Tuesday, January 19, 2016

4K Invest to buy Adria for €100.000

Adria Airways finds buyer and secures capital injection

The German investment fund, 4K Invest from Munich, has signed a contract for the purchase of a 91.58% stake in Adria Airways at a price of €100.000. The new shares will be distributed by April 20, after which the German fund is to complete the acquisition pending regulatory approval and the implementation of a series suspensory conditions. Details of the conditions were not immediately available. Furthermore, the airline's shareholders approved a capital injection amounting to 4.1 million euros, of which one million will be provided by 4K Invest and the remaining 3.1 million by the Slovenian government. 4K Invest specialises in acquiring medium and large-sized companies with poor operating performance. It aims to establish real value creation through systematic restructuring. Although it has so far restructured over 200 companies, Adria becomes its first airline venture. The Slovenian government has managed to sell its biggest assets in the aviation sector, with Ljubljana Jože Pučnik Airport operated by Germany's Fraport, and the aircraft maintenance company, Adria Airways Tehnika, now run by Poland's Linetech Holding.

Speaking at today's extraordinary shareholders' meeting, where a vote on the capital injection was taking place, Adria's CEO, Mark Anžur, said the company recorded a net loss of some five million euros in 2015, following its first profit in seven years in 2014. Mr Anžur is confident the airline will post a three million euro profit this year, fuelled by its contract with the Estonian government to provide commercial and operational support to Nordic Aviation Group. The Slovenian Sovereign Holding (SSH), which is overseeing the airline's privatisation process, says Adria will have to carry out additional measures to insure liquidity despite the capital injection. However, the SSH noted that Adria will essentially preserve its existing business model. "Adria Airways will continue to focus on the Slovenian, Albanian, Kosovan and Macedonian markets. It will operate with modern aircraft and offer global connection through the Star Alliance network. Adria will continue to develop a hybrid business model. The new buyer will renew the airline's fleet and grow its network. Adria will continue to offer services in Estonia as part of its existing obligations", the SSH said.


Today's vote marked the culmination of Adria's second privatisation attempt, after an international call for bids published in August 2012 failed. Back then, a total of ten parties submitted non-binding offers, although the bidders were never publicly revealed. However, it is believed that Welcome Air, a small Austrian-based airline operating two turboprop aircraft and the Dutch company Panta Holdings, which in 2012 purchased the German airline OLT Express (which has since gone bankrupt), were among the bidders. Also rumoured to have been interested at the time was Germany’s Intro Aviation. Unlike two years ago, Adria is no longer under investigation by the European Commission for receiving state aid.

75 comments:

  1. Go Adria, good luck! Hoping for the news update in the afternoon after the decision has been made!

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  2. Good luck. Whoever buys it I hope they preserve the brand and don't go changing the name.

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    1. I also wish they keep the name. I am still disappointed that Jat was changed to Air Serbia.

      Jat was certainly more than just an acronym. Among people in the diaspora that I know, Jat simply means a domestic airline. I don't think I have heard my parents ever say Air Serbia, despite them flying with ASL, they always just call it Jat.

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    2. Jat had a horrific image abroad. Us locals may have sympathetic memories of it but outside of the Balkans it was something of a joke. Exactly as Hogan called it - a broken brand. It had no future and laying it to rest was a smart move. It deserves a very special place in the aviation history of this region and that's it.

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    3. The way I see it, overhauling Jat as a brand was certainly possible. Many brands have reinvented themselves to become more liked.

      And I think overall, Serbia as a brand is much more disliked than Jat ever was. Of the Americans I know, most either don't know that Serbia exists, or they have negative feelings.

      Overall I feel like ASL should have put much more emphasis on Ex-Yu, Romania, Bulgaria, and Greece, and I think that an overhauled Jat brand would be more successful there than Air Serbia is.

      And when I say overhaul Jat as a brand, I mean an entirely new and professionally done identity, with an entirely different image.

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    4. broken brand or not, just look at Iberia now.

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    5. If you look on amadeus it still says JAT Airways when looking up flights.

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    6. Abandoning the JAT Airways was another bad decision by the JU/EY management teams.

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    7. None of the people I know ever had a positive impression of Jat Airways brand in any way. It remained plagued with politicized management, delays, inconvenient timetable, delapidated fleet, etc.

      JAT as JAT Yugoslav Airlines had certain cache among flying public of the past but that brand has been effectively abandoned ages ago. They tried to revive the JAT spirit with those lovely commercials featuring Vesna Trivalić & Co. but the product itself remained subpar on so many levels.

