Croatia Airlines resumes search for strategic partner


Croatia Airlines is due to select a privatisation advisor by the end of the month as the government seeks to increase funding for the carrier. The company is due to choose a financial institution within weeks, which will formulate the best privatisation model for the airline. According to media reports, frontrunners include Deloitte, AT Kearney, PwC-a and Boston Consulting Group. A future strategic partner is expected to recapitalise the airline, in order for it to launch new routes and expand its fleet. According to Croatia Airlines' CEO, Jasmin Bajić, the carrier requires a recapitalisation of some 33 million euros. LOT Polish Airlines and 4K Invest have been singled out as prospective buyers who have shown interest in the carrier. The previous government, which unsuccessfully attempted to sell the airline 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.

The President of the Croatia Airlines Supervisory Board, Zlatko Mateša, previously 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.

Meanwhile, the Croatian government will hold talks with the European Commission over increasing funds for Croatia Airlines through its Public Service Obligations (PSO) contracts. In order to maintain appropriate scheduled air services on routes which are vital for economic development, the Croatian carrier currently receives some ten million euros per year from the state. In addition, the Croatian National Tourist Board will provide an additional one million euros for joint advertising.

Following the completion of Croatia Airlines' restructuring process in 2015, the carrier has seen its passenger numbers and profit margins grow. It has also expanded its destination network for three consecutive years. On January 1, 2018, the airline completed the two-year monitoring of the implemented restructuring plan. Croatia Airlines' CEO, Jasmin Bajić, said, "The key goal of the privatisation is for this reputable partner to increase our share capital and future business operations. In other words, to find strategic partner(s) that will assist with the implementation of our fleet plans and provide synergies for the company, while also taking into consideration the wider impact of such a transaction".

Comments

  1. Let's just hope it doesn't end like the story with IFC. Money given, no results.

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    Replies
    1. the CEO and government have been singing this tune about financial/privatization adviser for almost a year. You would think they would have chosen that financial advisor by now.

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  2. 10 million for PSO? Quite a bit.

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    1. Same as the bogus tender for flights from LJU to BRU

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    2. That was 4M.

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    3. Some people dont like to learn anything senseful but just keep spreading false information.

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  3. Replies
    1. JP and OU together would be a stronger and more competitive company.

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    2. @09:32

      Look, I don't want to be rude - but are you paying attention? Do you read Slovenian media? 4K is a proven vulture fund - it takes over a company, sucks out the remaining funds, and closes it.

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    3. Keep calm and keep away from 4K.

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  4. Will they manage to find someone this time around?

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    1. I think some Asian/Chinese airline could be a possible partner.

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    2. Garuda was interested from what I heard.

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    3. Please, not this Garuda bs again - GA itself is a basket case! Their latest expansion failed miserably.

      Mihael

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    4. What happened with their latest expansion?

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    5. What did happen with Garuda? They went publicly on record to say that they wanted to buy OU. They even outlined some plans for the company... and then nothing.

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  5. Lufthansa would be the logical partner.

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    1. They would have already done, if they wanted to. And, if they did, they would shut it down and bring Eurowings, which wouldn't be good.

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    2. Agree. Lufthansa/Eurowings will eventually take over OU.

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    3. The unions in OU are putting Lufthansa off, and I can assure you they wouldnt turn it into Eurowings. The routes and running of the company would probably change quite a lot, but Croatia Airlines is a valuable brand!

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    4. OU Brand is not valuable, at least not anymore.

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    5. How about Lufthansa Croatia/Crohansa?

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    6. Really curious why LH didn't buy it, they wouldn't have to invest that much in OU! Or they are simply waiting for OU to go bust?

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    7. Or Luftacia.

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    8. To control national silver plate?

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    9. Why not CROLUFT?

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  6. Not again! How much money do we have to spend for these consulting companies with zero results? As far as I would like for OU to find a buyer (LO would be a good choice), I'm afraid it's too late.

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    1. I still don't think LOT is financially stable enough to take over any airline.

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    2. LO wont do it especially not now when their BUD operations are falling apart

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    3. What do you mean, "falling apart"?

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

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  8. They are doing this again so some consultancy firm can just get a few extra euros in their pockets. The same as last time.

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    Replies
    1. So what happened with the money that was given to IFC to find a strategic partner for OU?

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    2. Someones pockets got full for sure

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    3. How much was paid to IFC?

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    4. Several million euros.

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    5. 750.000 euros

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    6. Unnecessarily wasted money.

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    7. That's exactly it. This is why the government constantly goes back and forth with wanting to privatize - not wanting to privatize. On and on. Secret negotiations, lack of transparency, corruption. And the pockets are being filled all along.

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  9. Croatia Airlines was fine tuned for privatisation in 2018 and now in 2019 we are waiting for juicy fruits of that fine tuning. I hope that 4K will take them, they seem to have found a money pit so financing will not be a problem. And I hope that 4K will speed up consolidation of Balkans aviation market. Just too many micro airlines in such small area.

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    1. Do you notice the kind of problems they are having with Adria??

