Thursday, October 11, 2012

No cash for new jets

Jat’s “Airbus saga” spreads westwards

Croatia Airlines does not have the resources to finance four Airbus A319s it ordered in 2008 at the price of 135 million euros. The weekly “Globus” writes that Croatia Airlines CEO, Krešimir Kučko, will have to meet up with Airbus officials to renegotiate the deal otherwise the national carrier could be facing bankruptcy. The delivery of the aircraft has been delayed by several years, with the first jet now planned to arrive in Zagreb in 2015. Originally they were to begin arriving this year. The deferral of the delivery date has already cost the airline 9.1 million euros while the cancellation of the order would result in a further 5.6 million euros in damages.

The “Globus” publication writes that the order for the aircraft was made for political reasons and was a prerequisite for then Croatian Prime Minister, Ivo Sanader, to meet with his French counterpart Nicolas Sarkozy. Last week, the Croatian carrier told the government the order was damaging and that the airline did not actually need the aircraft at the moment. Furthermore, it presented its plan to finance the aircraft which sounded alarm bells at the government, since the proposal is unsustainable.

Krešimir Kučko will attend an annual Airbus gathering this weekend but will have to act quickly in order to set up a meeting with officials at the plane manufacturer, in the hope of renegotiating the terms of the 2008 order. In September 2011, the Croatian Competition Agency cleared 42.4 million euros in state aid to Croatia Airlines for the purpose of settling its contractual obligations for the purchase of the Airbus jets. However, the airline must repay the state the borrowed money. In 2008, when the Airbus order was made, CEO Ivan Mišetić said, "This strategic decision will allow us to meet the future demand of our customers with the most modern, fuel efficient and environmentally friendly aircraft". At the time, Airbus CEO John Leahy added, "We are very pleased that Croatia Airlines, one of the largest and most successful airlines in the region, has further confirmed its confidence in the A320 Family by expanding its order backlog with Airbus. This shows the airline’s satisfaction and clearly demonstrates the high demand for the A320's advanced technology and efficiency in the years to come".


  1. So what if they fail? We are just fine in Macedonia without a national carrier. Actually we are far better than before. Maybe it would be the right solution for Croatia if OU goes belly up.

    1. Yes, because it would probably take forever for the country to establish its own airline. Now it's Turk OU have a modern and healthy fleet - they have the most modern fleet within the whole ex-YU region.

    2. Wow the whole ex-Yu region, good for them, especially since the ex-Yu region is known for high tech aviation.

  2. I hate OU! They are too expensive and they barely fly anywhere. They should be replaced by Wizz Air like Malev was in Budapest.

    1. ^ LCCs aren't the solution to everything. And that they are always cheaper than legacy carriers is a furphy which is proven untrue time and time again.

      You should also explain where you would like them to fly in addition to their current destinations, and how they'll be able to do this given it doesn't look like they will be getting extra aircraft any time soon...

  3. They fly to MUC and FRA.

  4. Its sad if OU ends up bankcrupted. But i think the croatian goverment will react on a positively way. I have worked for the company, Its a great company to work for. All the Bestfor you OU (L)

  5. OU does need those planes, and the govt should be paying for their own mistake (rather than the airline going under), and before entering the EU so it is not seen as an 'uncompetitive loan' (or some equal wording).

    The fact is, the older the plane is with higher cycles, results in higher maintenance costs. All airlines around the world strive to reduce their expenditure, and new 144-seat 319s replacing ageing, leased 320s will result in long-term financial security for the airline.

    If they actually wanted to make a positive move for the airline medium-term, the Croatian govt would also be announcing two more Q400s to add to the fleet in 2014...

  6. Does anyone know why there were charter flights from Zagreb (OU Dash-8), Rome (BV B733) and Brussels BRU (FQ A320) into Belgrade today?

    1. BRU == Belgian football team coming to play world cup qualifiers

  7. In 3 years..

    Jat = will have 1 flying plane, the others are crashed/jukyard.

