Tuesday, April 18, 2017

Croatia and Montenegro Airlines eyed by same fund


A European fund is considering investing jointly in both Croatia Airlines and Montenegro Airlines in return for shares, EX-YU Aviation News has learned. According to sources, the fund is pondering over the potential investments but has made contacts in Croatia, which it has deemed as a higher priority market due to its potential and size. Although the two airlines differ in various aspects, the investor has recognised that both have a similar passenger structure due to the existing tourism industry in the two countries. The fund has limited investments in the aviation sector. Currently, the only national carrier in the former Yugoslavia which is owned by an investment and restructuring company is Adria Airways, which was purchased by Munich-based 4K Invest last year.

Croatia Airlines' CEO, Krešimir Kučko, recently said that the carrier is in contact with financial institutions and investment funds over its future and could draft a proposal to its majority owner, the government, over plans to seek a new strategic partner by year's end. Mr Kučko noted that following its restructuring, Croatia Airlines is now a "stable and prospective company with a clear direction for future development". On the other hand, in February, Montenegro Airlines was removed from a list of state-owned companies slated for privatisation this year due to low interest. However, the governemnt has said it will add the company to the list once there is sufficient interest.

Several years ago, Croatia Airlines and its Montenegrin counterpart drafted plans to strengthen their ties. Montenegro Airlines was to commence services from Podgorica to Zagreb and feed Croatia Airlines' Western European network. Local media reported that the Croatian carrier was also interested in a stake in Montenegro Airlines. However, several months later, the Montenegrin national airline changed course and dropped its plans for closer cooperation with the Croatian carrier, opting instead to work with Air Serbia and the Etihad Aviation Group. In 2012, Croatia's former Minister for Sea, Transport and Infrastructure, Siniša Hajdaš Dončić, announced the possibility of merging Croatia Airlines, Adria Airways and Montenegro Airlines into a holding company, similar to International Airlines Group (IAG), which was founded by British Airways and Spain’s Iberia. A year later, Croatia Airlines' Deputy Vice President for Marketing and Network at the time, Mirko Talović, said the Croatian carrier was willing to merge its operations with Adria Airways but that the move was blocked by politicians from both countries. He noted that the second phase of the airline’s development would have included a merger with Montenegro Airlines.

85 comments:

  1. Very interesting. Could this be a solution for both of them?

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    1. Why would it be bad? Elaborate.

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    2. Unlike some I don't see what Croatia Airlines has to gain from this.

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    3. But what does it have to loose? It's not Croatia Airlines buying MGX, what is being suggested is that they are owned by the same company. The two would just work more closely together. OU would be able to get feed off Montenegro Airlines' network. You would also provide much stronger competition to Air Serbia in one of its main markets which is Montenegro. I actually think OU has much more to gain from such a deal than MGX, which unfortunately because of its size and location will always play a feeder role if they are in the same groupation or owned by a bigger airline.

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    4. The issue I see with these two is winter. Let's say this materializes, what would the owner do with two airlines that have massive seasonality but have to fly year-round. The solution to all of OUs problems is turning some money during the winter time when they make the biggest loss and wipe out the majority of profits they accumulated during the summer. I assume the same issue is faced by MGX.

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    5. Agreed. OU had no positive effects would they merge. Getting an Embraer maybe but I am sure OU does not want it as the lease contracts of YM are said to be extremely expensive. It would also have to share the existing fleet with small YM. It would also inherit large YM debts. Would have to change to some two hub model for which the combined market is way too small.

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  2. Imagine if it's 4K Invest :D

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    1. Well then the plans to have Adria, Croatia Airlines and Montenegro Airlines under one roof would materialize. But I highly doubt 4K has such plans.

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    2. Adria is a name that could fit all three airlines.

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    3. @9:48
      Some people even after 25+years cannot stand the fact that the name Croatia, both for the country, and the company, exists, and will exist

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    4. Not at all. Leave politics out of it. I meant that if the three ever merged it would be best called Adria. BTW the name Croatia existed long before 25 years ago...

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  3. The smartest thing that could have been done was to merge Adria and Croatia Airlines. Both could have kept separate brands and similar networks to the one they have now but Adria could have gone back to its old roots and done charters from the Croatian coast during the summer. They have excess aircraft anyway and its more natural that they fly out of Dubrovnik, Split and Pula than out of Lodz. Both of them have similar fleets, are part of Star. Would have been a nifty airline group in my opinion that could have complemented each other perfectly.

