State eyes Croatia Airlines - airports holding


The Croatian government will consider forming a holding company comprised of the national flag carrier and six state-run airports in a bid to recapitalise Croatia Airlines. The model is expected to be officially proposed by the carrier’s privatisation advisors, which have until the end of the year to present the best possible options for the airline. Due to a lack of interest for the flag carrier from others in the aviation industry, the privatisation advisors are also expected to propose the sale of the holding company to local pension funds. Airports which would make part of the holding company would include Split, Dubrovnik, Zadar, Pula, Rijeka and Osijek. All of them have been operating with a profit over the past years, with exception to Osijek.

The formation of a holding company would result in the Croatian government maintaining effective control over both the airline and airports. The Croatian Minister for Sea, Transport and Infrastructure, Oleg Butković, said last week the government would avoid concluding a similar privatisation agreement to the one its Slovenian counterparts made with Germany’s 4K Invest over the sale of the now-bankrupt Adria Airways. “We don’t want such a strategic partnership, where state interests and services of importance to Croatia would not be safeguarded. Croatia, as a country dependent on tourism, needs a national carrier”, Mr Butković said. He added, “Consultants are currently looking into potential strategic partners and will decide on the best possible recapitalisation model by year’s end. Then we will launch a public tender. Based on the government’s decision, we will select a strategic partner by the end of June 2020. The focus is currently on finding an investor from the aviation sector, but we are not insisting on it. Different sale models foresee interest from different types of investors”.

The Director General of the European Region of the Airports Council International (ACI), Olivier Jankovec, has criticised plans to form an airline - airports holding company. “I have heard about this proposal and I must say I am rather surprised. It isn’t in line with the direction the European aviation industry has been taking in the past thirty years. In fact, it is completely the opposite of what has been happening in the aviation sector. The days when airports subsidised airlines are long gone. Therefore, combining select airports with Croatia Airlines is nothing more than a return to the past, somewhat like Aeroflot in the 1960s”. Mr Jankovec added, “Such a model would also raise questions over its compatibility with European Union regulations. I doubt the European Commission would approve for Croatian airports to be rescuing Croatia Airlines, which is in state ownership. The EU is very clear here: there is to be no financial assistance to airlines made by state-owned airports, except in specific cases and under strict rules when concerning the launch of certain routes’’.




Comments

  1. What a stupid plan. I hope it doesn’t come to this.

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    1. It will happen because OU is in a desperate shape and is barely surviving. They need to find a way to keep them operational.

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    2. Simple no Buyer.

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    3. they are not looking for a buyer (as someone who pays for it);
      currently they are looking for a "real" airline that would take it for a single kuna (after recapitalization) but as they will insist that there is no restructuring, it is a difficult proposal (Italy is trying the same for more than two years)

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  2. Downward spiral of Croatian aviation continues.

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    1. Dramatic much...

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    2. No, I'm just being realistic.

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    3. I am always very critical of OU, everyone coming here knows it, and I think OU is total failure, and fully agree with the part of your post saying downward spiral, but for OU only. It cannot definitely by applied for Croatian aviation in general, because numbers of passengers transported by air in Croatia are growing year by year, and are double then ones in double bigger Serbia, and the biggest in entire ex-yu. The second croatian airline company, Trade Air, is successful, and growing, slowly but steadily. All airports are getting modernized year by year, new terminals are being built. Number of long-haul services in Croatia is the biggest in ex-yu, once again. And generally, civil aviation in Croatia cannot absolutely be even remotely related with any downward spiral. Everyone who is realistic must admit it and if claiming opposite despite all these facts, can mean only one thing, and I will let people reading conclude what that thing is.

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    4. You speak of realism yet you are being unrealistic in your assessment of the situation in ZAG and OSI, two airports which are starting to struggle. Actually OSI isn't even struggling, it's outright collapsing ... or has it already collapsed?

      Also can we say Croatia is successful if coastal airports are only alive in summer? Look at SPU numbers outside the busy summer months, it's depressing.

      So the situation is definitely partially good, at least in summer. In winter? Not so much.

