Croatia Airlines to cover losses from reserves


Croatia Airlines has announced it will cover its net loss of 11.2 million euros accumulated in 2018 by delving into its capital reserves. The carrier's financial performance from last year marked its worst since 2012. At the end of the first quarter of 2019, Croatia Airlines' reserves amounted to fifteen million euros. The decision to cover last year's losses will be put to a vote at the airline's shareholders' meeting on July 7. The company currently has payments due on loans amounting to 19.1 million euros, of which 10.5 million are long-term loans, while the rest are short-term. The carrier recorded a net loss of 13.3 million euros during the first three months of this year.

Croatia Airlines' CEO, Jasmin Bajić, recently said the carrier requires some 33 million euros in order to launch a new investment cycle and better compete against its rivals. "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. The ownership structure should change through recapitalisation", Mr Bajić said. He added, "Croatia Airlines' main issue is the losses it accumulates over winter. During this time of year, 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 are the economies of scale because we are leasing more expensive aircraft, buying more expensive fuel and paying for more expensive services than our competition, who find it more affordable due to the amount they purchase, so the economy of scale gives them an advantage".

Commenting on the company's financial performance earlier this month, the Croatian Minister for Sea, Transport and Infrastructure, Oleg Butković, said, "In the long-term it will be difficult for Croatia Airlines to survive without a partner. I can't comment on how long but they are not in a position that would see them go bust tomorrow if no partner is found. However, under our national reform program, the company's privatisation process should be completed by the end of the year, and I believe we will deliver within the set timeframe". Croatia Airlines recently selected a consortium made of the Privredna banka Zagreb and Germany's DVB Bank to act as its privatisation advisor. During the first phase of their work, the advisors will analyse Croatia Airlines' business and results. The second phase will involve identifying the best privatisation model, while the third will include the transaction itself. The consortium will be paid up to half a million euros for their services and will receive a bonus if Croatia Airlines is successfully privatised.




Comments

  1. It seems that this is the last possible moment to sell the company.

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    Replies
    1. might be too little too late.

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    2. Let's just hope they find someone this time around.

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    3. The company should be privatised wholly as soon as possible. Everything else will be a disaster for the company itself as well for its owners- the taxpayer in Croatia.

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    4. They missed an opportunity to privatise OU 5 years ago. The chances of privatising it now are slimmer, not because of OU but because the state the world and aviation industry is in.

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    5. It is true that the longer they wait the more difficult it will become.

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    6. OU should have been sold long time ago.

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    7. They tried to but no one was interested.

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    8. Yes in 2013 they tried and management did everything for company not to be sold.

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  2. drugim rijecima, iz supljeg u prazno.

    odnekud vam dolazi novac da budete na pozitivnoj 0, morate bilancu uljepsati, inace nema kupca. haha..kako ste prozirni. kazu od rezervi od prosle godine...bolji vic nisam godinama cuo. hahaha

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  3. The best thing for Croatia airlines would be for Croatia to exit the E.U, then the government could invest properly into its Airline and pay it's debts just like Serbia does with Air Serbia.

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    Replies
    1. lol yes Croatia will leave the EU because of Croatia Airlines.

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    2. Croatia should rather actually close their national airline and instead focus on charters. Currently Croatia loses huge amount of money from tourism income just because most flights to their coast are operated by foreign carriers. And of course, it should need to be a SERIOUS charter company with a support and assistance from the government, to make it all clear its not a scam like Air Croatia or similar "airlines".

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    3. lol yes great idea anon 9,18. The government should replace OU with a charter airline and throw money at it.

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  4. The irony is that the CEO cites a lack of economies of scale for his problems when his company is the most striking example of DISECONOMIES of scale out there, with a ratio of employee per passenger being so high that it is a textbook example of public company bureaucratisation.

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  5. Not the way to run a business.

    Yes, they need to get back to profitability. But not using this approach to hide the incompetence of management, or an inability to grasp basic fiscal control of a company and reduce costs.

