Monday, June 25, 2012

Tough times ahead for Croatia Airlines

Croatia Airlines to suspend several routes
Croatia Airlines is planning a major shakeup of its international network with flights to Podgorica, Priština and London Gatwick to be suspended as part of its restructuring and financial recovery programme. The airline has shortlisted flights to London Heathrow, Paris, Istanbul and Copenhagen for suspension unless the routes do not start making money in the foreseeable future, Croatian media reveal. The suspensions have been proposed by the three financial consulting companies the airline hired to assist with its recovery programme. The Croatian carrier is expected to boost ticket prices to London, Paris, Istanbul and Copenhagen in a last ditch attempt to make the services profitable. In spite of this, financial advisors have proposed for Croatia Airlines to sell some of its lucrative slots at both London and Paris.

Some domestic services are also struggling including flights from Zagreb to Split and Dubrovnik. However, Croatia Airlines receives state subsidies for its domestic network, a practice which will be banned once the country enters the European Union in the summer of 2013. Other regional routes are also recording losses, though flights to Skopje and Sarajevo will be kept as they currently carry large amounts of transit passengers. Croatia Airlines’ most profitable flights are to Lufthansa’s major hubs - Munich and Frankfurt.

It has been estimated that Croatia Airlines will need somewhere between 80 and 130 million euros in order to come back up on its feet. The Croatian government is planning to provide at least part of the cash injection in coherence with European Union laws and regulations. Local aviation analysts believe that the major network reduction planed for the Croatian national carrier starting this winter could serve as major blow to the airline and its reputation.

38 comments:

  1. Lufthansa orders. This airline is practically a feeder for Lufthansa now.

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  2. And this is the airline that is supposed to lead the ex-Yu airline? Give me a break.

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    1. Yes, it should. The other ones, regardless of the above stated news, are still in worse shape.
      It is not true that domestic lines will no longer be allowed the subsidies after Croatia enters EU, there are ways in which this aid can be carried out.
      This whole report sounds like it came from LH's headquarters in order to make CA ripe for a take over.
      Do you really believe that London and Paris are not profitable? Come on!
      Nobody travels there or uses them as hubs for long distance destinations, but do use FRA and MUC instead?
      In 2010 there were some 25.000 people who traveled from ZAG to New York, which is enough to have several weekly flights all year round. It is not in the interest of LH for ZAG or CA to open a direct route.

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    2. Yes, it should. The other ones, regardless of the above stated news, are still in worse shape.
      It is not true that domestic lines will no longer be allowed the subsidies after Croatia enters EU, there are ways in which this aid can be carried out.
      This whole report sounds like it came from LH's headquarters in order to make CA ripe for a take over.
      Do you really believe that London and Paris are not profitable? Come on!
      Nobody travels there or uses them as hubs for long distance destinations, but do use FRA and MUC instead?
      In 2010 there were some 25.000 people who traveled from ZAG to New York, which is enough to have several weekly flights all year round. It is not in the interest of LH for ZAG or CA to open a direct route.

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    3. Good loadfactors do not mean good profits. If London was not performing well until now, then I doubt it will do well once BA enters the market.

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    4. True, but it is still questionable that FRA and MUC are, while the other two major hubs are not.
      Something stinks in this report.
      Another thing; how much are the actual salaries of CA's managers, pilots, etc., and why the cuts could not be done there?

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    5. Adria had a great load factor to Paris and London but they suspended because of big losses so I agree with the above comment.

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  3. I am specially happy they are about to axe the Kosovo service.

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    1. Why, I wonder?

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    2. That's just dumb. Sure, perhaps PRN is not profitable just yet, but this market has tremendous potential. It is packed with young people, prone to travel, there is lot of demand from expats who work there and their families comparing to other places in the region, the country is not only landlocked but in a way locked, which makes air travel even more attractive. Actually, the only threat comes from expanding SKP.

      But whoever takes PRN now will profit big time in the future, as operating now creates loyalty with customers and businesses. That's why I would actually love to see JU flying there, even if they have to go through Bulgarian and Macedonian airspace to land at PRN.

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    3. Oh please...
      Actually PRN could close and nothing would change at all because Kosovo has in fact two airports ,second one is SKP!

      A big mass of Kosovo Albanians are also Macedonian passport holders with no limits to travelling at all..

      how do you explain
      that PRN has almost as much pax as Kosovo has inhabitants?
      Thats the biggest percentage of all ExYu and
      in theory these people would need a visa!

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  4. Ex-Yu, can you please change the page header picture, it is summer now, let's refresh our minds with a new photo...thanks.

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  5. Looks like OU has engaged the same consulting agencies as JP before they had cancelled exactly the same routes out of LJU.

    I bet all 3 of them have German stamp, trying to hand over markets to other Star alliance partners and to leave both airlines as simple feeders and small regional carriers.

