The CEO of Croatia Airlines, Jasmin Bajić, has said the airline requires some 33 million euros in order to launch a new investment cycle and better compete against its rivals. The comments came after the Croatian government kick-started the carrier's privatisation process this week. "The situation is not good because we cannot develop. Currently, we can only stagnate and shrink. Therefore, we need a new investment cycle and capital which is why the ownership structure should change through recapitalisation. This will not be a sale in the traditional sense, rather a recapitalisation for the sake of development", Mr Bajić said. 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.
Mr Bajić noted that Croatia Airlines will not go bankrupt if it fails to secure a new partner but warned that the carrier would likely downsize its operations. "Competition will become more fierce and we will seek ways in which to survive. We don't want to back down. I guarantee the process will be successful", the CEO said. He added, "The main issue with Croatia Airlines are the losses it accumulates over winter. During the winter season, when Croatia Airlines has no competition and faces only ten carriers who maintain services to the country, we generate losses. When we compete against a hundred airlines in the summer we attempt to make up for those losses. During the summer season we handle almost half of our annual traffic. The key problem is economies of scale because we are leasing more expensive aircraft, buying more expensive fuel and paying for more expensive services than our competiton, who find it more affordable due to the amount they purchase, so the economy of scale gives them an advantage". Mr Bajić noted that he is unaware whether the carrier generated a profit or loss last year as the results are still being accounted.
Earlier this week, the Croatian government set up a multi-member, inter-agency committee whose main task will be to seek out potential investors for Croatia Airlines. “The main task of the committee will be to consider further steps that will secure a quality strategic partner with significant experience in the air transport sector who would, among other things, ensure the expansion of the network and an increase in the airline's market share", the Minister for Sea, Transport and Infrastructure, Oleg Butković, said. Mr Butković noted the government would secure greater funding for Croatia Airlines for Public Service Obligation services through the European Union next year. Currently, the carrier receives 10.3 million euros per year to maintain its domestic network, on which it handled 526.578 passengers in 2018.
I find it difficult to believe that someone would just give money without making any changes to the company's management.
ReplyDeleteWhat they are hoping for is unrealistic.
I get the feeling they are all pushing for recapitalization because it would mean the management would all keep their jobs.
DeleteMaybe he is talking about some local companies/organizations as candidates.
DeleteHe is talking about government money.
DeleteThat is the only way to get cash without changing the management.
What he is telling us is that Croatia Airlines price tag is 33 million euros. They need someone to inject EUR 33 million.
DeleteBingo @last anon.
DeleteNo private entity would inject 33€ let alone 33 MILLION € if it isn't allowed to make drastic changes to the management of the airline.
DeleteI agree with Petar. Just a remainder that Adria Airways was sold to 4K for 100.000 EUR.
DeleteLet's just hope they find someone this time around.
ReplyDeleteUnless its some business consortium, turnaround "experts" or financial fund I don't see a viable partner.
Delete"During the winter season, when Croatia Airlines has no competition and faces only ten carriers who maintain services to the country, we generate losses."
ReplyDeleteGreat way to promote the airline for sale....
The last thing management or any of the OU staff want is for the airline to be privatized.
DeleteIn the end nothing will happen. They will waste money on privatization advisors and will stay state owned.
DeleteIt will be difficult to attract interest. Main reason is that airlines are focused on different acquisitions.
ReplyDeleteMaybe Emirates would be interested in buying.
ReplyDeleteTim Clark said that buying airlines is not what they are going to pursue and that they burnt themselves by buying Sri Lankan Airlines
DeleteAnd why would EK be interested in buying OU out of all the European airlines seeking investors at the moment?
DeleteIt would make most sense for Lufthansa to buy them and integrate them somehow into Eurowings. Eurowings operates fleet of Airbuses and Q400s. It could assume OU's most profitable routes and maintain subsidised domestic network.
ReplyDeleteAgree. And they would resolve their "economies of scale" problems as CEO says.
DeleteLH/Eurowings would be a disaster for OU. They would be purely a feeder airline. Forget new routes.
DeleteI think they would be a good option as well. They could also start up some seasonal long haul flights from Dubrovnik.
DeleteWhat is good for the coast is not necessarily good for ZAG.
DeleteIf OU were to be taken over by LH I think we would see it develop its eastern network, especially the region. To the west I don't think we would see any major development except maybe in Germany.