    An important airline in the region, it can't afford to go belly-up. But the constant calls for privatisation are useless if it can't get its house in order ASAP.

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  6. "During the winter season, when Croatia Airlines has no competition and faces only ten carriers who maintain services to the country, we generate losses."

    Great way to promote the airline for sale....

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    Replies
    1. The first thing ANY investor would do is to get rid of OU's current management.

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    2. I am more shocked that there are only ten airlines flying there. :O

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    3. Actually there are. Zagreb is served by 20 carriers during winter and 32-33 during summer season. I think he's in love with his focus destinations instead of his own hub, such as Dubrovnik and Split, where there are several carriers operating in winter and hundreds during summer. I can't decide if it's weird or stupid.

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    4. Can someone list year round operators at ZAG?

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    5. Aegean, Aeroflot, Air France, Air Serbia, Austrian, British Airways, Croatia Airlines, CSA, Eurowings, Iberia, KLM, Korean Air, LOT, Lufthansa, Qatar Airways, Trade Air, Turkish Airlines.

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    6. Aegean and CSA do not fly year round to ZAG

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    7. CSA, correct. For Aegean, if I 'm not mistaken, they announced ZAG extending seasonal to year-round. Also, Emirates/Flydubai and Elal missing from the list. Not sure about Swiss, Vueling and Norwegian, but think at least one of the three is year-round as well

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    8. Emirates and Flydubai fly seasonally. Neither are year round. Aegean doesen't fly for 2 months. Also none of the three you listed are year round. Swiss flies seasonally to Zagreb for several years now, Norweigan stopped year round flights last year and Vueling has always been seasonal.

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    9. What I learned in maths is that two halves make one whole, so if Flydubai flies winter and Emirates flies summer, it makes year-round service to Dubai operated by EK/FZ. Omitting Elal probably means you agree with me. For Norwegian, I didn't now they stopped year-round, but at least it was, I did not invent it, and for Aegean, I am almost sure I read somewhere, maybe even here, they are going year-round. Also I remember seeing Vueling in ZAG during winter, but than again maybe it was not scheduled. And to conclude : it's not so good as I thought, but either not as bad as you presented :) And no hard feelings, of course :)

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    10. Evo iz mog članka:
      Kompanija se hvali kako je ona jedna od rijetkih koji lete tijekom zime i time omogućuje otvorenost zračnih luka i zimi. I protom „zaboravlja“ spomenuti da za isto dobiva preko 10 milijuna EUR PSO (Public Service Obligation) godišnje. Končano, nije istina da tijekom zime iz hrvatskih zračnih luka ne lete druge kompanije. Iz Hrvatske tijekom zime leti čak 17 kompanija, koje imaju skoro duplo više linija od Croatie. U svim hrvatskim zračnim lukama, osim Zadra i Pule, ostale kompanije imaju više linija od Croatie. Ostale kompanije imaju i više letova tjedno nego Croatia (218 tjednih letova), te obave preko 230 tjednih letova zimi.




      Broj zimskih linija iz Hrvatske:

      Zagreb
      20 linija Croatie
      20 linija ostalih: Aegean, Aeroflot, Air France, Air Serbia, Austrian, British, Eurowings, Flydubai, Iberia, KLM, Korean, LOT, Lufthansa, Qatar, Trade Air, Turkish

      Split
      4 linije Croatie
      8 linija ostalih: Eurowings, Laudamotion, Trade Air

      Dubrovnik
      2 linije Croatie
      8 linija ostalih: British, Iberia, LOT, Trade Air, Turkish, Vueling

      Pula
      2 linije Croatie
      2 linije ostalih: Trade Air

      Zadar
      2 linije Croatie
      0 linija ostalih

      Rijeka
      1 linija Croatie
      5 linija ostalih: Air Serbia, Eurowings, Trade Air

      Osijek
      0 linija Croatie
      3 linije ostalih: Trade Air

      Brač i Lošinj nemaju zimskih linija

      Ukupno:
      26 linija Croatie
      46 linija ostalih
      17 ostalih kompanija

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  7. Why 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? They shiuld save their money.