      Perhaps the previous managements could have developed JAT as a brand (similar to KLM) but sadly, none of them tried.

      I tend to be emotional as well but reality stepped in when I compared my Jat Airways flights to Paris and Berlin in 2011 and the same flights I took in 2014/2015 on Air Serbia.

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  3. It really is a 'do or die' situation. Because if they didn't raise this money they would have to liquidate the airline and that would be bad for everyone involved.

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  4. I might be sounding like a broken record but to me it would have been best to have merged JP and OU. Make Zagreb the main hub but keep the Adria name and preserve existing routes from LJU. In time bring in YM to the mix.

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    1. Sounds good in theory. In practice probably wouldn't have worked. This is ex-Yu after all.

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    2. Zasto bi dve propale kompanije napravile jednu dobru?

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    3. Zašto bi jedna propala kompanija napravila jednu hibridnu, kvaziprofitabilnu, "na teret državi" kompaniju?

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    4. It can still happen, you never know.

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  5. Would be great if they surprised us all and tell us the private investor is Qatar Airways :P

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  6. It's an interesting way to sell the airline. From what I'm hearing the investment fund will pay a bit more (around €100,000) for Adria, not €1 as previously thought after this recapitalisation is done. Could this privatisation model work for Croatia Airlines too?

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    1. Hope not, what these investor funds usually do is as they say put lipstick on a pig. Make the company look like its worth a lot more than it is and resell it or float it at a huge profit to the fund. The companies (not just talking airlines here) thereafter have a real difficult financial period and many don't survive when stake or shareholders finally realise they way overpaid for their stock.
      Its actually a very common story and legal because the investment funds never cover up or hide the financial state of the company but sell a real good story.

      For example, lets say their total investment in Adria was 5 million Euro's and after tiding up and cutting costs they float the company with a market cap that includes all of Adria's assets.... Could be with land aircraft slots etc 100 million Euros. Not bad but for the investment fund.... sucks for the poor buggers that bought the shares.

      I hope this does not happen with Adria so I would really not want to see it as an option for Croatia Airlines.

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    2. Saceka da Karamarko sedne u premijersku stolicu i kada izrone dugovi CA.

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  7. This could be good news for Maribor. A new owner will change the direction of the company and might focus more on Slovenia rather than every other country in Eastern Europe.

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    1. Doubt it. I'm sure Lodz, Pristina & Tirana base will stay.

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    2. Private partner needs to make Adria profitable and I don't think bases like Lodz are all that profitable.

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    3. I think those bases are more profitable than Maribor or even some routes from LJU. The thing is Adria gets nice subsidies from all those airports. They wouldn't base a plane there for the fun of it. But I do agree that having planes based at four different airports in different places on the continent might make logistical problems. We will see if there are any major changes to the business. I think they need to start cutting costs from the inside - management and people hired by the company for no reason at all.

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    4. Agree 100% with last comment.

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    5. Best hopes for MBX tho...

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  8. What does Adria own? Does anyone know their assets? Thanks.

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    1. Flights school and I think they still haven't sold their share in Amadeus Slovenia.

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    2. oh and planes of course. But I think they only own 2 the other ones are leases or leasebacks.

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    3. They do? I think they don't own any plane at all exempt this CRJ200 which you can not even sell for 100.000 EUR

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  9. I think that this is the best way for all...the state as an owner and wothin taxpayers who will rid off Adria's burdons and for new owner who gets option to make Adria profitabile

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  10. I don't quite get this. The investor will get 91% of all Adria's assets for 1 million euro? Unless they get all liabilities as well this would make a very generous gift.

    And if Adria urgently needs 8 million and receives only 4, what will the new owner do about the remaining 4 million? Will they borrow it somewhere or will they try to cut costs for that much?

    This leads us to one more details which is further expansion. Does any of these investors have any funds to invest into expansion and growth? Looking at their overview provided by admin, I somehow doubt it. They are likely to seek profits first and fund any new routes from Adria's profits rather than their own pockets. So what will happen if any of the existing routes turn nonprofitable?

    Good luck to Adria and I hope some money will appear in this deal ultimately, because currently I can hardly see any of it.

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  11. This is Adria's 4th recapitalisation and let's hope its the final one.

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    Replies
    1. Seems only 4.1 million is being offered.