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    1. Agree with you anon 9:05. And JP and OU cooperate quite a bit. JP provides planes for OU when needed and the other way around as well.

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    2. What's stopping JP to fly from Croatian coast or Croatia to fly from LJU without the merger?

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  4. I'm not big on investment funds and institutions buying airlines. It hasn't worked for most. But then again airlines aren't all that interested in purchasing other airlines at the moment.

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    1. There is airline acquisition activity at the moment. QR is actively buying up and have been eying OU for some time. An OU / QR tie up would be interesting and a big game changer in the region and potentially an excellent addition to oneworld.

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    2. QR is having huge problems getting Meridiana. I highly doubt they are on the lookout for more European airlines.

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    3. Huge problems getting Meridiana? Please explain? I haven't read anything of sort and would like to know. Thanks in advance

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    4. Yes huge problems. They are unable to finalize the purchase because of a dispute with the unions. It will soon be one year since takeover talks started. Their negotiating position will became a lot more difficult with all of the mess happening at Alitalia, which has become a huge political issue in Italy. Original acquisition was supposed to happen a year ago, then it was moved to October, then it was moved to January, now it has been moved until further notice.

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    5. Thanks for the update. Yes I agree dealing with Italian unions is an impossible feat and AZ is on the verge of grounding its fleet. I doubt that QR would have these issues with OU.

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    6. I agree they wouldn't have such issues with OU. In fact I think that would have been a much smarter and safer investment than Meridiana.

      Who knows. I would never rule anything out in this part of the world. I will admit I was the first to laugh when I read on here that Etihad is getting a stake in Jat.

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  5. It would be a stronger and more competitive company.

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  6. I see Adria and Croatia Airlines as more of a natural fit then Croatia and Montenegro Airlines.

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  7. Can this even be done? Croatia is part of the EU, Montenegro isn't.

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    1. So? What does that have to do with anything?

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    2. British Airways and Iberia are owned by the same company and the UK will soon be out of the EU. So EU membership has no bearing whatsoever.

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    3. Ofcourse it does ... to maintain flag carrier status, Montenegrin nationals must hold 51% of the company.

      It doesn't matter for flying into/out of the EU, but it sure does for non-EU destinations such as Russia and Turkey

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    4. Who said they would by a majority share? They could buy 49%.

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    5. No one is saying that - just responding to / clarifying anon at 9.14am point that Montenegro not being in the EU has alot to do with how any possible deal would need to be structured

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  8. And where does that leave Lufthansa in all of it?

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    1. It leaves them in a position of being one of the most powerful companies in the world. Why is there this notion that Lufthansa must buy Croatia Airlines? If they wanted to, they would have done it by now. Otherwise they can base 4 Eurowings planes in Zagreb and get the same feed they are getting from OU at the moment.

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    2. I guess because LH and OU have always had close ties. No notion that LH 'must' buy OU however a good addition to their airline group.

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  9. Interesting to see how this develops.

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  10. I wish them both good luck. Both have tried to get privatized on numerous occasions and like someone said above, this could be a solution for them. Would make things interesting in the region.

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  11. I assume this would happen only if the Montenegrin government wrote of all of the airline's debt.

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    1. That's the only way anyone would buy Montenegro Airlines.

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  12. Some form of consolidation in the ex-Yu among airlines would be an interesting concept and new angle. Let's wait and see.

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  13. This idea has been going on for a few years. Obviously some foreigner had to come in to make it happen.

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  14. Micro state airline like MGX will never work. Therefore linking up with another airline, in this case Croatia Airlines would be a good idea.

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  15. " year later, Croatia Airlines' Deputy Vice President for Marketing and Network at the time, Mirko Talović, said the Croatian carrier was willing to merge its operations with Adria Airways but that the move was blocked by politicians from both countries."

    Of course it was blocked because it was too big and serious of a project for our governments and would require getting rid of political backed management.

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  16. @Ex-yu:
    I live near the old Headquarters of MAT Macedonian Airlines in Skopje and since last week there is an ongoing refurbishement of it. There is an advertisement in it with the first logo of MAT and a new company name called Aviatica (www.aviatica.mk).
    Do you have more information about this?

