Monday, September 15, 2014

State prepares for Croatia Airlines sale

Government outlines Croatia Airlines privatisation plans

The Croatian government is preparing to sell a minority stake in its national carrier this autumn, with the privatisation process likely to begin in November. The Minister for Sea, Transport and Infrastructure, Siniša Hajdaš Dončić, is convinced Croatia Airlines' sale will be successful this time around, following a failed attempt last year. “I’m confident we will get a couple of good offers. We can offer a majority stake if a buyer is from the European Union. We have received some queries”, Mr. Hajdaš Dončić explains. The minister adds that companies will have a 45-day timeframe in which to submit non-binding bids before the government selects candidates for the next round of negotiations.

The first attempt to sell Croatia Airline began over a year ago and failed after nobody responded to the tender call. Mr. Hajdaš Dončić recently outlined the government’s plan to conduct a thorough analysis of the aviation market in order to identify potential investors, adding that Croatia Airlines must consolidate its operations and expand in the region. Since the failed sales attempt late last year, Croatia Airlines has managed to post an annual profit, its first in years. However, its passenger numbers have been steadily declining throughout the year and its market share has been decreasing as it faces tougher competition, especially at its base in Zagreb.

Several airlines have been courted as Croatia Airlines’ potential investors. They include China Southern Airlines and Garuda Indonesia. While Garuda publicly expressed interest to purchase a minority stake in the Croatian airline last year, it failed to submit an offer during the tender process. Talks with China Southern Airlines were held behind closed doors, however, it did not put in an offer. Over the year, both Turkish Airlines and Etihad Airways have ruled out any interest in acquiring Croatia Airlines. On the other hand, Qatar Airways says it is again pursuing acquisitions in foreign carriers. CEO Akbar Al Baker notes that he is “actively discussing opportunities” with other airlines. “When we see that there are strong synergies between the two carriers we are open to investment”, Mr. Al Baker says. “We want airlines that we acquire to be complimentary to us, we don’t want to get involved in fixing other people’s problems”. Croatia Airlines could be of potential interest to the Gulf carrier, which maintains daily flights to Zagreb.

61 comments:

  1. would be very interesting if Qatar purchased OU. Then we would have real competition between Croatia Airlines and Air Serbia and their owners Qatar-Etihad.

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    1. I doubt Qatar will buy Croatia Airlines. I really don't see anyone at the moment that would buy them.

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    2. Potential buyers for OU are those who want to invest in airlines, not those we would like to see because their names sound sexy. Currently chances are that OU will be taken over by an investment fund rather than another airline.

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    3. Hope this will be successful, OU is in a much better position than JAT was, and they tried to sell it several times! I agree that it would be interesting if Qatar bought them, but that's not gonna happen! Wish them all the best!

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    4. @AnonymousSeptember 15, 2014 at 9:57 AM

      Yes agree, most likely if it comes to sale of OU it'll be an investment fund and not an airline.

      OU could sell its 49% steak for 875 million kuna + investment commitment, but I doubt any major airline out there can commit to what is very likely long term investment program worth in the region of $300-320 million, for OU will need a fleet of brand new aircraft around 2020, 8 Aribus A319 type and at least 6 smaller 100 seat CS100 Aircraft, cost of which can be very high, and come 2028 replacing Dash 8s won't be cheap either.

      OU might not be privatized before the elections anyways, its a poisonous pill, selling family silver, looks really bad with the electorate.

      Croatian economy has started to recover with exports up by 15% and industrial growth going up with each month, state is able to fill in the coffers with good tax returns and books are finally being balanced, although at very high expense to the general public who had to endure and will endure another 6 months of strict budgetary cuts.

      That being said Government should have sold OU long time ago, I fear its too late now, it would be a political suicide to sell it now, most people in Croatia hate when foreigners buy Croatian firms, HDZ is bound to use this in their electioneering, they blame SDP lead government for all the mess HDZ caused between 2004 and 2012, which is basically manged to nearly bankrupt Croatia (I am referring to the country not the airline).

