The Croatian Prime Minister, Andrej Plenković, has said he anticipates no difficulties with the European Union over the government’s decision to provide Croatia Airlines with 33.7 million euros in aid, despite the measure being contrary to the block's regulations. The airline has been advanced 13.5 million euros so far, with a further 20.2 million euros to be paid in 2020. Mr Plenković noted there would be “no issues” with the European Commission over the capital injection, adding, “We explained the situation”. The state last recapitalised Croatia Airlines in 2013 with 106 million euros, just before the country joined the European Union. As a result, the carrier was forced to restructure. Under EU policy, the state is barred from providing further financial assistance to the airline until 2023.
The Croatian government has said it will strictly monitor spending at the country’s national carrier as part of the capital injection. The company will be obligated to submit expenditure reports to the Ministry for Sea, Transport and Infrastructure, and will need to include statements of purpose and copies of invoices. In turn, the ministry will be required to forward its assessment on whether the funds are being spent appropriately to the Ministry for Finance. Financial projections for the next two years showed that Croatia Airlines would be unable to repair and overhaul two aircraft engines without the support of the government, as well as pay its debts to Croatian suppliers and finance other necessary investments.
Mr Plenković said the government believes Croatia "needs a national carrier" to provide connectivity and to strengthen trade and tourism, while the company’s stabilisation is intended to precede an effort to provide further funding by the state. “We know how important Croatia Airlines is for our economy and tourism industry, especially during the slower winter months when foreign carriers reduce their operations”, Mr Plenković said. Finance Minister Zdravko Marić previously noted, “I am not happy or satisfied with this situation, but we have assessed that Croatia Airlines and Croatia's airports have great potential”. Under the terms of the capital injection, a model for the company’s privatisation process must be drafted and presented to the government by December 31, 2019.
I really hope that this money will be strictly monitored like it says in the article. The last restructuring was an absolute failure and those 106 million were obviously not used in the way they were supposed to.
ReplyDeleteif you throw money in a trash bin the effect is the same in both cases; monitored or not.
Delete“We explained the situation”
ReplyDeleteSound very reassuring.
LOL
DeleteI don’t get why didn’t Croatia Airlines just sell some of its assets to raise funds. They still have them.
ReplyDeleteWhy should they? The state owns the company and wants to invest.
DeleteSuch as?
DeleteIt still has Heathrow slots. It also owns some of its aircraft. They could have done a sale and leaseback.
DeleteThe government is trying to sell the entire company. Selling its slots, aircraft and the little it has of actual value will decrease any chances of a successful sale.
DeleteThis goes to show the double standards of the EU. Don’t get me wrong, I’m happy Croatia Airlines will live another day but others weren’t so lucky to have understanding from EU over aid, like Malev for example.
ReplyDeleteThey had less competent government.
DeleteThese are just the hopes of Croatian Government. Why did many others have to follow strict EU rules and Croatia does not have to? Funny.
DeleteLike someone said below, Italy is really following strict rules with Alitalia.
DeleteAlItalia is too big to dissapear and Italia has much more influence in EU than Croatia.
DeleteCroatia Airlines belongs to the group of Cyprus Airways, Malev, Estonian Air, Spanair etc.
Guess where they all are now...
Anonymous 18 October 2019 at 09:28
DeleteTrue dat!
The EU might be understanding now but when it needs to pull some politicians in line, don’t be surprised if the question of Croatia Airlines aid comes back to the table.
ReplyDeleteAnother day. Who cares?
DeleteLetting OU go bust would cost the government much more than these 33 million. Especially the compensation it would have to pay ZAG concessionaire.
ReplyDeleteFinally someone smart!
DeleteWhy should EU care about it?
DeleteMuch bigger Malev had to bring back the money and had to stop all operations. OU is not different at all
I hope its spent wisely but I'm worried it won't.
ReplyDeleteYou should not worry. There is a plan behind this decision.
DeleteWhich is?
DeleteSense the irony.
DeleteBravo EU
ReplyDelete33 million really isn’t a big sum in the grand scheme of things.
ReplyDeleteCroatia Airlines better make the best of it because this is the last dime they will see from the government.
ReplyDeleteI would love to see Croatia Airlines expand and grow and become profitable... but somehow I am sooo sceptical about their future :(
ReplyDeleteFrom 2017 Alitalia got 900 million euro, and this week they got 350 million. I am not saying that this is right, but would like to show double standards.
ReplyDelete+1
DeleteVi jednostavno ne citate nista. Odrzavanje Alitalije iznad vode je jedna ogromna logisticka operacija niko ne tvrdi da je to dobro. Dok tako rade tolerisace im se. oni imaju 5 puta duzu obalu od Hrvatske i malo eksluzivnija letovalista i zimovalista.
DeleteNisam napisao da je to ok. Samo da ocito postoje double standards. Sto nije jasno?
Delete900 million EUR was not invest but loan. Which Alitalia will give back when it will be sold.
DeleteAh, the "loans". Like Air Berlin paid all the loans back to German government before their last flight?
DeleteJak je on u ekonomiji.