DeleteFor those advocating closer ties with LH Group, this is their philosophy. This is what Lufthansa CEO said in an interview:
Delete“The Lufthansa Group has 15 airlines. Whoever brings down costs and generates more income can fully count on our support. A good example is SWISS, which will soon have new and additional aircraft. At Austrian Airlines and Brussels Airlines, less good results were achieved, these companies do not have to expect additional investments, let me put it this way: their fate is in their own hands.”
Lovely.
LH decided more than a year ago, that none of its airlines will operate any turbo props.
DeleteOU did not submit a bit to operate either the Austrian nor the LGW part, so that business went elsewhere.
Anyway, LH's would never run ZAG as a micro hub, as they already have 4 real hubs and way too many micro hubs (CGN, BRU, DUS, STR) who do not really work out, even if all are much bigger than ZAG;
Further, as long as the main topics that keeps LH awake are Norwegian and Italy, they will not think too much about such small markets, even if they are "connected" for years.
So we could finally see Croatia Airlines privatization completed in 2019?
ReplyDeleteThe OU employees would never allow that.
DeleteIt has been going on for years. I would not count on it.
DeleteNo chance that it will be done in 2019. Best case scenario in 2020.
DeleteBut the real question is why would anyone show interest in buying them? They barely have any presence on the coast, a hub model wouldn't work because of VIE, FCO, MUC and BEG nearby. On top of that ZAG numbers slipped last month which shows weak demand outside the few summer months. I think OU IS destined to go bust.
ReplyDeleteHere comes the real answer why would anyone not only show interest but buy them : to increase their presence on the coast, and to introduce hub model at base airport which works well for all around you listed. ZAG numbers can skyrocket with introduction of real hub model and simultaneously letting in LCC's. Numbers for last month in ZAG, 87 passengers less, is really not something indicating that OU is destined to go bust, it's just indicator of someone being very malicious. Everything is only and entirely about the government - would they finally have enough courage to privatize OU. Of course Bajic doesn't want it because he loses the job, along with some 300 administrative employees OU can be more succesful without.
DeleteHub model in ZAG will never happen as long as OU is in Star Alliance. Why would LH Group let them grow and take away passengers from VIE, MUC, ZRH...? So that's already a first negative thing when it comes to buying OU.
DeleteAlso look at easyJet, they dominate the Croatian coast yet they didn't have to buy OU. So one doesn't need an airline in Croatia to dominate the market.
Aegean is Star, hub in Athens exists. THY is Star, hub in IST exists. LOT is Star hub in WAW exists. Hub actually already exists in ZAG as well, but mini one, limited to domestic Croatian and very few regional feeding cities. It has nothing to do with Star or any other alliance. With privatization this can change and mini hub can become real hub. Of course it will never be IST or VIE but there is potential to grow significantly. And LH has nothing to do with it, it's only mismanagement and incompetence caused by politics. Eventually it will have to be changed.
DeleteAnd I never said OU must dominate coastal market. I don't mind Easyjet or whichever airline continues to dominate it. But with privatization OU can increase its market share on the coast, earn more money during high season and cover its winter losses until seasonality is reduced. And if we apply your logic no airline anywhere is needed because there is always and everywhere some bigger airline which can operate. So once again, you are just being malitious.
DeleteI am not being malicious, you are being disillusioned. Like I said, OU was founded with LH's help only to feed its network. If OU decided to go rogue LH Group would kill it in two days by cutting all ties with them. Simple as that.
DeleteZAG is not ATH, WAW or IST, it's nowhere close to having their demand. For the love of God ZAG can't have ARN on a year-round basis! Without LH Group and its feed there would be no OU today, it would be in a worse situation than YM.
OU can barely dominate on its home market even less so outside of it.
Airlines can expand on the coast without OU. OU has no real advantage as we can all see. If there was any real benefit then OU would be sold ages ago and we wouldn't be having this discussion. No one wants OU, no one sees anything of value at this point. OU will suffer until it is shut down one day. That's the harsh reality.
100 airlines operating to Croatia and you claim no potential. Long-haul airlines coming to Croatia and you claim no potential. Stockholm, all 3 airports served with dozens of flights, you claim no potential. Government in talks with potential investors, you claim no potential. I am speaking of what can be changed to improve the picture, you are focusing on existing picture claiming it cannot be changed. I am giving options, whit possible good results in case of privatization and eventual demise in case if privatization doesn't happen, you wish for demise of OU and therefore you are exclusive and not willing to admit that the option exists. Obviously we are two totally different personalities and therefore I will not discuss this topic with you any more and let the people who read this conclude whose argument are stronger. Cheers!