      Only way forward for OU now is to get a smart executives from Lufhtansa and turn around OU in to a really profitable airline, Croatia (name) is a valued brand, very popular and well recognized brand, with international elites as well as general public, it would be a great time to use it and make profits out of it.

      14.2 million visitors are expected to visit Croatia this year, with 75-77 million nights and $11 billion revenue, with host of major international celebrities and super stars that have visited Croatia this year, I think its fine time Croatian airlines got its share of success, first thing that must happen is Kucko and his cohort of crooks must go, 2nd OU must loose 200 staff and increase number of winter flights, and destinations, OU can't serve only major EU hubs and hope to make money out of this, I just booked my tickets on London - Zagreb - London flights for Mid October, my return fare is £105 with OU, i simply don't see anyone making money on that fare, and no its not OU's business plan to bankrupt itself with low fares, they're simply put-competed by BA and EasyJet and these routes, I had cheaper choice with EasyJet for £97 return, but i also figured that train to Gatwick is around £15 and booking fee another £12, so OU is cheaper. BA wasn't much more expensive return for £127. there are deals to be made, i love how prices are so low when you have 3 airlines on the same route. We need competition, but OU can't sustain that kind of business plan they need to spread out they need new routes and loads of them, OU should be flying to Stockholm, Prague, Budapest, Barcelona, Lyon, Manchester, Glasgow, Birmingham, Nice, Oslo, Helsinki and few other destinations, at least twice weekly, do what Adria is doing as well, base an aircraft in Skopje and Pristina, money can be made but they need to have guts, OU under Kucko isn't what OU could be. Kucko must go!

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    5. DLH nedaje prostora OS a ne da da Ctn, meni je u toj prici jedino zao Pilota a kucko je mozda ukrao para i za unuke svoje ;)
      INN

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    6. +1 Anonymous 7:08 PM

      Btw., where is Purger?

      I just tried to book a Dubrovnik-Zurich ticket (Croatia Airlines) for 29th of September with 4th of October return, the price is around 3800 kuna (500 euros), terrible!

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    7. mozda ne sme vise da pise. 0d
      INN-NS

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    8. Of course I can, but I was in European majorettes' championship for 7 days working 0-24. I am back now so I have a lot of reading, than I will start to write again.

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  2. On paper the airline is a gazillion times a better investment than JAT was.

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    1. *Jat

      Yes but Etihad's purchase of Jat Airways was a political move- that's the main difference.

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    2. It all depends on the price or the final deal. I think Etihad got a very good deal, the only deal under which somebody would ever buy such a mess JAT was. They got it basically for free + investment, ,debt free with government taking care of old employees. On the top of that, government still controls the airport etc.. In the case of OU, Croatian government I think expects the buyer to shell some dough plus invest in the airline. They'll never get a sweetheart of a deal when it comes to the airport charges. Even though they are major player at ZAG (coastal airports not so much) they are seeing lot more competition these days plus ZAG operator is in these for profit only.

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    3. OU is a very important player on the Coast, nearly 25% of all traffic in Croatia is generated by the OU, figure excludes Zagreb, problem is OU isn't big enough for Summer season and its too big for winter season, a paradox which has plagued OU for many a years.

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  3. What difference will one year make? If no one was interested a few months ago, why would anyone be interested now?

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  4. I don't understand deleting my comment - I mean we have read this article a milion times... They're never going to sell it - if it wasn't for that Kucko idiot who only cares about himself OU would be in much better position than Air Serbia or Adria are...

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    1. they use to say the same thing about JAT ....

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    2. Some people simply forget where Jat was before they sold it, Croatia has more than 10 million tourists every year, domestic network, people travel a lot, there's a potential, unfortunately it will be very hard to sell it!

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    3. Well if there are 10 million tourists, domestic network, people travel a lot, and if there is potential, then it actually should not be very hard to sell it.