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    5. Yes, OSI airport which represents less than 0,1 % of croatian numbers is bad. Yes, aviation in Croatia suffers from seasonality. You are right about that. And both these facts don't change the real situation, and all other facts, that all other entities which make croatian aviation, with exception of OU and OSI, so even ZAG, despite some cut routes/airlines lately, are growing, making money, contributing to economy, and have the biggest number of passengers carried within ex-yu. And pardon my French and it cannot be called downward spiral, no matter how much you wish for it

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    6. But, related to today's topic, I believe that downward spiral will commence, if it's decided to proceed with this nonsense proposed behind--the-iron-curtain model which we NEVER had in ex-yu, not to mention today's situation in aviation. It's guaranteed disaster for both OU and especially for successful airports

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    7. And why does OSI have less than 0.1% of total traffic despite some airlines launching flights only to suspend them? Also what routes are exactly growing from ZAG? From what I see most are being cut even LX which is not staying even in summer. Let's face it, the numbers we have today are thanks to foreigners and their foreign airlines. Croatian airlines and airports are clueless which is why they are all dead in winter that is when westerners have no interest in going there. Seasonality is something that needs to be fixed by Croats. Same way JU is doing by boosting winter flying. Croats need to start finding their own solutions because the west will only help if they have direct interest.

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    8. I am not here to fight and argue with no one so this will be my last reply today. Croatia had zero decent airports and 5 million passengers a decade ago. Today it has 3 most modern, functional airports, which make profit, and btw,make 90 % of its numbers ( and you talk about 0,1% OSI again), and 11 million passengers. If 0 to 3 new big terminals , and 5 to 11 million passengers, is DOWNWARD SPIRAL, I am Elizabeth, the Queen of England. Seasonality is something that is slowly improving, and there is even strategy for that, unlike for most other aereas in HR, but it takes time, money and effort to get there. And I am not happy as well with the overall siatuation , especially in OU and ZAG, and yes, it can laways be better, but it is NOT DOWNWARD SPIRAL. FULLSTOP.

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    9. What full stop? Who are you to decide when a discussion is over? Or just because you are out of arguments the discussion is finished? Sorry, that's not how it works.
      You still didn't reply to me, why is it that OSI only has 0.1% of the total market if the whole market is not in a downward spiral? If there is success all around why is Osijek as good as dead? Why are we ignoring continental Croatia? Is it because it is struggling? Are we going to ignore all those airlines that recently suspended ZAG among which is also LX? How can you claim that the market is not at least partially in crisis if an airline like Swiss can't make it in your market?

      As for the coast, yeah it does well in summer because foreigners decided like that. They are selling tour packages, the moment they stop all airports go to sleep. Seasonality is an issue we are hearing about for ages now yet locals have not done much to change it. Why is that?

      Of course it's easy to just write full stop because you don't want to argue anymore but you are in way right over here. The Croatian market only does partially well and only partially well on the coast. Continental airports are not doing well at all, especially Osijek which is dead and which accounts for only 0.1% of the total market.

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    10. Oh and what about all those Croatian airline that went bust until now? Dubrovnik Airline, Air Croatia, Sea Air ... and soon enough we might have OU on that list. Why did they all fail? You mentioned Trade Air but they are probably doing well because they are flying a lot outside of Croatia, right now they are operating TLV-BEG quite successfully. Croatian airlines have failed on the Croatian market. So once again the growth in the country is once again thanks to foreigners.

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  3. So airports will be dragged down to help save OU.

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    1. Well isn't that what ZAG has been doing for a while? They are keeping competition away in order to protect OU.

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    2. ^ Under government pressure, yes

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  4. The EU can keep their nose out of Croatian business!

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    1. If you are part of the EU, you have to play by the EU's rules.

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    2. Hopefully EU will do something about it

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    3. Nothing will change until they shut OU down.

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  5. All this shows is that the Croatian government is keen to keep pumping money into Croatia Airlines.

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    1. All it shows is that no buyer can be found.

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  6. Has anyone else attempted this?

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    1. I mean any other country?

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    2. You have it in Qatar. Qatar Airways is the operator of Doha Airport and Duty Free.

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    3. In the nineties, Belgrade Airport was part of JAT.

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    4. Not true. They were always separate. But Czech government did something simmilar with CSA and Prague Airport. It didn't work out.

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    5. It was ČSA and Prag Airport, was not successful.