    That all is nothing but a consequence of our Balkan or South Slavic mentality, arrogance and ignorance.

    All ex-yu nations together have potential to go double daily to USA plus at least daily to Canada. While we fight over whether BEG or ZAG have enough potential to be the base for such flights, or whether JU or OU should lead the new air alliance, other airlines, led by LH are taking advantage on our markets. So sad :(

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    1. It was OU who immediately said no to ex-yu cooperation. So godspeed to them.

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  6. Ca will survive-no Balkan sas joint venture-just Ca

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  7. This summer season Bern-Belgrade will be operated three times per week. Really nice to see an increase in frequencies between the two cities.

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    1. Continuing on this off-topic, I'm glad to tell you that you're wrong, it's gonna be 4 times per week - added frequencies are on Sunday and Monday.

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    2. actually 4 times per week: 1,2,6,7

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    3. Actually I saw it on their website, after theyhave sent me an email, and it was three times per week. check again.

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    4. I flew skywork once from Belgrade and I loved it. Love Berne airport.

      Too bad their fares are so high now.

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  8. The airlines add only some flights
    which looks lame on the first sight.

    But at the second view you recognize they are making clusters ...
    FZ has Thu,Fri,Sat,Sun cluster,
    Wizz to Malmo has Mon,Tue,Wed
    and then Fri,Sat cluster,
    SX has Sat,Sun,Mon,Tue cluster..

    Its like they are filling holes.

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  9. How can TK be more succesfull at ZAG-IST
    than OU?
    And how can be flights to London and Paris be unprofitable even with a high loadfactor ?

    Could someone explain this ,please?!

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    1. It can depend on many factors such as what type of passengers are flying on ZAG-IST segment or flight timings, but in general, TK is a "stronger" airline offering far more connecting options via IST than OU can offer via ZAG.

      For example TK flew far more passengers than JU on BEG-IST segment in the past years and that gives them an opportunity to introduce double daily flights, even better connecting options etc...

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  10. TK has much more feeder flights to IST hub than OU to it's ZAG hub. This could be one reason. And succesfull is in my eyes the carrier which operates a route with profits and not just high loadfactors. And I think no one in this blog knows how profitable a route is, such confidential information usually is not spread in public.
    LGW and CDG: rather difficult, but it can happen. CDG I somehow could understand as there is AF serving ZAG as well. London has "still" no competition, so rather difficult to imagine why OU is not selling smarter.

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  11. 25000 pax from New York to Zagreb? And how many out of those would pay to be in the front cabin? Come on with croatian bs. Delta got about 30 B767s parked on the ground. Their managers must be so dumb no to see Zagreb as a goldmine.

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    1. Actually, in 2010, 104,345 people flew between Croatia and the USA.

      The same year 21,355 travelled between Zagreb and Toronto making Toronto Zagreb Airport’s top indirect market.

      I am sorry you do not like to hear what you term 'croatian bs' but your humble ignorance of the facts does not change nor nullifies the numbers above.

      There are a lot of hidden factors which are to blame for either BEG or ZAG not to have direct intercontinental flights. And each one is different for the respective cities in question.

      It is becoming quite obvious that joining the Star Alliance was a double edge sword: Lufthansa is having the upper hand in this one.
      Someone mentioned here that high load factors do not necessarily mean profits. Maybe it is so, but in this particular reports I find it highly suspect. I often fly these routes and although I would not judge the entire year's worth of load factors by my experience alone I still cannot escape the feeling there is a salient operation taking place here.

      Think about it; what this report is basically saying to CA is to cut off its lines to FRA and MUC competitors (London and Paris to North and Latin America, and Istanbul to the Middle and Far East), get rid of the excess planes and just FEED US!
      They have done it to Adria Airways, and to some extent even to Austrian.

      I believe similar thing would happen to BEG as well if LF (and Germany) had more influence there.

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  12. Well, regional leader should only stay with regional fleet. Few Dashes are enough.

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  13. Unfortunately I predict in 2007 that LH can make with Croatia Airlines the same scenario as they did with Dolomiti. Dolomiti had lot of lines to main European airports including London, Paris, Amsterdam… When Lufthansa take ownership of Dolomiti they terminate all those lines and instead change base of Dolomiti from Verona to Munich. They open lot of lines from Munich to most of Italian airports even small ones.

    Today you have:
    1) more and more lines are opened from Croatian airports to Munich or Frankfurt (from this summer you will have DBV-MUC all year, even in winter). Today you can fly from MUC to DBV, SPU, ZAD, ZAG and from FRA to DBV, SPU, ZAG.
    2) they want to close LHR, LGW, CDG, CPH, IST, PRN, TGD, and only profitable lines are to FRA, MUC, ZRH and VIE!?!?!?!

