Croatia Airlines’ privatisation stalls

Croatia Airlines awaits new owners

Just under a year after Croatia Airlines’ privatisation process began, plans to sell the country’s national carrier have stalled. The Croatian government announced its intention to resume the process this summer following a failed attempt late last year. Its initial plans to sell the airline represented a break from its previous policy to keep the carrier state owned. The Croatian Minister for Sea, Transport and Infrastructure, Siniša Hajdaš Dončić, recently outlined that the government will conduct a thorough analysis of the aviation market in order to identify potential investors before resuming the privatisation process. “We cannot allow for Croatia Airlines to be purchased by a predator, which would in turn destroy the company. Croatia Airlines needs a strategic partner and not a predator”, the minister said. He added, “Croatia Airlines needs to consolidate its operations and expand throughout region”.

Since the failed sales attempt late last year, Croatia Airlines has managed to post an annual profit, the first in years. However, it faces difficulties on other fronts. The airline has continued to see its passenger numbers decline and its market share in Zagreb weaken. Croatia Airlines welcomed 292.524 travellers on board its aircraft in the first quarter, a decrease of 6.5% on the same period last year. In addition, the consortium running Zagreb Airport warned the carrier it January it had six months to bring its business in order before the airport began courting low cost airlines. Croatia Airlines’ presence in the region has also declined with the carrier terminating services to Podgorica and slashing flights to Pristina and Skopje this summer season.

There have been varying opinions as to how Croatia’s national carrier should be sold. Only recently, the airline’s CEO, Krešimir Kučko, said the government should avoid adopting similar privatisation models to those used by the Czech Republic and Serbia for the sale of their respective national carriers. Mr. Kučko believes that Croatia Airlines should instead be recapitalised by local companies after its restructuring process is completed at the end of the year.

With summer already in full swing, it is likely the Croatian government will wait until autumn or the end of the carrier’s restructuring to resume its privatisation process. This time around it will send direct invitations to interested parties to put forward their bids. This is because companies from the far East rarely participate in tender procedures due to their corporate culture as seen in Etihad Airways’ recent acquisitions of Jat Airways and Alitalia. However, the Croatian government has a “plan B” if its second attempt to sell its national carrier fails. The airline will continue its restructuring program which has already seen the carrier cut its fleet by one aircraft, reduce its destination network by 7% and cut down on employees. In the coming year it would sell some of its slots and infrastructure and continue the search for a strategic partner. Mr. Hajdaš Dončić recently said, “You can’t persuade someone to invest in a company if they see no interest in it. We have to forget these stories that investors will spend their money in Croatia just because it is beautiful. They won’t. They will invest in Croatia only if they see an opportunity to make a profit”.