Wednesday, April 21, 2010

Counting the cost

Croatia Airlines ponders over ticket price increase
The dust over Europe is yet to settle after a week of unprecedented events in the world aviation industry. As one by one countries in Europe started closing their airspace, due to a volcanic ash cloud from Iceland, airlines could not do more than sit and wait. Now, as some services are normalised, airlines are beginning to count the cost. EX-YU airlines have a lot to be worried about.

Croatia Airlines said that its losses have amounted to at least 2.5 million Euros. The airline could not handle some 24.000 passengers, which were supposed to fly with Croatia Airlines since April 16 until today, the airline’s spokesperson Davor Janušić said. The CEO of Croatia Airlines, Ivan Mišetić, confirmed that the airline is considering increasing ticket prices to cope with the massive losses. “I’m afraid to say that increasing tickets will come as a relief to the airline”, he added.

The Slovenian flag carrier Adria Airways said it had lost up to 1.4 million Euros due to cancelled flights and would ask the Government for a refund, the Slovenian news agency “STA” reports. Transport Minister Patrick Vlačič said he was inclined to the idea of providing state aid to the airline.

Serbia’s Jat Airways said that the volcanic ash has created a loss of 900.000 Euros. However, the airline said it was still too early to predict the final loss as some services are still being cancelled.

Montenegro Airlines is asking the Montenegrin Government for a refund of up to 1 million Euros. The airline’s CEO told the national broadcaster RTCG that the airline had lost up to 4.500 passengers by Sunday afternoon. Montenegro Airlines has said it will not be offering refunds to passengers as the natural disaster was an act of God. The newspaper “Dan” states that this could have a negative affect on the airline’s image as other regional carriers such as Jat Airways and Croatia Airlines are fully refunding tickets. Airports of Montenegro, which runs Podgorica and Tivat airports, said that it lost some 80.000 Euros in 2 days due to the ash cloud.

B&H Airlines is yet to announce its losses. The airline was forced to virtually cancel all of its services in the past few days with the exclusion of Istanbul.


  1. Where is the logics here:

    Croatia Airlines: Loss of 2.5 mil. Euros for not handling 24.000 passengers.
    Montenegro Airlines: asking the Government for 1 mil. Euros for having lost up to 4.500 passengers.

    According to this data, Montenegro Airlines' cost is more than double of that one from Croatia Airlines not mentioning the fact that they are not refunding tickets for cancelled flights. What a shady airline!

  2. I'm sorry, but there is NO justficiation whatsoever for raising the price of tickets, Mr Mišetić. They are high enough. The losses will be recouped in one way or another, and the airline still has the ability to fall back on the Croatian taxpayer.

    You should be ashamed for trying to profiteer from your regular passengers who already pay high enough fares!

    @ Sam

    Spot on. Using those figures, OU loses roughly 100 euros per ticket, YM cannot be more than double that.

  3. Here here frequentflyer! Croatia Airlines should be looking at lowering prices to attract more passengers and there is absolutely no need for OU's prices to go up!

    Sometimes I wish I could have the chance to run OU for a year and show these closet commies how a business is supposed to be run!

  4. What kind of thinking is this?! In the long-run, lowering the prices (or even keeping the current ones) would be a much started decision as it could attract more passengers and the overall income might increase ...

    But, not with OU's leadership!

    Here's my own personal story, how Croatia Airlines has lost me as a loyal customer just yesterday:
    I live in the Netherlands, but regularly spend my summers in Istria. So far, every summer I flew with Croatia Airlines in high season, AMS-ZAG, then changed tu Pula (with another landing in Zadar) - quite some journey, but it got me to Pula from where it's 70 km to my summer house (and the view from the small Dash over the islands on the way Zadar - Pula is brethtaking!). I usually paid up to 250 euro per person.

    Anyway, yesterday, I wanted to book the same tickets, when I realized the price was 375 euro per person! WTF?! So, looking for other options, I booked with Alitalia from AMS-Rome-Trieste, which is about 100 km from my summer house and that only cost me 230 euro! As I'm flying with my wife, we save 290 euro alltogether!

    I've always been satisfied with OU and with their service, but this really is ridiculous! and they have lost yet another customer who flew with them about 6 return journeys a year ... But, I don't think they mind ...

  5. @ Anonymous

    Maybe you should try JAT on AMS-BEG-POW now. Not really sure how much their price is but it must be even closer than PUY or TRS :)

  6. Just curious as to how you know what kind of leadership I would offer??????

    The do as we like and eventually the government will back us because we employ people attitude is what is wrong with the whole of the eastern Europe (former communist countries in Europe) today. And the mindset they have inherited from that period continues to have an influence on CEO's decision making such as this one by Croatia Airlines.

    It is a lazy way of doing business because there is no incentive for being successful and more importantly no consequences for not being successful.

    The direct result of all this is that your ticket with OU has gone up 125 euro's in one season and as you put it they don't care they are loosing passengers because they think there jobs are safe and it is simpler to just put up prices because, why bother doing the extra work in implementing other business models when its not going to make a flying F##* of a difference to OU’s management.

    What is great about capitalism is that it rewards businesses and individuals more the better they are and the ones who are not get a reality check, real fast!

    Its nature, survival of the fittest where you get the best CEO's with the best ideas making the best money possible, employing more people and paying them better for there services because they are needed.

    Compare this to what you get from communism and the results of which is still in Eastern Europe today. 400 euros a month if your lucky and if you boss feels like paying you for that month.

  7. @sam: thanks for the tip, but to be honest, I didn't really consider flying JAT as for a long time, there "direct: flight from and to AMS have made a stop in Brussels :-) But I don't know how it's this summer timetable, maybe they finally changed it. Also, POW is not every day, whereas I could choose between numerous arrival and departure times with TRS ... anyway, this summer I'm booked, but I would most definitely have flown OU again (as I like their service), if they wanted my money (sorry that I can only reasonably spend some 250 euro for a flight to Croatia :-))

    @q400: I absolutely agree. There is no competition on the Croatian market (well, most of it comes from Lufthansa, which is another StarAlliance member). And yes, you're right that as long OU (and others) feel that they're too important, too precious to be dropped by the government, there's no real incentive to change company politics. But, it's not only the Balkan countries, it's also countries such as the Czech Republic, where you do make quite some more money than the 400 euro a month you mention, but the state-owned Czech Airlines behave very similarly. True, they're not as expansive as they were (due to huge competition on the Czech market), but the airline as such is mis-managed: taking out loans from other state-owned companies (that are bankrupt), selling planes, canceling destinations (and adding very few new ones - primarily to markets without competition, regulated by bilateral international treaties, i.e. Russia), cutting down on service, etc.

    However, if they want to survive, they will have to restructure eventually. And the same goes for OU too - in the long run, their business model is not sustainable!


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