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    2. I would steer clear of a shady investment fund like 4K. Unless you want Sukhois flying for OU.

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    3. TU-204s would look great in OU livery!

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    4. Why TU204? What's wrong with TU154? LOL!

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    5. Actually when I think twice it's TU134A capacity OU lacks

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  10. I fear this privatization attempt will turn out as all the others - without any concrete results.

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    1. And what happens then? What will happen if this privatisation attempt also fails?

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    2. Then OU will get another credit with the government as a guarantor

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  11. LOT's interest could be down mostly to securing rights to fly from Croatia to the US.

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    1. Doubt it. They are not doing great out of Budapest. Many US flights are cancelled on regular basis. And LOT can start flights from Croatia to the US as they please, just like they did from Hungary. They don't need to buy OU to do it.

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    2. But there is no national carrier in Hungary.

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  12. Croatia Airlines is now in a much better position than a couple of years ago and with a little effort I think they could find a strategic partner.

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    1. How on earth they are on better position if they sell slots in Heathrow, most of engines and one plane? Plus they have new (huge) debts after cleaning them all in begging of restructuration. What is left is really modest. 2 engines, 5 old planes without engines, 4 slots not so good (in afternoon), and technic.

      Purger

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    2. Network wise they are doing well. But financially the profit has been generated through asset sales. Anyone who wants to buy Croatia Airlines will look at their books are realize that immediately.

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  13. Agony continues.

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  14. I think the government as an owner is not a good thing. OU definitely needs a change so this is a good development.

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    Replies
    1. True. In the long run I do think OU needs a partner.

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  15. In the end nothing will happen as usual

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  16. What will happen with the neos if Croatia Airlines doesn't find a partner?

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    Replies
    1. The government will pay for it and then OU would probably have to go through some kind of restructuring again.

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    2. Didn't they already started making payments?

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  17. I'm disappointed 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. Well, accoriding to the majority of readers of this website, virtually all of the airlines have potential. In reality, the only airlines that can survive are LOCO's (with the help of shady labour practices) and legacies (with the indirect or direct help of the states). Everything in between will disappear - the trend has been obvious.

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  18. Croatia airlines moraju da budu pažljivi pri izboru sledeceg tipa aviona za njihovu flotu,najnoviji model Airbus320 ima probleme sa kvalitetom izrade aviona.Momci budite detaljni pri izboru novih aviona,dok postojeci avioni Croatia Airlines su veoma dobri.

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    1. Verovatno treba da uzme SSJ100? :) :) Kad i ako JP uzme svojih 15 ostaće ih još parkiranih… :)

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    2. najbolja kombinacija je A220 i A320, ako se posreci jos i A338neo :) sanjati je dozvoljeno, zar ne?

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  19. No one is interested. We already had 'interest' from Garuda, Aegean, Turkish, Lufthansa, LOT aand absolutely nothing happened.

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    Replies
    1. The government is simply not interested in OU's future. They should be more "agressive" in trying to sell it.

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  20. Perhaps they can pitch OU to Hainan. It was interested in them after all.

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    1. I would prefer if a non European airline or company bought them. But then they would not be able to get over 49%.

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    2. Hainan has paused foreign acquisitions at the moment.

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    3. I would prefer LH, but only if they keep the Croatia airlines as a separate company (but, highly doubt it could ever happen).

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    4. And what would be LH interest? To develop the network from Zagreb? Don't think so. ZAG would just have 500 routes to Frankfurt and Munchen. Everything would be channeled through Germany, so, no, thanks.

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    5. Eurowings would probably base two CRJ in ZAG and fly it to Star Alliance hubs plus some routes like Paris and that would be it. Also I doubt the government would be generous with PSO then. Then again, if we do not get EW, what do we get? Is bankruptcy really the better option?

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  21. What's happening with the OU workforce? Are there still a lot of people leaving. Demands for a strike seem to have disappeared.

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    Replies
    1. Not disappeared but banned. The courts have banned them from striking!!

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    2. Is it permanently?

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  22. interest from Japan, Philippines......

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    1. Asian carrier would be best for OU. The government should do more to secure a sale to them.

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    2. Anything other than a European airline would be good for OU because it eliminates the possibility of them being a feeder.

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    3. Qatar would be perfect!

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    4. @10.45 exactly the opposite. You need a strategic business partner not an alliance. YOu need someone to look in and restructure, synergize. Deffinitely not different culture or on the other side of the globe.

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    5. Yes, but if it's European carrier, OU could use them only as a feeder.

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  23. In times where airlines are merging and no longer going solo, in order to avoid possible bankruptcies, smaller regional airlines must act as feeders and cope with the bigger boys.
    JU for example is heavily protected by EY and this kinda helps it, being under its umbrella.

    RO has a good partnership with UX, after initially working with IB because of Skyteam. It is a Spanish airline that is seriously growing.
    Situation with FB and IB is the same. Their partnership has been existing for years.
    A3 has partners in Asia that belong to the Star Alliance member.