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    6. Well Jankovec mentions Aeroflot in the 60s.

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    7. JAT did not own Belgrade Airport. It did own Tivat Airport though.

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    8. In Qatar, the government owns majority of the business in the country. Not comparable to developed Western economies.

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    9. @ 19 November 2019 at 09:19

      +10 LOLOLOL

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  7. So this is new way how to inject more money in Croatia Airlines?

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  8. I remember how people on here attacked Serbia when Airports of Serbia was created yet this is much worse since OU will run the show. It's clear distortion of market dynamics and business synergy.

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  9. Pension fund? What do they know about running an airline???

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    1. Nothing but they have money, something OU doesn't.

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    2. But aren't pensions funds owned by the government. I mean what's the point. So they are literally going to drain money from the people and their pensions to support Croatia Airlines.

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    3. Yes that's what the Italians did with Italian Post and Alitalia.

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    4. Well that turned out well...

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    5. And then all the people must be convinced that working longer (67,68, 69.. years of age) until they get their well deserved pension is necessary.

      Ask OU where your money is.

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    6. Point of promoting pension fund (or any other government owned institution) as a owner would be to have middle man between government/budget and OU. In that way they would try to "disguise" flow of funds from government to airline and would also introduce additional sources of funds. For example, if Pension fund or some bank is owner of Airline they can easily "invest" into business.
      This is similar to current situation where there is HTZ as "partner" between state budget and airlines, airports, etc. New solution would just more flexible and creative regarding number of funds sources & total amount.

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    7. So OU will receive money from

      - Government (33 mil EUR)
      - pension fund (who knows how many million)
      - udruzeno oglasavanje fund (who knows how many million)
      - PSO for each domestic route (12.5 million)

      This is amazing how much money they get. And they are EU carrier.

      Hilarious!

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    8. Don't forget Airports :) All you listed is budget money, one way or another.
      With airports scheme, they would start to take money from successful companies and transfer it to OU.

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    9. Pension funds dont have to be government run .
      In the US and Canada there are many private listed pension funds .

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    10. Actually with the exception of the few, all the pension funds, at least in Canada are entirely independent entities. Some are run by the companies themselves for their employees while the others are like investment funds.

      On the other hand, pension funds are thing of a past and privilege of few in NA. Many companies only maintain them for current members and offer contributions to personal pension plans (registered savings accounts basically) for the new employees. Aging demographics, liabilities and costs of pension funds are all reason for this.

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    11. Unfortunately, OU is not in US or Canada, if you haven't noticed yet :)
      Anyway, thank you for the helpful insight, I'm sure that structure of pension funds in those countries help us to understand what government of Croatia wants to do with national airline! Thumbs up for relevancy! :)

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  10. So now it is clear why Croatia Airlines has always insisted on calling the process "recapitalisation" rather than privatisation because they won't be privatised at all. They will just find a way for the government to keep giving money without formally raising any eyebrows.

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    1. Yes it will be a recapitalization and not an actual sale.

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    2. True. Kucko launched this idea. He always said how the strategic partnership should be purely financial. Now no one in their right mind would agree to that, except of course another state run company.

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    3. The management is pushing for it because they just want capital while the decision making will stay as is.

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    4. And I wouldn't be surprised if they brought back Kucko as CEO after his successful run at Gulf Air :D

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    5. Kucko is SDS cadre so no. Plus why would he give up a well paid job at Gulf Air.

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  11. I fail to see what good this might bring.

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  12. Sorry but I think even this would be more effective than having only foreign airlines serving the country. I know there are people who would want to have only one European airline and for that to be Deutsche Lufthansa.

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    1. There will probably never be just one European airline, but likely not more than 4-5 in the long game, just like in the USA.

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    2. USA has American, Delta, United, Southwest, Alaskan, JetBlue, Spirit, Frontier, Allegiant, Hawaiian, Sun Country and a bunch of smaller feeder airlines.

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  13. I hope certain people realize now how bad the situation is at OU. They are nearing bankruptcy really fast. They burned through the €100 million real fast so these €33 will be a nothing for them.

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  14. How come Lufthansa doesn't want to buy it?

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    1. Because they have bought up too many loss making businesses. Plus why would they need to buy an airline which already feeds all of their flights?