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  12. OT: A bit off topic, but besides ZAG, TAP is also suspending OTP and BUD and some other routes in Europe. Source: http://airlineroute.net/2016/01/19/tp-europe-s16/

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  13. Ok. It is, what ig is. Let's hope Adria will be able to function succesfully and hopefullx ot will be able to serve travellers better than it did hitherto.

    what bothers me about Slovenia's privatisation process is that they always declare in advance who they'll sell it to. Maybe they could get more money if they negotiated with all the potential buyers.

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  14. I know very little about EU financing rules. Can someone provide a little bit more details about what Adria must avoid in order to sway away from Malév scenario. In all of this I haven't seen much money invested, yet it must arrive somehow.

    I wish Adria and especially their employees all the best. We talk about routes and brands but IMHO saving jobs is what matter the most.

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    1. I think the company can be given subsidies by its registered state if it is following an approved restructuring plan and as long as the subsidies are within set guide lines.

      Now that just my assumption based on what I have read from different news articles etc over the years.

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  15. So Adria is sold...the new owner is 4k
    Stakes will be on it's account on 20th April

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  16. Who is or what is 4K??

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  17. OT SORRY - Air Serbia published profit of ~2mil usd for 2015 and didn't pay airport 22mil. Does that mean they created 20mil Usd losses?

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    Replies
    1. Admin will you be writing about this?

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    2. You wrote about this as an off topic yesterday. This was reported here before. It is stipulated as part of the takeover agreement - refer to paragraph three

      http://www.exyuaviation.com/2014/08/serbia-unveils-etihad-contract.html

      Furthermore, Air Serbia has not published its official profit margins for 2015.

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    3. So what if it was published such a long time ago? You should write that it actually happened and that foreign carriers are subsidizing our national carrier.

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    4. No they are not. Try curbing your hate for a single day or at least focus on Adria which is the topic today.

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    5. I have a question. Did they agree on the amount beforehand or was it agreed that whatever expense they make is written off?

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    6. Nadjite bolji izvor od kurira .
      INN-NS

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    7. Foreign carriers are subsidizing BEG's offering low/no airport charges to ASL.
      They don't like it and they are reducing flights.
      Both travelers and taxpayers are loosing out.

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    8. No airline would reduce filled flights simply to protest the state support to a state-owned airline. Many states provided - and still provide - loads of cash to carriers in their ownership, and of course no foreign carriers reduce their capacity to protest that.

      When foreign carriers reduce capacity they simply do it because they lose some passengers to their local competitor and find themselves in overcapacity. They reduce capacity to reduce costs, not because they want to protest. And when the local carrier loses some capacity they again decrease their own. Pure business. And very simple - unless your brain boils in hate.

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    9. Of course you are right. But you can not compete against company that is not paying nothing or just little amount of money to airport and in same time airport is giving them 22 million EUR. How you can compete against that. If Air Serbia would have those condition against Lufthansa in Frankfurt they would never fly there.

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    10. Wrong again. Whether they fly somewhere or not depends purely and simply on how many passengers they can get on board. It does not depend on benefits someone else enjoys in the airport. You have many airlines that simply receive huge cash injections form their governments - which is the same thing as if they received it from airport owned by the government - and foreign carriers still fly there. Of course they would be flying more if the local carrier was not subsidized but they will for sure grab whatever remains in the market.

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    11. Actually you are wrong. Let's take JU and LH on the segment BEG-FRA, which is one of the top O&D destinations out of Belgrade. Now, from the very start JU has an advantage because it's based in Serbia so it's costs are lower from the get-go. On top of that, the airline pays nothing to BEG which distorts the market even more. Even if both LH and JU charged €200 for a return flight, JU would be making much more money on the route eventually forcing LH to reduce flights.
      This also applies to all other destinations. Now, some airlines outsmarted them (Lot, Aegean...) while some others didn't.

      Despite not paying anything to the airport, JU still managed to suspend two routes, not launch two announced and to get totally beaten by Lot to WAW, by SU to SVO and they will most likely suffer quite a bit when W6 launches Baden Baden.

      All in all, JU has a decent enough product but it still fails to win a battle against another legacy carrier, it's been two years since Adria suspended BEG. For me it's incomprehensible how they managed to shrink their operations at such time. What can we expect when they start paying their fees? Will their be even more cuts? I highly doubt that it's then that they will start rapidly growing.

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    12. Anonymous January 20, 2016 at 7:49 AM
      +1000

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  18. Basically this will be more of the same. Nothing will change at Adria.

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  19. How can this model be good if they made a loss of 5 million in 2015?

