Croatia Airlines' losses widen


Croatia Airlines has posted mixed results for the three quarters of the year by recording a 4.6 million euro net loss, while passenger numbers improved to reach record levels. The carrier's consolidated net loss slumped from a profit of 13.4 million euros last year. However, the airline noted that 2017's results were impacted by the sale of its five weekly slot pairs at London's Heathrow Airport for eighteen million euros. The company said that if the slot sale were to be excluded from last year's results, the carrier's financial performance would have improved 10% in 2018. The airline also blamed its results on higher fuel prices and the announced industrial action by its staff over summer, which did not materialise following a court injunction. "During this period there were 1.666 articles and reports about Croatia Airlines in the media which is more exposure than the company gets in an entire year. As a result of the media's coverage of the planned strike, our business results were affected. The strike announcement occured during the height of the summer season (third quarter), which is the worst possible time for Croatia Airlines, keeping in mind the seasonality of the market and that the company earns the greatest amount of revenue at this time of year, which it uses to cover inccured losses over winter", the carrier said.

During the Q1 - Q3 period, Croatia Airlines increased both its expenditure and revenue by 4.7% on last year. It spent most on flight operations, in part due to the higher cost of fuel, followed by passenger services, as a result of increased compensation claims due to a surge in the number of cancelled or delayed flights earlier on in the year, then maintenance and promotion and sales. The airline took out a long-term loan valued at 8.5 million euros in June, as well as an additional revolving loan amounting to 3.2 million euros. At the end of the third quarter, Croatia Airlines had 1.022 employees and fourteen aircraft, two of which were on wet-lease from Air Nostrum until the end of the summer season. In Q3 alone, the airline posted net profit of six million euros, however, this wasn't enough to cover the accumulated losses from the first half of the year.

The national carrier handled a record 1.705.470 passengers on board its aircraft during the January - September period, an increase of 3.1%. Of those, 412.420 travellers were carried on domestic flights, up 1.4%, while 1.223.170 passengers flew on international services, an improvement of 2.5%. The remaining 69.880 passengers were carried on charter flights, up 24.4% year-on-year. However, charters accounted for only 4% of overall traffic. The airline operated 21.891 flights during the first three quarters of the year, which is up 1.7% compared to the same period in 2017. The average cabin load factor stood at 73.7%, down 0.5 points. Loads were down on international flights by 0.2 points for an average of 73.9%, while they declined 0.1 points to 72.4% on domestic services. Passenger carrying capacity, measured in Available Seat Kilometres (ASKs), stood 1.8 billion, up 4.1% year-on-year. The airline’s cargo operations recorded a decline of 0.4%, with 1.674 tonnes of mail and freight uplifted in the first three quarters of 2018, compared to 1.681 the year before.

During the week, the Croatian government nominated to extend the term of the acting CEO, Jasmin Bajić, by another six months. The company said that the airline will begin procedures by year's end to seek out the best recapitalisation model and indentify and verify potential investors with the help of financial consultants.

Comments

  1. Losses increase but government extends CEOs term. No logic.

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    1. Who ever said the current government is logical???

      That political appointee without any qualifications should be fired on the spot, and replaced by a competent person, but there's little chance of that.

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    2. Sorry but hasn't Bajic been with Croatia Airlines for like 20 years? He must have some qualifications.

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    3. And what happened with the government's promise that they will replace current management? Promise given in June, still nothing.

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    4. My guess is that they forgot to deal with that issue and when they realized the contract was expiring they just renewed it without thinking about it.

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    5. Or the CEO is well connected politically.

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    6. Оr maybe no one wants the job? Before HR entered the EU it could have worked but now the situation is rather bad and there is limited access to capital.

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  2. Not great but overall OK considering the slot sale last year. What is really disappointing for me is that the load factor went down.

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    1. +1 and the LF seemed to improve all the time and now it goes down. Anyone know why?

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    2. They've said it themselves. People were reading about the strike and probably some decided not to book with OU.

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    3. Less transfer passengers from Heathrow!

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    4. I think they got a lot of trasnfers from SKP.

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    5. BA codeshares now on OU's ZAG-SKP

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  3. Typical story in the Balkans: poor management.
    OU, JP and especially JU need to hire qualified managers and not shabby, imcompetent ones.
    OU is a diappointment for Star Alliance and its mother-in-law: Lufti.

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    1. OU is Cinderella and Lufti is its stepmother.

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    2. Every body with internet can be a wonderful analyst. It costs nothing. I wonder not much people talk about the real issues of airlines this year like oil price or euro value when it comes to OU or JP or JU

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  4. I think that Croatia Airline biggest problem is their weak and miss-aligned organizational culture.

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  5. Worrying article. These are the main points I got from reading it:

    1. OU recorded a loss during a period when it's supposed to make most of its money. Q4 is always bad so a yearly loss could amount to €10 million by the end of the year.

    2. Most of the growth at ZAG came from foreign carriers only showing that the airport must work on attracting more customers.

    3. They got a revolving loan which is a short term loan usually up to a year meaning they will have to pay it back within the next 6 to 7 months putting even more strain on their finances.

    4. Government extended the CEO's contract which proves that we were right and that they have no clue what to do with OU as a whole- especially now when we know for a fact no one is interested in buying it.

    5. OU must keep on growing next year especially in ZAG. This year they copied what they did last year without any additions so numbers grew by a tiny fraction. OU needs volume, that should be their priority.

