Croatia Airlines prepares for "difficult" privatisation


Croatia's former Prime Minister and current President of the Croatia Airlines Supervisory Board, Zlatko Mateša, has said the company is preparing for what will be a difficult privatisation process, with interest from foreign carriers expected to be low. "It would be best for the airline to be recapitalised because it will be difficult to find a strategic partner. This is because the European Union has a rule which states that carriers from outside the block cannot own more than 49% of a company from inside the Union. This immediately rules out carriers from places such as China, Japan and the Philippines which have shown interest in Croatia Airlines but cannot be serious partners as they are unable to control a majority stake", Mr Mateša said.

According to the President of the Supervisory Board, recapitalisation and a partnership with a European airline, for example from Poland, would be a good solution for the carrier. Recapitalisation would entail changes to the airline’s capital. This may occur, for instance, when a creditor exchanges a loan for a stake but does not require changes to the company’s management structure. The company could also be of interest to financial institutions, which are not linked to the aviation industry. "We are a regional company that does business globally and a large amount of revenue is made on offline markets. This could make it appealing to investors that are outside of the aviation industry. That would include any financial institution that wants to generate profits on investment", the airline said last year.

Croatia Airlines will seek a privatisation consultant in the coming weeks. The Croatian Minister for Sea, Transport and Infrastructure, Oleg Butković, said, "Croatia Airlines needs to find a strategic partner and we will commence this process. We have held talks with the company's management several times. As far as I am aware, a tender for the selection of a privatisation consultant will begin soon. They will give us answers to questions such as how, when and in what way the procedure should take place". He added, "This year is crucial in our search of a strategic partner". The previous government, which unsuccessfully attempted to sell the carrier once, selected the International Finance Corporation (IFC), the World Bank’s investment arm, to act as a consultant and seek out potential investors by October 2015. However, its search failed to provide any satisfactory results.

Comments

  1. Probably the worst time for workers to go on strike, not just because of the time of year but because of this planned privatization. No one is going to be interested to invest money in a company with hostile unions.

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    1. It isn't a good look but OU won't be put up for sale probably until 2019.

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    2. That should have been taken care of by current management. It is not Unions' fault.

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    3. @anon 8.46. Minister says

      "This year is crucial in our search of a strategic partner"

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    4. Hostile unions are not the only issue. Anyone that will invest will take a long hard look at your finances and the way you are generating profit.

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    5. Unless you are Etihad.

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    6. Or 4K invest

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  2. "According to the President of the Supervisory Board, recapitalisation and a partnership with a European airline, for example from Poland, would be a good solution for the carrier"

    Is he telling us LOT is interested?

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    1. No, he is telling us that they would like LOT to takeover. That said with LO expanding at BUD I don't think they would be too interested.

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    2. Is LO even in a position to take over an airline. How are they doing financially?

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    3. They took over Nordica.

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    4. Nordica is different, it is located within their sphere of influence and it was a good opportunity in order to stop airbaltic from further expanding in the region.

      It was during that time that BT started adding more and more flights out of TLL.

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    5. I don't understand LOT in general. They were on the brink of collapse just a few years ago and now they bought an airline, bought new planes, started new long haul routea. I doubt much changed in their finances.

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    6. From what I remember they posted a profit last year so it seems like they managed to turn the airline around. Mind you, they just got four E90, brand new, to be delivered by the end of 2018.

      LO understood that you can't shrink yourself into profitability. They worked on creating critical mass.

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    7. It certainly helps operating in a market the size of Poland.

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    8. LOT's main market is Warsaw because Poland is highly decentralized and other cities such as Wroclaw, Krakow, Poznan... have a lot of air-links by both legacy and lowcost carriers.

      The best thing LO has going for it is the fact Warsaw has become a mini economic center that generates quite a bit of corporate travel. I think Goldman Sachs has a Warsaw office.

      On top of that, LO has worked on turning WAW into a major hub. So far it seems like they know what they are doing.