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    Replies
    1. Apparently the loss was aggravated by Russia crisis. I don't buy it one bit,

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  20. Wow, these are definitely tough times from small aviation companies especially those operating under EU rules. Think about it, Slovenian government practically paid 3 million for someone to take over this hot potato. And that might not be the end of it. God knows what they agreed to regarding the previously accumulated debt.

    Judging by this miniscule capital injection, investment is just to shore up cash reserves and make sure they can operate until the big changes take place. What are they going to transform it to is a big question. We know it can’t survive as a legacy airline, transforming it to LCC might be an option but that market is very crowded with some big players in the neighborhood. I see them as a much smaller company providing mainly charter and service like what they are doing in Estonia plus some LH feed. At the end of it all, fund will keep it for 3-4 years. If at that time they can’t sell it, they’ll just sell assets trying to recoup their investment and move on.

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    Replies
    1. Dakle Slovenija je prodala Adriju za:

      - 100.000 EUR
      - pri čemu 4K daje 1 milijun EUR investicije
      - država daje 3,1 milijun

      zapravo to znači da
      - Država nije dobila ni lipe
      - dala je kompaniju đabe
      - i još mora dati 3 milijuna EUR da ju 4K preuzme (3,1 milijun - 100.000 od 4K)

      Kolika je vrijednost Adrije? Ima li Adrija ikakve imovine?
      Zašto je država učinila ovako što?
      Jel stanje u Adriji toliko očajno, da je država platila da netko drugi preuzme vruči kumpir, pa bude evenutalno odgovoran za njeno zatvaranje ako ne uspije Adriju staviti na profitabilan put?

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    2. Ne vrede nista oni su dva tri puta vec bankrotirali od svog nastanka nego ih exYu vadi iz svojih pilicarskih pobuda. Nekada su vozili gastose i putnike na Jadrana za racun drzavne bezbednosti. Posle postali drzavna aviokompanija koja nikada nije zaradjivala dovoljno.

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    3. Purger,

      To je bilo i moje pitanje. Investitor je dobio Adriu i svu njenu imovinu. Ako im je cilj "očistiti" je i zatim preprodati, verovatno će dobro zaraditi na toj prodaji. Pitanje je zbog čega država to nije učinila već čišćenje uvek mora obaviti neko drugi a država onda ostane bez centa zarade.

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    4. The value of an airline (or any business) is simply the amount someone is willing to pay for it.

      Small national airlines that are awaiting privatization are a dime-a-dozen. Personally I wouldn't give a cent of my money for Adria because these airlines are money pits.

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    5. It is much harder for a government to "fix" anything because it is always subject to many pressures: from politicians who want to be reelected, from the media, from the unions, from other state-owned companies. But, any way... a pretty sad state of affairs for Adria.

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  21. Bice zanimljivo videti dali ce jos iko imati privatizaciju osim ADR i ASL.
    Jel zna neko dali ce ADR ostati u Star Alijansi i dali ce ostati ugovor sa Estoncima posto je ipak drugi Gazda sad
    INN-NS

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    1. Gazda je znao za ranije potpisani ugovor.

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    2. Sta ako nece LH vise to na to sam mislio .
      Ali dobro je za zaposlene sto su nasli novog kupca.
      INN-NS

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    3. JP will stay in Star Allaiance an fly for Nordic Aviation Group eighter.

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  22. OT: YU-API is flying again after the Wifi installation.
    YU-APA and YU-APG are to be done until end of winter timetible.
    Best wishes from Basel

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  23. OT

    I came across this brilliant video by Emirates! What an innovative and fun way to promote your business. :D

    https://www.youtube.com/watch?v=jAF2hZxdFRE&feature=youtu.be

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    Replies
    1. Hello Tomorrow in brand management :) Awesome!

      If I recall well, that was one of the publicity stunts in build up to the introduction of their second daily flight to Lisbon. Emirates will also remain Benfica's main jersey sponsor until 2018.

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  24. Why don't Adria try Kraljevo airport? They can try to base an aircraft over there and launch destinations such as IST, FRA, BER, ARN, ZRH or even code share with TK or LH?!

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    Replies
    1. Because Kraljevo is unfinished, unequipped and unready for any commercial flights.

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    2. And because Adria do not have a Serbian AOC and are therefore prohibited from basing an aircraft in Serbia and operating as a Serbian airline. They could fly there, just like any airline with whom Serbia has a bilateral air service agreement with, but they are unable to base an aircraft there

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    3. Wizz Air does not have a Serbian AOC and has a plane based in Belgrade and Serbian crew.

      Delete

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