Government outlines Croatia Airlines plans

State to privatise Croatia Airlines after stabilisation

The newly formed Croatian government has outlined its plans for the national carrier, which could see its privatisation process pushed back. The Croatian Minister for Sea, Transport and Infrastructure, Oleg Butković, says the airline should first stabilise its operations and business before it is privatised, noting that this can only be achieved by increasing the carrier's competitiveness and strengthening its market position. Once these conditions are met, Mr Butković believes a strategic partner should be found with "extensive experience in the commercial aviation sector, which would ensure network expansion and market share growth". According to the minister, a strategic partner should support the Croatian tourism industry but also ensure year-long operations and invest in the carrier's fleet.

Croatia Airlines completed a four year restructuring program on January 1, which has seen the company return to profitability. It is believed it recorded a small profit for a second consecutive year in 2015, although its results are yet to be made public. The previous government, which unsuccessfully attempted to sell the carrier once, selected the International Finance Corporation (IFC), the World Bank’s investment arm, to seek out potential investors by October 2015. At this point, it is unknown whether the IFC has come up with any prospective buyers. According to media reports last year, the IFC entered talks with Lufthansa, Turkish Airlines and Aegean Airlines over the possible acquisition of Croatia Airlines. Both Lufthansa and Turkish Airlines have denied such claims, while Aegean refused to comment. The current management, headed by Krešimir Kučko, is in favour of the airline being recapitalised, rather than being taken over by another carrier. Recapitalisation would entail changes to the airline’s capital. “The arrival of a strategic partner won’t generate much money for the state but will allow Croatia Airlines to develop at a quicker pace”, Mr Kučko noted.

Croatia Airlines will expand its operations this summer with the lease of regional aircraft and the development of its European network. “For quicker growth and a return to the position we once held, but lost due to restructuring imposed by the EU, fresh capital is certainly welcome and it should come through recapitalisation. If we are to go at it alone, we will develop as well, but it will be at a somewhat slower pace", Mr Kučko previously said. Originally, the former government planned to decide on the carrier's privatisation model by this spring, following which an international tender would have been launched in order for interested parties to submit binding bids. As a result, the privatisation process would have been completed this summer.