      And yet, no specific interest is shown so far. Which means all those tourists and network are not enough to attract investors. Why? Because tourists come on charter flights and the local market is not big enough even when you add diaspora to it.

      A potential investor in OU would have to try and make a successful hub in ZAG + to outplay charters and LCCs in coastal airports. All of that in the increasingly deregulated environments of CEAA.

      Very difficult task in my opinion. Making a hub in ZAG with VIE so close to it would simply not work. And outplaying charters and LCCs on coastal routes would require huge investments with no result guaranteed.

      That is why OU will continue to run in the state hands or will be sold to an investment fund on which end you would smell some rich guys related to the state.

      Ultimately what matters is that the planes fly and the airline works on a zero margin or slightly below it (which the government can easily cover). Big expansion plans would probably have to wait for some major reshape of the airline industry.

      Anything goes of course, but this seems the most likely scenario to me.

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  5. So the government is selling Croatia Airlines while Kresimir Kuscko is ordering Embraers, opening new routes and planning long haul flights in the future. LOL

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    1. Then you can make the conclusion that Doncic and Kucko have no idea about flightbusiness!!
      Actually they both have to be kicked out!

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    2. @AnonymousSeptember 15, 2014 at 9:40 AM

      OU isn't ordering new aircraft or starting long hull flights, who told you that ?

      OU has ordered 4 A319 and these will enter service in 2016/17, they might lease one or two more smaller aircraft but only over summer season, but they do that almost every year, they didn't do it in 2013 and 2014 for obvious reasons, but in the pat they did as regularly as a clock work.

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  6. I don't see where this obsession to compare OU with JU comes from. Do you realize that when you insist on saying how OU is so much better than JU was, you will make it only more embarrassing when there are no people interested in the airline?

    Let's be realistic. The time to sell OU has long passed. No airline is stupid enough to get it now when the airline will be sandwiched between two Etihad backed airlines- not to mention Austrian Airlines to the north.

    So what if Croatia has 10 million tourists every year? Those come on a seasonal basis and mostly on chartered flight (or summer only flights). It's not as if we are talking about Paris, Munich or Amsterdam which have tourists all the time.

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    1. It's not just tourists, there's diaspora, excellent infrastructure, slots, fleet, I said it will be very hard to sell it, what's your problem?

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    2. I have no problem I am just pointing out some facts.
      Any future investor will first look at the competition and when he sees that Croatia Airlines operates in a market where it competes with Air Serbia, Alitalia and Austrian Airlines he will not be so keen to get involved.

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    3. Compete with Air Serbia? Where?

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    4. @AnonymousSeptember 15, 2014 at 4:39 PM

      I think he means on Dubrovnik Belgrade and Split Belgrade seasonal charter flights :D lol JAT has what 18+14+6 flights out of three airports each summer and suddenly they're biggest players on these airports :D

      Nationalism of some people here is beyond stupid. Air Serbia has middle east and balkans sorted out of Belgrade, OU's main problem is they fly to main EU hubs without many other routes to play with, these hubs are heavily contested by bigger players, British, KLM, Air France, Lufthansa.... OU needs to figure out its marketing plan cause right now they're bleeding money just so they can stay in the game, they've been out-competed long time ago.





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    5. I did not mean to compete with them in cro airports but in the bslkan market. ;)

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    6. @AnonymousSeptember 16, 2014 at 1:17 AM

      Is OU present on Balkan markets is the question you should be asking, the resounding answer is not really.

      With few weekly flights to Sarajevo, Skopje and Pristna, not sure you could call that a real network, OU's priorities are the EU, so Balkans plays a minor role in OU's network

      Adria on the other hand is trying to build a good and sold network in Balkans and they're the one AS should be watching if they're talking of competition, although Wizz air has taken the largest share of the market.

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    7. Excuse me but let me reminds you that Croatia, Greece, Bulgaria and Romania are both EU and Balkan states.

