State invites expressions of interest for Adria

Slovenia formally puts Adria Airways stake up for sale

The sale of national flag carrier Adria Airways has entered the next stage, as its privatisation advisor, KPMG, has issued a call for expressions of interest for a 91.6% stake in the company. "Adria Airways is a unique investment opportunity being a European national flag carrier with a global reach and a recognisable brand name", KPMG said as it published the call in the “Finance” business newspaper. Nearly 70% of the company is directly controlled by the state, while the Bank Asset Management Agency holds an almost 20% stake and the Slovenian Sovereign Holding a 2% share. The owners signed an agreement on the joint sale of a combined 91.58% stake at the beginning of January, while KPMG was selected as the financial advisor in the sale in March.

This is the second attempt at selling Adria, after an international call for bids published in August 2012 failed. Back then, the government offered 74.8% of the airline’s shares and interested parties had until September that year to submit non-binding bids. The Assets Management Agency confirmed that ten parties submitted offers but declined to give out their names. The CEO of Adria Airways, Mark Anžur, previously said it would be best to offer the carrier to small airlines or financial investors, as big European players have "problems of their own". During the first half of the year, Adria Airways handled 549.272 passengers, an increase of 15% compared to the same period last year.

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POTENTIAL AND NONPOTENTIAL INTEREST

Air India

In 2011, Air India and Adria Airways signed a Memorandum of Understanding which was to see Air India codeshare on Adria’s regional flights, while, in return, the Indian national carrier would have operated some of its services to the United States via the Slovenian capital. Plans were set for flights to be launched either during the 2012 summer season or the 2012/2013 winter season. However, Air India requested lower fuel prices at Ljubljana Jože Pučnik Airport and an exemption from paying fees in order to launch services to the Slovenian capital, all of which were denied. In 2012, the Slovenian government, together with the petrol provider, Ljubljana Airport, Adria and Air India announced their willingness to get back to the negotiating table and discuss possible cooperation. In 2012, India and Slovenia signed a Scheduled Air Services Protocol. On March 2, 2015, Adria and Air India entered a free flow codeshare agreement. The two Star Alliance members currently codeshare on each other’s flights, with Adria adding its code and flight numbers onto Air India’s services between New Delhi and Frankfurt, while the Indian carrier has placed its flight numbers and codes onto Adria’s services between Frankfurt and Ljubljana.

China Southern Airlines

During 2013, China Southern Airlines was said to have been close to purchasing shares in both Adria and Ljubljana Airport, which was ultimately sold to Germany’s Fraport last year. The Chinese carrier was also interested in purchasing Adria’s Flight Academy, as the Asian carrier trains up to 3.900 pilots per year. At the time, the Managing Director of Ljubljana Airport, Zmago Skobir, said, “Big European airlines have no interest in small markets such as Slovenia but perspective and growing Asian airlines do. Ljubljana Airport and Adria could operate soundly if a deal is reached with the Chinese airline and traffic would grow”. However, Mr Skobir warned that a potential difficulty to the deal could surface in the form of political problems between China and the European Union.

Intro Aviation

German based Intro Aviation is believed to have had put in the strongest bid during Adria’s last privatisation attempt in 2012. Intro Aviation is a consultancy firm which has turned around several loss making airlines, including NFD (presently known as Eurowings) as well as dBa and LTU International Airlines, which have since been integrated into Air Berlin. It is believed that Intro Aviation would weave its magic again and build up Adria which would then be handed over to Air Berlin, Germany’s second largest airline.

Qatar Airways

Slovenian President Borut Pahor urged Qatar Airways to purchase a stake in the carrier in January, following talks with the Emir of Qatar, Sheikh Tamim bin Hamad al-Thani. Slovenia’s former President, Danilo Turk, initially proposed for Qatar Airways to invest in Adria back in 2009. A year later the CEO of the Qatari carrier, Akbar Al Baker, ruled out a possible acquisition following talks with Adria’s management, noting that Qatar will instead focus on organic growth. However, last year, Mr Baker said the airline is again pursuing acquisitions in foreign airlines.

Royal Jordanian Airlines

In 2014, Adria and Royal Jordanian Airlines signed a cooperation agreement under which the Slovenian carrier provides connecting flights to passengers between Ljubljana and Amman via Amsterdam, Frankfurt, Istanbul, Munich, Paris, Vienna and Zurich. In 2008, Jordanian was one of three companies to submit a bid for a 49% stake in B&H Airlines. The airline’s bid was ranked second with a mark of 32.2 out of 100, behind Turkish Airlines which subsequently won the tender procedure.

Turkish Airlines

In 2014, Turkish Airlines ruled out any interest in acquiring stakes in carriers in the former Yugoslavia following its experience with B&H Airlines several years ago. Mehmet Baspinar, Turkish Airlines’ Vice President for Marketing and Sales in Eastern Europe and the Balkans, said at the time that strict European Union laws and regulations, which are enforced across the region, forbid the Turkish carrier from becoming a majority shareholder. As a result, it cannot effectively enforce its strategy, as was the case with B&H Airlines.