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    1. They seem to be a consulting company using the old MAT logo.

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    2. it will be great if they revive it :)

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  17. I doubt it that this will materialize.

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  18. It might actually very well be 4k invest.

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    1. I think they have their hands full with Adria.

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    2. Hehe, well if the government pays them, they might consider it ;).

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  19. Replies
    1. haha :D I see what ou did there.

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  20. MGX could really use some of those Dashes and OU could really use some of those Embraers.

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  21. What would a 'holding company' actually achieve for these two carriers if they are still allowed to make independent decisions and run competitive routes? It does nothing to solve the inherent problems facing each airline.

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  22. i would love what these sources are?
    this deal seems highly unfeasable

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    1. Why do you think it's unfeasible?

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    2. it just to complicated and i don't see much sense in buying and combining these two.

      some reasons just from top of my head:

      - i don't see natural synergies in combining there two except for the apparent ones you would get merging any two airlines (some airport discounts on pax traffic, stronger negotiations position with supplier (but still negligible compared to serious 100+ fleet companies) and cutting some higher and middle management). for example, seasonality would be crazy if you put these two networks together. also no fleet match.
      - YM is a loss maker, very hard to turn around. it would be much smarter for anyone to let YM die in a natural way and then to slice up that small market.
      - YM is is in poor financial conditions, montenegro government would need to take over that debt
      - YM has started to tie-in with EY, now all that work needs to be undone. new YM CEO had such a bad contract with Dinkić who was suppose to advise them in their relation with EY, with this he would need to also throw that away
      - you would need to undone this CS they put in place with JU
      - politics, politics, politics
      - investment funds don't have a good track record, especially in europe. bigger company would be a better takeover candidate.
      - also, it would be harder to justify to the public this investment fund takeover, especially in croatia

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    3. Well the article says that Croatia Airlines is a priority for them and that they have made contacts there. That makes sense because Kucko said a few weeks ago they were in talks with an investment fund. Montenegro might just be some plan down the line.

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  23. I actually think it is a good idea. Good luck.

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  24. Who knows what will happen with a change in management at OU.

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  25. We need 2 players! One multinational Balkan SAS and one lowcost that covers whole of Balkans as well!

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    1. Please no "Balkan SAS". As for the LCC you have Wizz Air.

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  26. The fund is called "We love to lose money" and is based off shore.

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    1. Do you mean "fund" or "airline"? If airline it has to be Etihad.

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  27. Doubt anything will come of this and if it does than I would be worried. Investment funds are just legal fraud and I am just waiting for the day 4K announces an overly priced IPO for Adria. This will be the beginning of the end. Who know ms, maybe it is 4K and maybe they are looking to bundle OU at least in with Adria to make it more appealing. The end result will be the same.

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  28. No matter if it's the same fund or not, I hope both get privatized.

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  29. I have heard a rumor that it is 4k.

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    1. If it is, maybe those rumors that LH is behind it are somewhat true. They'll use 4K to clean all of the airlines and buy them/join them or something.

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  30. I think the Croatian government should organise an international tender and see who is interested in Croatia Airlines.

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    1. They already did that two years ago and no one applied.

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    2. Circumstances have changed. Back then OU was still in restructuring.

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  31. OT
    LH1410 A320 FRA-BEG almost completely full yesterday, I only counted 3 empty seats, LF 98%

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  32. So what happened with the money that was given to IFC to find a strategic partner for OU?

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    1. It ended up in IFC's pockets.

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  33. I can see the reaseoning a company would have to acquire both. I actually think that would be Montenegro Airlines's only chance

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  34. Heard in sjj over the weekend that some new company called air bosnia have contacted the sjj regarding permit to fly sjj-spu and sjj-dbv with some 19 seaters

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    1. That would be amazing!

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    2. Another Bosnian Wand Airlines. Don't get your hopes up.

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  35. YM ne vredi nista ima samo dugove. Moze Kucko da se poigrava sa njima za svoje potrebe. Cim pre zavrse sa njima crnogorci ulazi im RA i sl.

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  36. If the three were to merge has any one thought maybe ZAG becomes the new hub for them all???

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  37. This is bad for both companies...

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  38. How "stable and prospective" can they be if they are looking for a partner who has funds ?

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