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    8. @AnonymousSeptember 16, 2014 at 12:43 PM

      totally irrelevant what you think, what matters here is business proprieties of an Arline, in this case OU, do they see Balkans important for their business strategy, from their network it seems it doesn't.

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  7. It won't be embarassing, people in Croatia are not as obsessed with their national carrier as the Serbs are with Air Serbia, the state already gave OU so much taxpayers' money, if they go bankrupt, who cares, someone else will step in!

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    1. Why shouldn't the Serbs be obsessed/proud with their national carrier? It's a normal thing just like so many Turks feel proud of TK or Germans of LH.
      If you had reasons to be proud of OU you would be.

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    2. People from Serbia don't care about Air Serbia and know very little about aviation in general. It's just the few hardcore fans here who give the impression that someone is obsessed with the airline.

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    3. Hmm if you pay close attention to Air Serbia's social network you will see how they managed to involve a lot of people who have no link to aviation.
      In my opinion that's a great achievement.

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  8. "We can offer a majority stake if a buyer is from the European Union. We have received some queries”, Mr. Hajdaš Dončić explains.

    Will Croatian governments ever get out of prejudices and the discrimination? What the Armchairs!

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    1. It has nothing to do with the prejudice of croatian government - fool ! EU regulations define that a majority of shares of an EU airline may only be sold to an EU buyer. Rest of the buyers (outside the EU) may buy up to 49% of shares, maximum thus not allowing them to become main stake holders of any EU airline.
      Protectionsim - but not by CRO govn't...

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    2. No prejudice or discrimination. Croatia belongs to ECAA aka 'Open Skies' under which the majority stake of a government-owned carrier can only be sold to another carrier provided that this other carrier also comes from ECAA meaning the European Union.

      To the buyers outside of ECAA/EU they can only offer 49.9% of shares without formal control.

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  9. OT It seems Air Serbia forgot to renew its domain name. Try www.airserbia.com and see if it works for you.

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  10. www.airserbia.com

    Somebody really needs to get fired over this. Say the entire Corporate Communications team? So amateurish...

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    1. No, that should not be their job. Air Serbia needs CIO that reports directly to CEO, instead of head of IT reporting to CFO as it is now.

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    2. Reporting to CFO? Why would IT report to CFO?

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    3. I don't know what happened, but it works perfectly fine now, I just tried it...

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    4. I guess they cashed something in the vicinity of $7.99 for the extension...

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    5. Why is IT reporting to the head of Finance? That's not so uncommon for small/mid size organizations. In some cases, organizations treat IT primarily as a cost center, so CFO is a natural fit for IT cost cutting exercises.

      However with major changes at Air Serbia, delayed projects (like online check-in) and nasty surprises like this domain incident, CIO underneath Mr Kondic would be better positioned to fight for IT priorities.

      On the other hand, I have seen far worse, from IT reporting to head of Marketing (CMO) or even reporting to the head of HR!

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    6. I was head of IT in several companies, even startups (abroad) and I never reported to the CFO. I was always reporting directly to CEO and I was also always member of the core management, so I could know what's going on and what the plans are, as it all directly affects IT. True, these were internet/online companies, so IT was our main priority, but in general IT cannot be considered a cost center. Unless you want things like this today with Air Serbia to happen.

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    7. AirCEO - I can understand your ill informed conclusions, particularly as they relate to supposed 'delayed projects, such as online checkin'. However, let me correct you. There is no delay here at all. On-line checkin ability is tied to the PSS. In JU's case, they use Amadeus and have a deal in place until end of 2016. Unfortunately, this was signed by the previous mgt and it did not include an on-line checkin module. Even if the new mgt team now want to introduce it, the earliest that Amadeus can deliver on it is 18mths, due to their current pipeline of customer commitments. By then, JU will be in the market evaluating new gen PSS systems, so things are not always what they seem to be and it is easy to make such throw away comments, without having the sufficient background and knowledge of the facts...

