReplyDeleteThank you for the balanced and detailed summary of their financial results. Appreciated.
ReplyDelete+1
DeleteDidn't they hire some consulting company couple of years ago to help them turn around and become profitable? What happened with that?
ReplyDeleteYou are really a funny guy!
DeleteNot a joke, they really did. What was the name of that consulting company?
DeleteIt's called BCG (Boston Consulting Group) and they threw money at it. Same as money was thrown at two different privatization advisors in last 10 years that delivered no results.
DeleteWe are talking about all the increased costs. But what about biggest cost for carriers, fuel? Fuel was down this year compering it to last year, so they saved significant amout there. Ooohh they are in trouble, big trouble.
ReplyDelete+100 exactly. They conveniently forgot to mention that
DeleteWinter is coming.
ReplyDeleteI really hope things turn around soon.
ReplyDeleteI’m happy to see they’re investing in digital tools like boarding and baggage tracking. As a frequent flyer, these small improvements really add up in the overall experience. Here’s hoping these changes attract more passengers and help them get back to profitability
DeleteIt’s understandable that costs would increase during such a big shift, but I’m optimistic that the A220 will pay off for them in the long run with better fuel efficiency and lower maintenance costs.
ReplyDeleteFuel efficiency and lower maintenance costs mean nothing if your route network is crap and you have no revenue management strategy.
DeleteHonestly, this looks like poor planning. Croatia Airlines is taking on massive expenses for this fleet upgrade at a time when inflation and operational costs are already high. Did they really think they could handle all this at once?
ReplyDeleteAgree. If their goal was to stay competitive, they’re going about it the wrong way. With these huge losses and rising expenses, Croatia Airlines might end up pricing themselves out of the market if they don’t turn things around soon.
DeleteThey’re expanding the fleet when they haven’t even recovered pre-pandemic demand levels. Seems misguided to me.
ReplyDelete+1
DeleteCroatia Airlines should have slowed down and been more strategic. It seems they’re just bleeding money with no immediate end in sight. The A220 might help in the long run, but they’re digging themselves into a hole now
I'm sorry but I think Croatia Airlines is the only airline in the world that is banking their whole turnaround on savings produced by a plane. It shows just how desperate they are. If demand doesn’t pick up soon, those savings won’t matter much if they’re not filling seats and the best indicator of that is the poor load factor.
ReplyDeleteReport says "substantial costs associated with the fleet upgrade" affected financial results. So far Croatia added only one A220 to the fleet. Will they even survive adding another 14 A220s?
ReplyDeleteWell it makes sense. The costs associated with adding A220 included engine purchase, equipment purchase, crew training. They didn't do that all for one aircraft.
DeleteU Croatiji ništa novo, nesposobna uprava radi gubitke, a Plenković plaća koliko god treba.
ReplyDelete