DeleteSame think. Germany gave loan to Air Berlin, which was paid back to Germany after company was sold to Lufthansa and easyJet.
DeleteJust to add to this conversation regrading OU's financial injection. Without it OU would face bankruptcy. This financial injection/consolidation won't bring any new funds to the Airline, give airline improved competitive edge or make airline any better off than currently is, what this will do is just consolidate OU's financial books and ensure airline is better prepared for privatisation. This financial consolidation will make airline more attractive as a potential investment in the future, give it a clean balance sheet and ensure Airline is a profitable and able to provide good level of service.
ReplyDeletePrivatisation? When? Who? Apparently NOBODY is interested. The only thing we now is that there are consultants payed to find a strategic partner. And this is not the first time they pay somebody with no results.
DeleteAnd if privatisation does not happen?
DeleteOh, I'm sure some big boys like 4k invest are more interested now.. And they have plenty of time now..
DeleteCookiemilk and Cowarse are ready to take over ...
DeleteCroatian Government isn't stupid they know what they're doing.
ReplyDeleteFunny.
DeleteRead this
https://www.maltatoday.com.mt/business/business_news/48270/cyprus_airways_shuts_down_after_order_to_repay_state_aid#.XalqIGbgr-g
Noted, Mr Plenković.
DeleteApparently saving their a..s
DeleteI am sorry, but I have never heard of an airline constantly banging on about engine repairs as much as Croatia Airlines does. Don’t all airlines have to do this? Yet every year in every single financial report, Croatia Airlines has a line saying “but this year the losses increased because we had to repair engines”. WTF!?
ReplyDeleteTrue!
DeleteMy guess is that it is a cover for something
DeleteAirbus neo payments?
DeleteClassic Balkan style.
DeleteI bet if you go read annual report of EZY, FR or LH it will not say "we had 50mio less profit, because we had to repair X engines". Because any respectable person in aviation knows this is just cost of doing business.
I hate OU! They are too expensive, and they barely fly anywhere. They should be replaced by Wizz Air like Malev was in Budapest.
ReplyDeleteWizz Air are much more expensive then Croatia Airlines in most instances once all of Wizz extras are added on, plus you have to fly from some low grade Airports.
DeleteLCCs aren't the solution to everything. And that they are always cheaper than legacy carriers is a lie which is proven untrue time and time again.
DeleteYou should also explain where you would like them to fly in addition to their current destinations, and how they'll be able to do this given it doesn't look like they will be getting extra aircraft any time soon...
DeleteIt's amazing how bad people's understanding of pricing is for an airline blog.
DeleteLCC (Ryanair / Wizz Air) pricing - including extras - is way below legacy carriers, to the tune of 50% or less. Just compare RASK figures and average fares from their yearly reports for crying out loud.
Or can it just be willful ignorance?
(inb4 replies containing cherry picked handful of price comparisons that pretend to be a representative sample of 100'000s of price points)
DeleteI travel often. The main reason why i always avoid LCC's are their early morning travel times. The bulk of their flying from Eastern Europe is at 05:00 or 06:00 in the morning.
DeleteDo you honestly expect decent and reasonable conversation with someone who starts the topic with: I hate OU! In sense of connectivity in Croatia this is very small amount comparing what is government giving to the railways. And they don't even operate on some routes. The buses are. I believe that 250 million HRK is injected every year and nobody seams to be bordered. No articles, no "experts" in railway. We are small country with a lot of aviation experts.
Delete" Finance Minister Zdravko Mamić " oh God its worse then we thought :P
ReplyDeleteWouldn't be surprised if things roll out in that direction :)))
DeleteSlovenian government washed their hands with selling JP to 4k Invest, who then made the dirty job instead of them.
ReplyDeleteI think in Croatian case the EK will make the dirty job for Croatian government, who will also wash their hands at the end.
Sooner or later.
EK as Emirates? :-)
DeleteEK as european commision ;)
DeleteAnd Purger said that Croatian Government is not allowed to help financially OU...
ReplyDeleteActually Purger is right. They are NOT allowed by EU regulations to give those subsidies. That is why they talked to the Commission, trying to get an exception.
DeleteRead the article.
Exception, right? And why only for Croatia? Somehow Croatia is special becuase of...what?
DeleteHairstyle of Mr. Plenkovic?
Plenkovic is rather close to the current EU commission. And probably Croatia taking over EU presidency helped their case in persuading EC not to react.
DeletePlease tell me you are kidding
DeleteAnon 10:11
DeleteHahaha that close
https://www.youtube.com/watch?v=8XDqihrBEss
Elections are coming. OU going bust would be a disaster both for government and president.
ReplyDeleteBut if they have limited the sale time my guess is they are at least in talks with someone.
ReplyDeleteMaybe Lufthanda finally buys them along with establishing airline in Slovenia.
Delete*lufthansa
DeleteSelling slots at LHR is single best indicator that company is doomed.
ReplyDeleteThey sold part of them years ago. And they are still around.
DeleteWould they be around if they did not receive 34 mil eur?
DeleteOf course not
You see, how they get them money to survive.