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    2. When you buy a business, or invest into one, you always look at something called ROI - return on investment.

      Let's say LH buys OU for 1 EUR and invest 100 mio EUR. When would they see their money back? And when would they actually make profit from it?

      The answer to this is probably never, so that's why they (or anybody else for that matter) don't want to buy it. It's the same as with JP, the only willing buyer was investment fund and even that only after government agreed to put a substantial financial injection just before the sale.

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    3. Lufthansa will most definitely not buy OU especially not now when EW suspended two routes. The market is just not there to justify millions they will have to spend on the business. Easier to wait out for OU to die and for them to move in, same like in LJU.

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    4. Lufthansa already owns Croatia Airlines ..

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  15. OU future is on far east, only there is a buyer that could use OU slots and Zagreb Airport to expand their east operation to the Europe.

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    Replies
    1. True, Garuda was interested so the government should stop dragging their feet and get that deal going.

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    2. Garuda was interested 5 years ago for 5 minutes.

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    3. There were so many "interested buyers"... Lufthansa, Garuda, Aegean, Turkish, LOT.. and all of them had run away after they saw the situation in OU.

      Even world bank was hired as advisor.

      So much money burnt for nothing. And won't stop.

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    4. above anons: make screen shots of the above posts for future reference. Exactly the same as with JP - when nonbinding inquieries were going on there was some poking around, and when the situation got serious and binding offers were asked only experts from 4K were actually left. And after 3 years the common Janez (or Ivan in OU's case) will totally have forgotten those fact and spread bull**it that all the major airlines were basically fighting each other for this wonderful and prosperous airline. :)

      People have really bad memory. So just wait and see and come back to these comments in 3 years :d

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  16. I'm sure local governments and municipalities are trilled about this news.

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    1. They will do what the central government tells them.

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  17. Replies
    1. Hey it doesn't matter as long as Croatia has the most long-haul flights in ex-YU! At least according to some on here. lol

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  18. Hope OU is going to be actually sold and not just bungled in some holding. This way the company will progress much slower than it should

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  19. Stay away from the airports. They are doing great by their own.

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    1. Well everyone but Osijek.

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    2. ZAG isn't doing that well either.

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    3. The only metric for an airport doing well is weather it is making money.

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    4. +1000 last anon. With a small correction that it is true for any business in general, not only airports.

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  20. With OU regaining monopoly to Zurich and Prague next year, let's hope their finances improve.

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    Replies
    1. monopoly = higher prices = less people flying = empty planes = routes closed

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  21. Destructive decision for the airports.

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  22. A right investor with a vision could do wonders with the company. I think OU has a lot of potential. Unfortunately I don't think it will happen by being run by airports.

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  23. 'I doubt the European Commission would approve for Croatian airports to be rescuing Croatia Airlines, which is in state ownership. The EU is very clear here: there is to be no financial assistance to airlines made by state-owned airports, except in specific cases and under strict rules when concerning the launch of certain routes’’.

    The European Commission obviously could not care less. They looked the other way when the government just recently gave OU aid.

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    1. They looked away once. I don't think they will look the other way twice.

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    2. But Plenkovic "explained the situation".

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    3. They didn't look the other way, they're waiting to see if the company will be sold by mid-2020 as promised. Then the boomerang will turn back...

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  24. Any sane financial or investment fund would never invest in the aviation sector - period. As much as I love this industry, if you wanna make money, stay way clear of the airline sector

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    1. According to current portfolio statistics, Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) has four positions in the airline sector as of the first quarter: Delta Air Lines Inc. (NYSE:DAL), Southwest Airlines Co. (NYSE:LUV), United Continental Holdings Inc. (NASDAQ:UAL) and American Airlines Inc. (NASDAQ:AAL). Jadno.

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    2. Not really. Look at profitable airlines in Europe and their profit margins. Ryanair at 11%, easyJet at 8%, Lufthansa at 7%, Wizz Air at 12%, IAG at 10%, etc.

      Investing in state-run or ex state-run airlines with nephews, sons, daughters, friends of the party representing majority of employees and business partners is a different story though :)

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  25. This was to be expected airlines aren't all that interested in purchasing other airlines at the moment.