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    1. Exactly.

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    2. The conditions at the company have changed.

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  8. And what will happen next year if they produce loss again. How will they cover it if they have used up almost everything from their reserves?

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    Replies
    1. They will get a loan with the government as the guarantor.

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    2. Where do reserves come from if they had so many losses since 2012 or their profit (after selling asets) was microscopic small?

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

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

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  10. Good luck OU!

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  11. Drzava Hrvatska ponovo mora pokrivati gubitke svoje avio kompanije. Hrvatska nije dovoljno bogata da stalno subvencionira Croatia Airlines i mora staviti tocku na ovaj projekt.

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  12. Croatia Airlines is a mistery for me. They had the chance to start from scratch zero with independence. They had a white piece of paper and they will end up like some state owned dinosaurs, e.g. Cyprus Airways. With a dozen unions, unprofessional management, corruption and nepotism, political interference, huge staff and overhead account.....unbelievable. Tourism is booming......what's wrong with this airline?????It can't be just the inferior status withing the Star Alliance group. I am afraid there is some "balkanic" mentality in doing business. Not the best are at top, but someones with right names and background. Unless the airline is fully privatized and professionally managed, I don't see any brighter days.

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    Replies
    1. OU has to change the core of its business strategy completely.

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    2. In the 90s they had grand plans, Zagreb was going to get a new terminal (larger than the current new terminal) DC-10s were going to join the fleet etc. Then Tudjman died, Mesic and Racan took over and all the priories changed. All the positive post independence momentum Croatia had slowly died and a lot of people will allegiances to the old country took back power in both HDZ & SDP and are their still to this day. There seemed to be an attitude of 'Croatians don't do that' when it came to major innovation, and works so major projects were continuously delays (modernising and selling ship building industry) the diaspora were discouraged to return and invest and many Croatians who wanted to build businesses were told to leave the country 'because we don't do that here' Only one who seemed to not have listened is Mate Rimac (look at some of his talks where he talks about how he was told to go to Germany to make his cars by people in the Croatian government).

      Lots and lots of missed opportunities! Sorry to be a bit political but I think its the only way to answer the original question.

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    3. Now if we consider Croatia Airlines from say the late 90s when they first started to think about renewing their fleet and lets say they had competent and ambitious management and most importantly Zagreb built the new terminal in the early 2000's.

      OU would have already established long-haul operations.

      They could have invested properly in region jet aircraft.

      They could have taken complete advantage of the chaos which was happening with Jat and established themselves as a regional hub. Today it would have been second nature just to consider Zagreb and OU as one of the main airlines in the regions to get to where you need to go.

      They could have completely failed in all those points I raised but we would never know and obviously it would not have hurt them trying since they are completely failing anyhow.

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  13. 13m loss in the first half? How are they going to cover that? How's their capital right now?

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    Replies
    1. Well if their capital was 15 million and they covered loss of 11.2 million, they have 3.8 million left.

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  14. Koliko brižnih duša se okupilo oko OU. Ne brinite se, letiti će OU i dalje. To je strateški državni projekt i uvijek će biti novca za to. Penzioneri mogu čekati svoj red, oni nisu strateški.

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    Replies
    1. Lol bas kao i Agrokor

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    2. And what happened with the fact that OU must not be financially helped by Croatian Government?

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  15. How to reach profitability - that's the question for "financial advisors".

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    Replies
    1. How much money do we have to spend for these consulting companies with zero results?

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    2. Lesson 1: Don't be greedy and chase easy money to save the day. Follow what your business model dictates. If you're a charter company, be a charter company only. If you're doing ACMI, do ACMI only. If you're a hub&spoke carrier, fly from your hub to spokes only, not from the spoke to 3rd destinations. So simple!

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  16. Let's hope someone takes over and OU ca realize its full potential.