    6. OU management would rather play the blame game than to pull its act together and start thinking outside the box.

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    1. To your fourth point: of course they know what they are doing - they will sell the company to a 'German investment fund', that will in turn close it down. The main policy of EU is privatization - even if Croatian made gazillion euros a year, the EU would want it stripped down, privatized and closed in order to make way for the only acceptable companies in the EU - RYR, LH Group, EZY etc.

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    2. Yes but OU will be more difficult to manage by these funds. OU is much bigger and its employees are not as obedient as the ones in JP- they are ready to fight, strike, shout... in order to protect their benefits.

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    3. @09:26

      You can strike in LH, because it's a rich company, in a loss making company strikes are useless. What will the workers in OU strike for? Any assets the company has will be sold (and money funneled to Bahamas), and the company shut down. Once OU is sold to the 'investment fund', it's game over.

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  6. Selling Heathrow slot's has done damage!

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  7. These debates are getting a bit repetitive - yes, in 10 years we'll have about about five airlines in the EU and 0 in the Balkans - this is written in stone, it's going to happen. The airline business is simply to expensive to play without the support of big, influental players.

    Adria is on the brink of bankruptcy, Montenegro is closely following Adria's footsteps, Croatia will probably be third to go down. And modus operandi is also known - governments do not have the political capital to close such companies, which is why they are paying shady 'investment' funds to do it for them (4K).

    And this is quite sad given the rich tradition in aviation we have in the Balkans. The general aviation sector is basicaly dead, aero clubs and small airports are also going under, and the last nail in the coffin will be the closure of national carriers.

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    1. If I may add - we deserve all of this.

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    2. @09:54

      Well, that's debatable. If American taxpayers hadn't pumped billions of dollars into Germany after the second world war, they would be, from economical stand point, somewhere near Uzbekistan. It's easy to be smug and preach others about hardworking Germans, corruption, lazy folks from the Balkans etc, when your country was build by others.

      Yes, it is our own fault, but far more importantly - we (exyu) are still considered trash by the EU. If you rename state aid to 'municipal subsidy' (Ryanair, Wizz etc), you're still taking cash from peoples pockets, but one is done by corrupt Balkanians, and the other is a smart business strategy. The exact same thing applies to LH and others.

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    3. Uzbekistan? Seriously?? Lol. They are still Germans and they would have definitely been way better then many Europeans. The Marshall plan helped them a lot, and the same is with Italy, but look were are they now.

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    4. Well, the 'argument' they are germans doesn't really tell us much, does it? what, they are genetically superior?

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  8. conclusion: they should only fly Q2 & Q3 with feeding VIE,MUC,FRA in Q1&Q4 as well

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  9. Loans worth over 10 million euros...

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  10. As predicted, unfortunately the summer wasn't enough to fix 2018. My guess is the loss this year will amount to 5 million euros.

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    1. At the start of the year they said they expected profit of +1 million euros. I'm not sure if that is still relevant.

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    2. Unless they sell something this year to improve financial situation.

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    3. I don't think there are any plans to sell anything.

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    4. They can always sell the remaining LHR slots.

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  11. I love how they keep mentioning that results are worse because last year Heathrow sale was accounted but last year they didn't even mention that the sale impacted their results which were of course much better.

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    1. Of course they mention it when they need it

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  12. I never understand how these coastal countries, flourishing with tourism, manage to collapse their airlines. You really have to be a genious to achieve that with all the resources on your disposal.

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    1. And why did they collapse Agrokor?

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    2. I miss Agrokor. :(

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  13. Let's hope LO takes over.

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    1. If you read the text they have just started preparations to find someone that will tell them what to do. This will take ages.

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  14. 12 aircraft (with own staff) and more than 1,000 employees is excessive.

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  15. Thank goodness there wasn't that strike. It really could have destroyed the company. The court made the right decision.

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  16. They should do more with their maintenance division. They could get a license to to maintain other aircraft types seeing as they have several hangars. Could be a good source of income.

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    1. Aren't they dealing with a shortage of mechanics. It was one of the major reasons why there were so many cancellations at the start of the year.

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  17. How about trying the long-haul market?

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    1. They can't make it on the short haul market let alone on the long haul market.

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    2. we have a good example in the region :D

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  18. In its press release (reported by all Croatian media) Croatia Airlines said how their losses have shortened. Of course they did not account the slot sale from last year and compared the results as if the sale never happened. Who exactly are they kidding? Do they think everyone is sheep. Idiots. Just for that they should dismiss the management. Let alone for the catastrophic results.

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    1. And just to add they did not even inform in the press release that they are not including the slot sale from last year. They just played dumb as if it never happened. If you go and look at their financial report they made a special column for their results where they say "Results without slot sale". Morons.

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    2. And of course the media being the way they are they didn't even bother to check, they just went along with it. At least here we can see the actual result. You can't pick and choose which year you are going to account asset sale and which not. And who are they lying to exactly. Themselves? Or us? Like little children trying to hide a bad result.

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  19. Is this the company that wants to buy brand new A320 NEOs? And where do they plan to get the money? The taxpayers?

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  20. Plenković went to China to sell national airliner..

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    1. And to the final arrangement for new services from Beijing and Shanghai to ZAG..

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    2. Neither will he sell Croatia Airlines and neither will he make any arrangement for flights. Mark my words.

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    3. He went to the Shanghai trade fair like 90% of European heads of state.

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    4. Croatian Tourism Board is opening their office in Shanghai!

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    5. That was announced almost a year ago. It was even published here in one of the articles about potential flights between Croatia and China.

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  21. And where are Americans? I believed that OU would be bought by some funds from USA.

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    1. Funny, last time Kolinda was not allowed even to step on the White house's grass. So, do you still believe to their friendship?

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  22. Bravo Hrvatska!

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