    Sapienti sat! By Dolomiti scenario we will have just Crohansa Q400 flying from DBV, SPU, ZAD, RJK, PUY, ZAG and OSI to MUC, from DBV, SPU, ZAD and ZAG to VIE, from SPU, DBV and ZAG to ZRH, from DBV and SPU to ZAG; and LH will fly A320 from FRA to SPU, DBV and ZAG.

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  14. "Croatian bs" when I said that, I meant you don't know how economics work. 25000 pax is about twice daily service with a 767 at the most, but it's more like one weekly flight on a larger plane. 25000 pax a year is 500 pax per week going and incomming. You will never be able to scoop up that real slack from Toronto to Zagreb because it can not be done with one single weekly flight. Look at Aerosvit for istance. There is a few million Ukies in Canada, and just a single flight operated by Aerosvit? So someone else is scooping up the bigger potrion of that slack. Even if you managed to fly daily with Croatia, Germans will slash their fares in half, and you will be left with no revenue/PAX.(That's what they had done to Malev, Csa and others) Let six months pass when you are out, and they will come back with the same agenda. That's why Skyservice failed.

    You had your time during 70s and 80s, and even than germans could not wait for some conflict in the Balkans so they could mess that up, and grab Jat'sax going to the Balkans. They want their citizens to work and not to carry guns in Afganistan.

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  15. pathetic airline pathetic service

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  16. First of all I have not written first comment by nick Purger. Someone takes my nickname here for several times, and that is one of the reasons why I don't want to comment on this blog so often.

    I absolutely agree that today there is no chance for opening intercontinental flights from Croatia or even from one united company from exYU. Chance for Croatia airlines was 1996 to 1998. War stops, Austrian and Malev was not so powerful, Jat had sanctions, LCC was just in beginning, alliances were just future. If than Croatia Airlines made flights to Germany, Scandinavia, France and Switzerland + Canada and 2-3 lines in USA today Zagreb would be center for ethnic migration flights, as it was till 1990.

    Today big players will do whatever they can to destroy such an idea. Lot of much bigger companies with more tourists, Diaspora, business traveler, much more passengers to North America was forced to terminate flights to USA like CSA, Malev, Tarom, bmi, Olympic, Austrian (number of today flights from Austria do North America is nothing to that 10 years ago), brussels (once many destinations in North America today just to JFK).

    When I told management of Croatia Airlines that it is not good for Croatia to be in Star Alliance they said: «OK, if we get out what do you think what will Lufthansa do? They will kill us with prices, put planes on Zagreb-Dubrovnik and other lines. Do you really thing they will just say, no problem, thank you and have a nice future?».

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  17. Very interesting comments. It shows how business and politics play hand in hand. German businesses made living out of our misery. And not just German, many other did unfortunately. This is not related to aviation only but look at Libya and what they did after the conflict there. It wasn't even over and they had delegation in place to scoop up any contract they can. And it used to be restricted area for them before under Gadafi.

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  18. Lufthansa is taking a beating from gulf carriers, and Germans have to hold very tight their puppets from the Balkans. That's the last place where they want any developments or suprises.

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  19. The only way to survive is to sit in two (or even more) chairs. New Croatia airlines CEO must first fly to Doha to have meeting with Qatar, than to Istanbul for meeting with Turkish, and just after that to Frankfurt to talk with Lufthansa. And if Lufthansa will be still same old prepotent stepmother make some contract with Turkish or Qatar or someone else. You have to show them: “Mali smo al smo pič*e”. Unfortunately to be good guy means that they will rape you to death.

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  20. I think you should all make a clear distinction between Lufthansa/German control over the Balkans, and an airline taking advantage of a good business opportunity. It is so easy to say those ...... Germans swopped down on us miserable ex-yu states and just bullied us out of our own market. If it wasn't Lufthansa then another airline would do it. If Hungary or Romania or Bulgaria had the same problems/crisis that ex-yu had/has and if JAT (at the time) swopped in and "took over" the airline market we would all be saying how smart JAT was to realize a great business opportunity. But now that things are reversed and Lufthansa and other foreign airlines are taking over market position in ex-yu, it's a difference story. Remember, nobody forced CA to join Star Alliance.

    -- Charlie

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    1. One of the better comments I have seen on this blog.

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  21. Of course you are right! But that is argument why one should offer market (collaboration) to other players in wider region. And when you do that, Lufthansa will be much more friendly.

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  22. relatively good load factor means that the line itself is worth keeping. How to reach profitability - that's the question for "fnancial advisors". They aparently have no idea what aviation is about, they just follow neoliberal policy - if it is not making money, cut it. They tried the same with Adria, but the managment quickly came to sense (they were also "ordered" to cut London, Paris and some other major city connections).

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