    A possible solution for OU would be DL on my opinion. It has improved significantly and has an extensive network in Europe.
    OU could focus on the key DL cities in Europe: CDG and AMS.
    The only problem is that OU is a regional Star Alliance member and not sure if you are "allowed" to partner with the competition. Also, LH has a big say on OU and will not allow DL to have a chunk of the Croatian market.

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    1. Considering that Delta is trying very hard to take over Alitalia it's hard to believe that they will consider OU...

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  24. sve samo ne 4K ili Garuda! osobno navijam za neku ozbiljnu azijsku komapniju. Mozda bi Asiana-i bilo zanimljivo tako do Zagreba doci. Konkurencija Korean-u.

    Poljski LOT mi se cini da nije finacijski dovoljno jak. LH nece, da su htjeli vec bi uzeli CTN pod svoje.

    A bit ce kako bude. Samo neka nekako prezive i da ostene CTN na nebu. I veliki Swiss je pod LH, to je tako u danasnje vrijeme, koga briga odakle novac dolazi.

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    Replies
    1. OU treba rebranding, pod hitno!

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    2. U sklopu neke nove investicije mozda da. Ali ovako nema smisla.

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  25. Telenovela presenta...

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    1. Seems to be a lot of those in our region ;)

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    2. In last 5 years only OU wanted so much to be sold but nobody wants it. After all and despite all problems EY has it looks like JU found the best solution.
      Adria and 4K - we all know, disaster
      YM - some talks were done but nothing still achieved. It looks like Government in Podgorica does not rush so much to sell YM
      OU - every few months we get news that Croatian Government wants to sell OU and as always nothing happens. And situation in OU gets worse and worse, but I must admit that every time they "find" some new company that could be "interested".
      First it was Lufthansa, after it Aegean and Garuda, after it Turkish and last time it was LOT. I wonder what will the new name for temporary purpose this time?
      Becomes real Telenovela presenta...

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    3. Good analysis.

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  26. What is the biggest and most useful OU assey that the new investor can benefit from? LHR slots, Croatian coast, fleet?

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    Replies
    1. That was supposed to be "asset"

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    2. I would say the maintenance division.

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  27. Option one, create a holding and drop in all major assets you have linked to the industry; you have cash cows -> airports who can cover the black hole _> airline. (example: Oman Aviation Group)
    Option two, find internationally proven management, pay them well and squezze their balls. Financial success of OU, before many others, depends very much on optimization of overheads. That means cuts a few hundreed of employees. Without that, no success.

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  28. U airbus industries imaju sve vise problema sa kvalitetom najnovijih Airbus320 aviona,za Croatia airlines je najpametnije da ne žure sa kupnjom novih aviona,druga aviokompanija pegasus airlines je prizemjio cjelu flotu novih Airbus320 aviona na 45dana da ih detaljno servisiraju, aservis tog aviona je veomaskupCroatia Airlines budite veoma pazljivi pri kupnji novih europskih aviona.

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  29. I don't understand why it is that hard to get interest for OU.

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    1. Corruption in Croatia is the main problem... any investment is not safe in Croatia.

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    2. Exactly. Corruption. The government didn't have real interest in privitizing OU, because they're filling their pockets both from it and various consultants with whom they share the state budget money.

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  30. I think YM should buy OU so Milo can pump millions into the project through Montenegro Airlines. It's a win win situation.

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  31. LOT Polish Airlines will not invest in Croatian Airlines as most of their fleets are Boeing planes and Embraer, and the Croatian company fleet consists of mainly Airbus aircrafts, and they have 4 A320 on order which will complicate the matter. LOT will be closer to invest in TAROM as most of their fleet consist of Boeing planes.

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    1. Excuse me @Unknown, do you know the difference between "invest" and "merge"?

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    2. Invest is keeping the company active with more money and resources,the merge is acquisition of a company-without further investment in cash or other material resources and lay off of people.so if Croatia Airlines is clever they should keep the company as it is today with solid investment plan-Do not sale this healthy company-airline.

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  32. Dvije su riječi dovoljne: ZLATKO MATEŠA. Sve drugo je suvišno

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    1. Who is Zlatko Matesa?

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    2. The Head of the Supervisory Board of Croatia Airlines

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    3. He is also the former Prime Minister of Croatia.

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    4. Why is he problematic? Sorry I am not from Croatia so I am not familiar with him and his work.

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    5. Because all the positions he got, he did not get them because of his competence but because of his political connections. EX PM. EX President of Olypic Comittee with several unsucessfull projects such as Sport TV and not Board of an airline company?

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  33. A ima jednako dobrih dvoriječnih kombinacija, kao npr. Matija Katicic, Ivan Misetic, Hrvoje Sarinic, Antun Vrdoljak (prvi se pamte), tako da gore spomenuti Z.M. samo nastavlja niz. Uspjesno, naravno LOL!

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    Replies
    1. Što Vrdoljak bio u OU????? Očito ima neka tajna veza između Olimpijskog odbora i OU. Možda Mateša nakon OU ode na HRT. Bilo bi pravedno. Vrdoljak je već bio tamo.
      Vrdoljaku ovo stvarno nije trebalo jer je bio solidan redatelj.

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