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    1. I'm afraid it's too late. They had the chance with 4K Invest but then everything went downhill at Adria and that option ceased to exist.

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    2. There could be other funds interested, like they were for Adria.

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    3. OU can still be saved but not with the current way of thinking with this management.
      For example, they have obviously realised that they can't compete due to 'economies of scale' but for some reason don't know how to address this. Big fail here already and in a normal country all these fools who call themselves 'managers' would be long gone and even investigated by the authorities by now.

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  17. Dismiss the management.

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    1. Government just extended their term by another 6 months.

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    2. The only thing that can save Croatia Airlines is sound and decent management.

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    3. Croatia Airlines, as I've been saying for years on here - has out of control costs and that's why it is losing so much money, no other reason.

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  18. Clever and cunning move indeed. In the current, harsh aviational times it's time to be smart.

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    Replies
    1. What here is "clever" and "cunning"?

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    2. I'm wondering too.

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  19. Everyone can see how successful that restructuring was.

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  20. My question is where did they get the money to buy A320neos?

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    Replies
    1. Yes loan, and the money they got last year 'to pay for engine maintenance' and a government guaranteed loan clearly went to Airbus to pay for those planes. Still can't believe that they aloud themselves to get into a position to be paying for planes which when it comes to OU still don't exist and that no one has been held accountable for this!!

      Imagine owing a coffee shop and you were paying for coffee grains and milk for 4 years which was never delivered to you and you were never able to use to make what you sell. CRAZY!!

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  21. Do privatisation advisors have a certain deadline?

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    1. Not that I'm aware of. IFC was privatisation advisor for over a year before they announced that they didn't find an interested party to purchase OU shares.

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    2. They probably won't find anyone and say how it was evaluated that it should not be privatized.

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  22. Will OU actually achieve profitability this year?

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    Replies
    1. It all depends on Q2 and Q3. When the Q2 results are out I think we will know.

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    2. April was strong. We will see how May and June perform.

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    3. Strong in traffic does not mean strong in profit

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    4. Doubt it, usually their losses are a lot less off season and now they have more expenses like expensive NEO payments which have started.

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  23. It's a shame that this airline is in the situation it is in. Good luck OU and I hope the management does the right thing and finances improve.

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  24. The definition of iz šupljeg u prazno.

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  25. It will be a profit after tax and state support :)
    Sounds familiar

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    Replies
    1. Government can't give money to OU.

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    2. Where do you think the "reserves" come from then?

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    3. Exactly. Interesting how the reserves were almost exactly the amount of the loss.

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    4. There reserves have been the same for the past 2 years. Look at their financial reports.

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    5. They got the reserves from selling assets aquired by the state with state money in the past. So it is hidden state support anyway.

      Cash comes from the tax payer so a bunch of incompetent managers can exercise their managerial skills.

      LOL

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  26. What will happen if this privatization attempt is unsuccessful?

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    Replies
    1. Nothing, they will come up with yet another new strategy and they will keep on moaning and complaining

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    2. Well the CEO said in the text what will happen. Stagnation.

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    3. "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."

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  27. How did they cover losses from previous years? Also from reserves?

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    1. They didn't have losses in previous years. They were in profit!

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    2. That's right forgot about that.

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    3. Yes officially they were in profit in 2013, 2014, 2015, 2016 and 2017. There were no assets to sell in 2018.

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    4. There are still assets to sell but they are big assets that would affect them operationally.

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  28. So they will use reserves to cover losses but they have enough money to change the livery... ok.

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    Replies
    1. The livery is being changed to cut costs. The white colour makes the plane lighter and consume less fuel.

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  29. Company reserves = state coffers

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    Replies
    1. Doubt it. In their financial reports they probably have to show from where the reseves were accumulated.

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    2. No they don't. Look at their financial reports. It's online.

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  30. Dead man walking.

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  31. Croatia Airlines is very lucky that a major LCC hasn't started flights to Zagreb.

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  32. In Croatian media today, Croatia Airlines has officially blamed the media for their 2018 loss.