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    8. Air Serbia already moved check-in functionality to SabreSonic back in February. Etihad is also on Sabre, Dane worked for Sabre, it makes sense. Now the travel agents in Serbia were totally hoked on Amadeus, that's a different problem. There's no denial online/mobile checkin is missing from the picture and should have been here already.

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    9. Even small airlines such as Astra in Greece have online check-in. Obviously Air Serbia's pets will try to find excuses to justify this major flaw.

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    10. Let's assume all of this Amadeus info is correct. Since Air Serbia exercise was well under way behind the curtains in March of 2013 (from branding and fleet decisions to finalizing contract), if Amadeus was asked at that time (under some sort of NDA) to start effort on online and mobile check-in, they would have been finished 18 months later, which is right about now. Something is not right.

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    11. Let's assume that what you write is correct, then that is a question for the previous mgt team which was in place at that time, as to why they didn't invest in online checkin. The new mgt team wasn't officially in place and running the business until Sep 2014. They took a decision to change the DCS to Sabre in Oct 2014, which was a necessity due to the system in place at the time - Gaetan - expiring by March 2014. The Amadeus host (or reservation system), was another matter altogether. That contract still had 3 years to run and Amadeus wouldn't play ball in offering its online checkin, unless the new mgt team extended the contract for another 5 years on its terms. Under those circumstances, no one was going to sign such a contract extension without going to market with an RFP to what the competitors would offer. So you see, things are never as they appear to be. Armchair critics are rarely right .... but it is their right to criticize, irrespective ....

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    12. Apologies, dates above are wrong ... new mgt team was in place Sep 2013, not 2014... Similarly, the decision to adopt Sabre DCS was taken in Oct 2013, not Oct 2014 ...

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    13. Don't get me wrong, I am not here to criticize Air Serbia, but it pains me to see all kinds of competitors using online check-in as a selling point against Air Serbia. I doubt that feature alone could generate significant bottom line impact, but you have to agree online check-in is a norm in today's airline industry.

      So it looks like Amadeus refused to generate extra revenue for adding online check-in for the remainder of the 3 year contract? In my experience (from another field), vendors that leverage existing contracts to bully customers into unfavourable decisions always end up being sore losers at the next contract negotiations or RFP. If Amadeus already saw writing on the wall with Etihad going with Sabre a year before, someone over there should at least wonder why did they miss the opportunity to upsell online check-in functionality for at least three years? That's a bunch of $$$ missing on Amadeus' sales reps quota... or at least that's how it looks like from the armchair :)

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    14. Yep, you are right .. that's why in all probability, Air Serbia will go with Sabre as their host system .... Through Etihad and the Etihad group, they will leverage a super deal ... can't blame Amadeus though - I would've done the same thing in the hope that the carrot of online checkin would have swung them to extending the contract

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    15. Thank you, really enjoyed this chat. If I can offer any other advice (from the armchair), I am reachable at AirCEO2014@gmail.com.

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  11. CTN ako se ne promeni za 1 godinu( mozda i pre) bice mu uskoro sahrana nazalost.
    Jos ako su istinite te price za AGX ima da bude u mocnom meljacu od JU-JP-AGX-OS gde ce se tesko izboriti,AHAHAHAH video sam na fb kako Hrvati nude CTN Austrianu a AUA nezna sta ce od sebe.
    Jedini potencijalni kupac za CTN moze biti RYR zato sto su im propali razgovori za CYP i +RYR je iz EU =D
    INN-NS

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    1. "AGX u mocnom meljacu" je smesno koliko i tvoje "AHAHAHAH"

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    2. Vidio si na Facebook-u kako nude OU Austrian-u? Misliš da će Qatar ili Etihad kupiti propali Aviogenex, jesi li ti normalan?

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    3. Ima veze pa zna. ;-)

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  12. croatia airlines je vec jednom imala problem da dobije partera, neznam dali ce ovaj put isto biti, uglavnom srecno!!
    pratite nas cekamo slike i video snimke

    https://www.facebook.com/pages/ExyuPlanespotters/251653228378221

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