DeleteAre you sure about survival? I wouldn't bet...
DeleteIts sad if OU ends up bankcrupted. But i think the croatian goverment will react on a positively way. I have worked for the company, Its a great company to work for. All the Bestfor you OU (L)
ReplyDeleteHope it works out the way Plenkovic thinks.
ReplyDeleteThe government is HOPING EU will understand them ... but the reality is they will probably be fined.
ReplyDeleteAnd the fine means...return the money.
DeleteReturning the money means...bye bye OU
I certainly hope that EU will respect the laws.
DeleteIts all about the politics. Who knows, what other favour Croatia has done for EU, maybe just raised hands for some law in EU parliament, which will be paid out by not questioning this state injection to OU.
ReplyDeleteGetting the money is not really an issue, it's what they do with it, that's the problem. They are not using it to invest in their business and to expand their operations so that they can increase passenger volume... without which they can't survive long-term.
ReplyDeleteIn aviation that amount is really not much, it will barely cover their winter expenses. What happens when next winter comes and when they need yet another cash injection? Slowly slowly they are starting to go down the path JP went some years ago. They need transfer passengers to compensate for what the Croatian market can't provide them with.
That's what Air Serbia did some years ago and it's starting to finally pay off. For example, LCA last night departed with 2-129 and returned with 9-134 passengers. Flight to Cyprus had 36 connecting passenger from Croatia. A 30 people tourist group organized by Avio Adria plus another 6 regular transfer passengers. Without those 36 transfers from ZAG the load to Cyprus would have been 95 passengers which isn't that impressive on the A319.
I don't understand why OU doesn't launch ATH. It's a massive source of transfer passengers and a Star Alliance hub. It could help them boost their European flights.
A3 beat them to it. And they are a much stronger airline. You snooze, you lose.
DeleteThey are better off codesharing with them.
Which destinations OU has to offer that are not already offered directly by numerous airlines from ATH?
DeleteOr do you mean that they should offer prices so low for connecting passengers that they would get into even bigger financial trouble?
JU, OS, TK, LH...only carry passengers to destinations not served non stop from Athens?
DeleteCujem da su Air Serbia letovi iz Helsinkija puni Grka koji nastavljaju za Atenu. Iako postoje direktne linije, ova je cesto jeftnija
DeleteNemjee yes. From ATH they are feeding their intercontinental networks and destination in the former Soviet Republics not served from ATH.
DeleteAnd in the case of LH and OS are doing it with code shares and cooperation with Aegean.
In the case of JU it just offers the cheapest prices.
Petar ...lol no
DeleteNemjee ...lol, yes!
DeleteWhat intercontinental networks when Athens has flights to Canada, US, China, Singapore...so your argument makes no sense.
DeleteThere are many countries besides US, China and Singapore.
DeleteSo what passengers are OS and Ukraine International then carrying on their intercontinental flights?
DeleteI work at MZLZ and they were not tourists but the Croatian rugby team, 30 of them. :D
DeleteKind of agree with NEMJEE, but the other way around. Why don't OU try to attract some Greek passengers like JU does in summer with the 05 :00 am flight. They can schedule a flight arriving in Athens early noon and with the right price, right connecting times, right advertising in television and newspapers, can feed their afternoon departures to Brussels, Vienna, Zurich, Frankfurt, Munich with Greek passengers. You never know it might work, just give it a try!
DeleteIt's still too early for them to react to ATH's booming numbers. So far this year ATH grew by 6.5%. In the period January-September their numbers grew from 18.749.573 to 19.967.900! Yet OU doesn't think there is a market for them there.
DeleteTheir growth alone this year is like 50% of OU's yearly numbers. I don't know what has to happen for them to become more proactive.
Good news. OU gets aid and doesn't get punished for it.
ReplyDeleteLet's wait and see.
DeleteWhat sucks is that they are wasting taxpayer money for what? To get more of the same?
ReplyDeleteExactly
DeleteThat's my opinion too. If I was confident this money would produce some real changes at OU I would support it. But in 5 years we will be in exactly the same position.
Delete5 years - wow that is optimistic
Deletewhat happened with OU's last restructuring process? where did those 100+ million euros disappear.
ReplyDeletePaying of loans, suppliers, wages, engines...
DeleteI love the statement that they explained the situation to the EU :D
ReplyDeleteDoes OU codeshare with Emirates on their regional flights to Istra, Dalmatia and the rest of Ex Yu ?
ReplyDeleteYes.
DeleteThen in winter they must codeshare with Flydubai too ...
DeleteDon’t you all worry, sleep tight, Croatia Airlines will be around for a loooong time A+. ALL Balkan airlines are non viable without heavy government subsidies, Air Serbia would go bust if Serbian goverment didn’t inject money yearly, just like OU. There’s nothing wrong with that fact, national airlines like OU and YU are an important to each respective country, and OU will never go bankrupt, its a Croatian thing ;-)
ReplyDeleteCroatia Airlines will be around for a loooong time...and OU will never go bankrupt
DeleteIs it looong time or never? ;)))))