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    9. LOT is the example that ASL should have followed.
      Instead it went for the "boutique airline" concept and failed epically.
      SMFH...

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    10. LOT will collapse in a matter of years. It's on very shaky financial foundations.

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    11. LOT did not take over Nordica. LOT is minor shareholder in Nordica's daughter company Regional Jet.

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    12. Lot is bouncing back, its foundation is getting stronger.

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    13. Both LO, A3 and BT are the antipode of what Air Serbia has done and they achieved that by launching all that 'strange' list of destinations and balancing their network offsetting seasonality to a maximum extent.

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  3. I get the feeling they are all pushing for recapitalization because it would mean the management would all keep their jobs.

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    1. I don't see Matesa's point. He says it will be difficult for someone to buy 49% because they won't have full control. But with recapitalisation they have even less.

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  4. It is no doubt that it will be difficult to attract interest. Main reason is that airlines are focused on different acquisitions. Norwegian now seems to be of number 1 interest.

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    1. Not true:

      No. 1 interest: Alitalia (easyJet/Delta/Air France, + Lufthansa, + Wizz Air, + Qatar in Air Italy)

      No 2. Norwegian
      British/Ryanair, + Lufthansa

      No 3. Volotea
      Wizz Air, + one American investor

      + Lufthansa interest in SAS and Condor.

      Stupid time for selling Croatia. Big players are concentrate on big game. Even SAS and Condor was put on hold.

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  5. Maybe Emirates has interest in OU :)

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    1. Why would they? And Tim Clark said just last month that buying airlines is not what they are going to pursue and that they burnt themselves by buying Sri Lankan Airlines

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    2. Perhaps only to take the pilots, with the amount of aircraft parked at DWC :)

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    3. They don't operate DH8 at Emirates.

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  6. Whatever they do they should not sell to a financial institution/fund.

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    1. Worked for Adria.

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    2. Why not? Short term their interest is to stabilise finances. Mid term to grow network, fleet, yields and passenger numbers. Long term - to sell best as possible

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    3. Jury is still out on Adria. 4K had grand plans for Darwin too and we saw how that ended.

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    4. Darwin seems to be a completely different story with some shady dealings from Etihad era but not really clear what happened. Time will tell, or not.

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    5. Shady dealings from ETIHAD era?? Sorry, but the only shady dealings were from the 4K era.

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    6. Well, if you compare the Adria from the previous years, at least now they have some sort of strategy they seem to be following, unlike running around like headless chicken, changing strategy every day.

      Even the finances seem to have stabilised, I'm sure workers don't miss the old times when salaries were delayed, etc.

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    7. I'm not big on investment funds and institutions buying airlines eithet. 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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    8. It is not so good story. Au contraire it is very fishy. Read in today article about it:

      https://tangosix.rs/2018/19/06/kolumna-alena-scurica-radi-li-adria-pametno-ili-ne/

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  7. I'm dispointed in the whole Croatia Airlines prioritization process. First of all I was hoping it would be much quicker, that there would be more interest because the airline certainly has potential. I think Garuda which was really keen to buy it would have been an excellent solution because it is based far away from Croatia and would not turn the airline into a feeder. Instead, Garuda would probably have fed Croatia Airlines traffic.

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    1. What did happen with Garuda?

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    2. Government was not interested in pushing it through unfortunately.

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    3. that was a wet dream of management: to find some investor to pour money in without any say

      but still, they are not over it yet. they keep repeating it over and over again to look for some passive investor to put significant funds into it. the investor should just invest a lot of money and then keep calm and wait until ou becomes successful and makes him a profit...

      not very likely!

      if there is any financial investor who would be interested in ou, then it would be some small fund specializing in restructuring (= cost cutting); but even a restructuring firm would not pay a lot for a 51% share, as there seams nobody out there shopping for tiny profitable eu airlines...

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  8. Eurowingslike model would be best for OU

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    1. All in all, it would make sense to become Eurowings-like subsidiary of LH. Government should really step in and help negotiate a good deal.