Delete4K and Adria merger with OU would save them. We don't know if 4K has enough money.
DeleteI said there are no flights from ZAG to ARN but each time someone writes something you don't like you start with personal attacks. It says more about you than me. Like I said if there was potential someone would buy OU.
DeleteIs there a political will to create an updated version of JAT by merging national airlines of ExYu? With professional management, a neutral name and large, growing market that airline could have chances for commercial success.
Delete100 airlines on a year round basis? ;)
DeleteYeah, that JAT thing went so well, let´s have a RE....
DeleteNOT!!!
Serbia wouldn't go for a new JAT as it wouldn't gain anything, quite the opposite. Maybe merging YM, JP and OU could work as they are all on the brink of bankruptcy.
DeleteTwo months after the end of financial year and they don't even know whether they made profit. Very sound financials...
ReplyDeleteHint: have a look at some airlines with 100+ aircraft in Western Europe. For some reason (magic) they are able to post detail results within a month after the FY finishes. Pure magic.
Haha this was my thought too. But I think they had a loss last year and he just didn't want to say it. I think OU usually published its financial at the start of March so we will know in a week or so.
DeleteCroatovanje
ReplyDeleteI don't understand that it is that hard to get interest for OU.
ReplyDeleteAny real chance of OU getting sold?
ReplyDeleteEU ordered the government to sell up remaining state owned companies so they will sell it.
DeleteI think the government as an owner is not a good thing. OU definitely needs a change
DeleteWhy do they need a privatization consultant? They already got one a few years ago. Why do they need a new one to tell them the same thing?
ReplyDeleteSame story from government each year. DO SOMETHING!!
ReplyDeleteYes! Same old story from the government. They are repeating the same thing and nothing comes out of it.
DeleteMazenje ociju
DeleteI don't necessarily think they need to be privatised. They just need a smart management in place.
ReplyDeleteWhen you have a CEO say that he doesn't know whether the airline made a profit or loss in the prior year - you have to wonder, what on God's earth is this man doing running this company. Moreover, you have to have serious concerns about what sort of mgt team is leading the company, if they do not have ongoing monthly reporting of financial results !
ReplyDeleteAlmost 2 mths after the end of the prior year, they should have finalised Nov actuals by now and they would have year-to-date results for 11 mths of the year - meaning they should know whether they have made a profit or loss in 2018.
So either the CEO doesn't read his monthly financials, or is clueless around the state of his business. Whichever it is, he is clearly the wrong guy steering the ship
This guy can "guarantee that the process will be successful" - a crystal ball gaze into the future - yet can't tell us whether or not the company made a profit or loss in 2018 !
DeleteIs this guy for real ? Where did they find him ?
Hoping for Aegean as possible partner.
ReplyDeleteThey're not that stupid ....
DeleteWeren't they interested a few years ago?
DeleteGood luck OU!
ReplyDeleteWith a CEO like this one, they will need more than luck ....
DeleteI'm sure the croatian taxpayers will be delighted to hear that they can save their national airline again.
ReplyDeleteThat's what CEO hopes for. What croatian taxpayers expect is privatization, new capable management and self-sustaining airline. The decision is to be made. So there is nothing yet croatian taxpayers can hear and nothing they can be delighted or disappointed about
DeleteOU needs to speed up the negotiations with Garuda as they can be their lifeline at this point.
Delete+1
DeleteA strategic partnership with Garuda would be the winning combination. It could also bring more Indonesia tourists to Croatia.
Indonesians are far poorer than Croatians.
DeleteThey do not visit Europe in any significant numbers.
They could save up and visit it once a year. Also there are 200 million of them, I am sure a million could afford to visit Croatia.
Delete"The key problem is economies of scale"
ReplyDeleteit seems that they are targeting the kind of deal JU had with Etihad.
Get planes, fuel, IT and ground handling cheaper
inače, jasmin bajić izbacio i udžbenik
ReplyDeletehttps://www.datastatus.rs/proizvod/32664/menadzment-zrakoplovne-kompanije
Is there a section on the importance of monthly financial reporting or on P&L statements ?
DeleteDoesn't know if they made a profit but knows he needs 33 million Euro's.... I think he is just trying to scare ant 'potential investors' away. a sad lol
ReplyDelete