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    Replies
    1. Oh good. They have something in common with Adria.

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    2. How is the media responsible?

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    3. Apparently because of the way they reported about the company and potential strikes.

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    4. Za loš rezultat u 2018. Uprava na čelu s vd. Jasminom Bajićem vidi u sezonalnosti (dok zimi nema konkurencije, ljeti se za turiste bori 100-tinjak kompanija), ali i 1666 medijskih objava o štrajku koji su doveli do pada očekivanog prometa.

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    5. Tako se kompanija poziva na prijetnje štrajkom radnika Croatie, koji se nisu desili, no kompanija smatra da je na njima izgubila jako mnogo jer su putnici „pod strahom od štrajka“ izbjegavali kompaniju. Štrajk se najavljivao u top sezoni kada su avioni puni više od 95%, pa čak i da je nekolicina putnika apriorno odustala od kupnje avionske karte, avioni su i dalje bili prepuni, a prodavale su se vrlo skupe karte. Dakle, kompanija nije baš nikako izgubila na prijetnjama štrajkom. A kako se štrajk i nije desio stvarnih financijskih gubitaka (najma drugih aviona, kompenzacija, hotelskih i inih troškova) i nije bilo. Što bi tek napravila uprava Croatije da je imala tu „nesreću“ da joj radnici štajkaju kao što su štrajkali radnici Lufthanse (15 puta u godinu i pola), Ryanaira koji je imao nekoliko desetaka štrajkova u 2018. godini, ili Air Francea koji je u prvih pola ove godine štrajkao 15 dana sveukupno, a zbog čega su iz kompanije otišli i CEO Air Francea i CEO grupacije Air France-KLM. Da se tako što, ne daj bože, desilo Croatiji, uprava bi imala izgovor za idućih 20 godina lošeg poslovanja.

      Kompanija konstantno opravdavanje katastrofalnih financijskih rezultata traži u sezonalnosti. No, pritom kompanija namjerno zanemaruje činjenicu da najveći broj od stotinjak kompanija koje lete u Hrvatsku ima jednak problem sezonalnosti. Svi oni lete samo u top sezoni prema Hrvatskoj. Među kompanijama koje nemaju ni jedan jedini let zimi su i najveći prijevoznici u Hrvatskoj: easyJet, Ryanair, TUI, Norwegian, Trasavia, SAS, Jet2, Volotea idr. Volotea primjerice 60% svih svojih linija ima sezonskih, pa je svejedno povećala prihode za skoro 30% i profitabilna je od 2014. godine. Zašto njima sezonalnost nije izgovor kao upravi Croatije? Sve ove kompanija imaju prizemljene desetke aviona zimi. I ne dobivaju 10 milijuna EUR PSO pomoći, kao Croatia, da bi letjela, prvenstveno, zimi. Da se razumijemo, ja nisam protiv PSO, upravo suprotno, samo naglašavam da bi Croatia bez ove pomoći imala još daleko većih problema sezonalnosti, i tu je u boljoj poziciji nego konkurencija koju takvu pomoć nema, pa ne lete ni jedan jedini let u Hrvatsku zimi, nego radi toga avioni koje koriste u Hrvatskoj stoje prizemljeni više zimskih mjeseci. I profitabilni su i bez zimskih letova i sa prizemljenom flotom. Nevjerojatno je da uprava Croatie ovaj kvazi-argument toliko ponavlja i da ga njeni vlasnici (vlada), mediji i javnost uvažava. Iako je notorni nonsens u korelaciji sa konkurencijom.

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  33. They still have LHR slots to sell.

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    1. If they sell them they are out of the UK market.

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    2. That was a joke, they already sold their LHR slots :)

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    3. They only sold portion of LHR slots. Without Star partner at LHR, OU should sell all remaing slots and try to get into LGW for ZAG-LON O&D. BA is already taking most of connecting passengers from ZAG.

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  34. Sad bi i Etihad bio dobar spasitelj...

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