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    2. LH is now looking at Norwegian. Not sure they would have interest in OU.

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    3. That would be a major take over!

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    4. Europe belongs to Germany every single year...

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    5. LH/Eurowings would be a disaster for OU. They would be purely a feeder airline. Forget new routes.

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    6. it is just wrong timing for Eurowings;

      they are very busy at the moment with larger deals, and they neither do have enough planes themselves nor has ou planes (or crew for that matter).

      i am not sure, that eurowings-croatia would be mainly a feeder (for what exactly cgn, muc, fra, dus, vie???) they would rather do many touristic routes, because the croatian market is not really a market for business customers; the growing segment are the price sensitive tourists

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  9. They are telling us that this will be another failed attempt so some consultancy firm can just get a few extra euros in their pockets. The same as last time.

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  10. Time to stop playing around and replace this management, they have waisted enough time

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    1. Minister said 2 weeks ago they would be replaced. Still waiting...

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    2. Minister is completely uninterested in OU unfortunately.

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    3. Government in general.

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    4. They are "finding" CEO for 2 years now. It was in "two weeks" for 11 time till now. So, this time?

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    5. Maybe you should offer your services and see finally how does it feel like to run the company ?

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  11. What is basically the most expensive and useful OU product that the new investor can benefit from? LHR slots, Croatian coast routes? The Dashes?

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    1. I think Croatia's maintenance operations.

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    2. If they can find workers.

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    3. Most profitable sector probably.

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    4. I'm not sure Croatian coast routes can generate that much money with so much comoetition and generally low fares.

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    5. So, we can safely assume that OU is the most expensive airline in the Balkans?

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    6. I think it is diffocult to make that assumption, especially for the entire Balkan area.

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    7. The maintenance division could be of much greater interest to a potential investor than the airline itself.

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  12. Adria Airways was sold to 4K for 100.000 EUR - yes, 100.000. That's less than a new Merc. And before it was sold, the taxpayers chipped in 4 million EUR.

    4K allegedly has about 10 million euros in it's coffers. Some of this money is used to finance JP, which is still a loss making company. But if the state of Croatia recapitalizes OU and offers it to someone for 100.000 euros ... well, it really is slowly starting to look like another 4K takeover.

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    1. JP was sold at the market price. Leased aircraft, mortgaged office building and "know-how" on making losses year after year. And the taxpayers only payed 3 mio EUR in capital, the other 1 mio EUR came from 4K, on top of 100.000 EUR as mentioned.

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    2. JP was sold below the table. I'm surprized no interest to the media to reveal the background of this sale.

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    3. Well that is a diference between JU and JP. In Serbia we had everything thoroughly investigated by watchdog institutions and NGOs and then published by independent by weeklies and Insajder production. Not many people got to see it but still all is now public.

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    4. It cost "only" 3 millions EUR to give it to 4K. Shouldn't they pay something to Slovenia instead?

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    5. Well, it was the last 3 mio EUR the Slovenian taxpayers payed into the JP black hole and a very cheap alternative to continuous government ownership and pouring of tens of mio EUR every year (remember a year when JP was capitalised with 50 mio EUR?).

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  13. Spremite se za raspad OU.

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  14. If the strike goes ahead there will be sone tough times for OU. I hope not

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  15. So we could finally see Croatia Airlines privatization completed in 2019?

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    Replies
    1. It has been going on for years. I would not count on it.

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    2. Croatovanje

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  16. Ladies and gentelman, bankruptcy of Croatia Airlines just began. #pitty

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    Replies
    1. They have many assets left before any sort of bankruptcy can be considered.

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    2. Yea, a few engines and 4 LHR slots.

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    3. They still own some planes

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    4. Jat was in a bad shape 5 years ago yet every bank wanted to give a loan so do not rush with bankruptcy predictions

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    5. Exactly:
      5 20 years old planes without engines
      3 engines
      Techincs
      2 slots in LHR
      lend in Zagreb airport
      some real estate in Zagreb and Split

      Enough for 2 years

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    6. Then you have brand which is worth something. Purger do you think that Trade air will try to step in if Croatia goes bust?