    BH = will fly with one cheap ass

    OU = will sell everything and with some luck have 1 or 2 flying.

    And the conclusion is, we are all dumb or corrupted, Somalia, a country where 98,4% does not know what a airplane is does it better than the Balkans. While we once rulled the Europe with many things in the past, such a shame all this.

  8. Airlines in the region should be "thinking small" to succeed. They should get lots of small planes and really connect the region. The Osijek airport manager had the right idea.

    Forget about any super long haul. CA already has the best and most rational fleet. Too bad they screwed themselves up with this dumb order.

  9. Face it once for always: you HAVE TO buy something in EU if you want to become a part of it.

    Slovenia bought:
    France: Falcon and Cougars
    France-Germany: Airbuses, Roland missle system

    And since Croatia and other former YU republics wants into EU... they simply have to buy. Simple as that.

    1. +1 It cost to be friends with EU,US etc. Remember the deal JU signed with Airbus to soften negotiating position ahead of some negotiations in France.

      It just goes to tell you how small all of these countries are and serve just as a additional market to big countries. Maybe it is better to be out of EU and actually declare that you are not interested like Turkey.

    2. well, there is another perspective; EU is interested in the new markets where it can sell their products, thats why it has some very odd memebers such as Romania and are wrong about stating that Slovenia(so JP)bought Airbuses to become a member, because JP bought airbuses A320 back in the 80s!and it was a logical decision that while they were getting old to replace them with similar type-A319.and also when you check other "eastern"european countries there are not so many airlines operating airbuses: LOT, baltic carriers, ex Malev, etc.but i agree, buying EU products is an advantege for a country to become a new would be just nice if you dont generalise too much, so when stating something to give exact example.becuase as said JP bought european metal back in the 80s and also OU decided for it when they could not even dream of becoming part of the EU.

  10. In addition to this dreary reality, no more governemnt subsidies to get domestic flights going as of 1st of July 2013!
    Hard times ahoy for OU...

    1. So what route cuts might we see?

  11. Doot is right,
    small ac are the future!
    I would love to see a fleet of EMB175 and EMB195
    as well in Jat as in OU.
    A healthy loadfactor would be posible and increased frequencies.
    Small is the Beautiful!
    Also i would give that guy from Osijek airport a leading position in OU,his idea with that little ac is pure genius!

  12. Any idea how much that EMB120 costs to lease or buy?

  13. Price for used EMB 120 is:
    minimum 620.000 USD
    maximum 2.180.000 USD

    Monthly lease rate:
    minimum: 17.000 USD
    maximum: 29.000 USD

    (September 2012)

  14. Purger,
    Are these dry or wet leased rates?

  15. It is time for OU to start to stand up for itself. No point doing what Lufthansa wants you to do as many on this blog claim is the case if it’s not working financially. Whatever Lufthansa threatens does not matter because co operation with Lufthansa does not seem to be a good strategy for OU. If Lufthansa would like to have control of OU than buy a stake! Full stop!

    There are some obvious ways OU could start to at least reduce cost and save money:
    Reduce Frankfurt services from Zagreb to max 3 per day. Lease out other slots and use aircraft on other plausible destinations,

    Start Moscow and increase London to 2 per day. Flights to London are always packed while Frankfurt (whenever I have been on) maybe half full. I would like to know load factor on Frankfurt if anyone has it.

    Increase focus on Dubrovnik during winter season. Dubrovnik Tourist season is becoming more ‘all year round’ and OU should be there to make most of it.

    Seriously consider aircraft in the 30 seat class. OU could use at least 2 EMB-120s or equivalent and connect a host of cities during the winter and even more in the summer months.

    Completely retire A320 from fleet, start a new company offering the A320 for leasing or charter services only. Remember Dubrovnik Airline they were transporting nearly 400,000 passengers per year using this model. No reason Why OU could not do the same if not better!

    Review ticketing system and increase promotions. Educate people how flying can be more convenient and in some cases cheaper than the car or bus.

    Last but only if all else fails; reduce staff to a more appropriate level for this size of airline.

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