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  26. There is also a proposal to create a holding made up of Adriatic Croatia International (ACI) - these are 22 marinas across Croatian coast and Croatia Airlines. And then this holding would be sold to pension funds.

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    1. Kill two flies with one stone I guess.

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    2. Another genius idea by the privatisation advisers who will do anything to sell or should I say recapitalise OU because they won't get their fee if they don't (based on their contract with the government).

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  27. The smartest thing that could have been done was to merge Adria and Croatia Airlines. Both could have kept separate brands and similar networks.

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    1. It would have been a stronger and more competitive company.

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    2. There was no political will from either side.

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    3. Merge two loss-making businesses with each retaining their existing base and cost structure? Ridiculous idea.

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    4. The only way the merger would have worked is to develop Cerklje airport as a major base, with easy access from Ljubljana and Zagreb (especially once Croatia enters Schengen), common fleet and 3rd party foreign management.

      Obviously all these conditions are unicorns :)

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    5. anon 10:27: the guys and girls from Bled tourist board and all the s.p.'s would be having a hunger strike if that were to be planned :D

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  28. There was talk that Aegean was interested years ago. I think that would have been a great combo. Aegean + Croatia Airlines. Could have been a strong airline.

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    Replies
    1. No, it wouldn't. OU would have dragged A3 down. Aegean doesn't need them.

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  29. I don't understand that it is that hard to get interest for OU. Fleet is relatively modern, new ordered jets coming in the next decade, you have a nice domestic network which is partially supported by the government and a huge market during the summer. The biggest issue to overcome is seasonality. But still, OU isn't a bad investment. I don't understand that they haven't managed to find anyone.

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    1. That would suggest that something is not ok with their finances.

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    2. The issue is the market. Highly seasonal on the coast while mainland Croatia is still relatively poor and there is limited amount of p2p traffic.

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    3. no profit for years and it is good investment? Osnovno je da ce EU prekinuti ovakvo trosenje novca od poreza. Nemaju oni nista da se kompaniji pomogne, ali ovo je direktno ukopavanje aerodroma koji imaju solidno poslovanje leti i male troskove zimi.

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  30. The saga continues.

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  31. What they are looking for - capital without any decision making imput - can only come from another government run business.

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  32. What a sad story of illusion.
    If anybody in this forum or any politician could read financial statements (available free online), they would find out that Croatia Airlines didn't make a penny of profit from its core business - passenger and cargo air transport - in the last decade.
    It's just "other profits" (being sale/leaseback of assets in the last years) that simulate earnings.
    While Croatia is full of tourist...

    A textbook example of illusion and incompetence.
    And the Croatian taxpayer will pay for it.

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    Replies
    1. Croatian taxpayers don't need pensions, as long as there is OU! :)

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  33. They probably won't find anyone and say how this is the bet way to keep OU alive.

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    Replies
    1. In other words: iz supljeg u prazno.

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  34. What do you, guys, think if Croatia Airlines will add some new routes next year?

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    1. some of those seasonal routes could be year round, first MXP and PRG

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    2. Their former manager said that not a single route of them is making any profit in winter ..

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  35. Ovaj Butković je inace nema pojma o nicemu, postavljen je bez ikakvih kompetencija za ministra prometa.

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  36. What difference will this make for the airline? Absolutely none. It will give the company no option to expand business.

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  37. And just when I remember that in 2010-2011 they were the leader in ex-Yugoslavia having no competition at all in broken Jat Airways or loss making Adria.

    Look at them now...They beg for the money everywhere...

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    Replies
    1. Do you really think that they were profitable in that moment? :)

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    2. I did not say that.

      In the mentioned period of time they were first by passenger numbers, they had the best fleet, they had great tourism potential and they had big chance to be the air carrier nr. 1 in all ex-Yugoslavia.

      Now, all of it is gone. Air Serbia has the most of passengers in ex-Yu, OU's fleet became old, OU lost and keeps losing market share in Croatia, Air Serbia has much more planes and destinations and OU can't survice anymore without help of Government.

      If EU decides that the help from Government must be given back there is no way Croatia Airlines can survive it.

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  38. This is candidate for stupidest idea in aviation. Congrats uhljebima iz ministarstva!

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  39. Sack half the staff, for such a small airline they have a bloated workforce.

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