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  17. Anyone know how the new routes are performing - Dublin and Mostar?

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    1. From what I hear Dublin is performing extremely well while Mostar very poorly but Mostar is subsidised so it does not matter.

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  18. Some form of consolidation in the ex-Yu among airlines would be an interesting concept

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    Replies
    1. Adria + Croatia Airlinea
      Air Serbia + Montenegro Airlines

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    2. I believe you will see this: Adria + Croatia Airlines + Montenegro Airlines

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    3. Later option would be real Adriatic air :)
      I hope for JU-YM consolidation.

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    4. My tip is on

      Adria-Croatia-Montenegro. I wrote about this.

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    5. Indeed. For political reasons that is more plausible

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  19. I don't understand that it is that hard to get interest for OU. The airline is generally in ok shape. Fleet is relatively modern, you have a nice domestic network which is supported by the government and huge market during the summer. The biggest issue to overcome is seasonality.

    ReplyDelete
    Replies
    1. the airline is not in ok shape,

      if it would, they would proudly present its successes...

      the domestic network looks nice on a map but not in the books despite the subsidies; it actually makes it too hard for ou to offer more direct connections from the coast...

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  20. Look at airbaltic, why cant our countries work together and make an airline? Who can compete in europe, and with our massive diaspora worldwide it will be a hit! Forget the past and lets think sbout the benefits of working together

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    Replies
    1. It's an operational and political minefield.

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    2. It wouldnt be if we really wanted to make a differancw not just talk. I can see the main huns being zagreb-belgrade-skopje, their locations is perfect for serving entire balkan area, with good connections from all other airports in the region.

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    3. Well airBaltic manages to dominate the Baltic region only because Lithuanians and Estonians failed at setting up their own airlines. Lithuania is a graveyard of failed airlines, their latest adventure was Air Lituanica.

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    4. Lithuania graveyard of failed airlines ? OMG even If I had any doubts about your "expertize" now I have it all clear. For have sake have you ever heard of Avion Express? Of Small Planet? If those are on the graveyard of failed airlines I wonder where Air Serbia, Croatia Airlines and Adria belong then? ? ?!!!!

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    5. List of failed Lithuanian airlines:

      1. Air Lithuania (96-05)
      2. Air Lituanica (12-15)
      3. Amber Air (04-07)
      4. Apatas (94-09)
      5. Aurela (96-13)
      6. Aviapaslauga (94-05)
      7. FlyLAL (05-09)
      8. FlyLALCharters (09-10)
      9. Lithuanian Airlines (91-05)
      10. Nordic Solutions Air (05-08)
      11. Star1 Airlines (09-10)

      A total of 11 airlines failed which is a lot for a country that's 18 years old and that has a population of some 2.800.000.

      Air Serbia, Croatia Airlines and Adria are alive and kicking. They might not be the best run airlines around but they are far from being dead - like the 11 airlines I listed above.

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    6. Every single market economy country has failed attempts on all fields including civil aviation. I am not deniying failed attempts in Lithuania. But you cannot say that Lithuaninas failed in setting their own airlines and that they are graveyard of failed airlines because their airlines at the moment, with 2,8 million inhabitants have more planes, more seats, more passengers transported and more profit than Air Serbia and Croatia Airlines together. But then of course, you are the wisest and most expert guy ever and of course you must be right, although the most common sense and elementary logic say that having few failed projects doesn't mean you can't have succesful, actually very succesfull ones too, precisely those I was referring to

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  21. Lepo zvuci ali zar ne vidis kakvi moroni vladaju ovim prostorima....

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    Replies
    1. Bolje da se svatko drži svog dvorišta kad je riječ o avio kompanijama. Samo nam treba još prepucavanje koliko će Srbija, odnosno Hrvatska imati mjesta u upravi neke zajedničke kompanije.

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