Croatia Airlines renegotiates aircraft leases


Croatia Airlines has renegotiated a number of aircraft leases in order to reduce the financial impact of the coronavirus Covid-19 pandemic. The airline has cancelled its planned seasonal summer lease of one Bombardier CRJ1000 aircraft from Air Nostrum, as well as the planned long-term dry lease of a Dash 8 Q400 turboprop, previously operated by Austrian Airlines. The aircraft was to have a low utilisation rate and was to be primarily used as a spare, so as to limit network disruption, by supplementing any aircraft which may go out of service due to technical reasons. Out of the current thirteen lease agreements for aircraft and engines, the carrier has renegotiated more favourable terms for eleven and reduced the monthly leasing costs.

Last month, Croatia Airlines took delivery of a newly leased Airbus A319 aircraft, which has since been stored. The carrier has renegotiated the terms of the lease and will use a Power by the Hour contract during the first year of the lease, until the 2021 summer season. Power by the hour leasing is a form of operating lease wherein the lessor eliminates the requirement of a fixed monthly lease rate and instead charges for the aircraft’s utilisation during a fixed period of time. The carrier used the same system for several other aircraft leases, which were renegotiated.

During the first quarter, due to minimal fleet utilisation, Croatia Airlines performed maintenance on a number of aircraft, including C checks on four Airbus jets and one Q400, as well as an engine overhaul and an undercarriage replacement. The carrier’s CEO, Jasmin Bajić, recently said, “We are adjusting to the current situation and are doing our job to the best of our ability. All our costs have been reduced as much as possible”. Croatia Airlines also has four Airbus A320neo aircraft on order, with the first two scheduled for arrival in 2022 and the other two in 2023.

Comments

  1. Anonymous09:02

    I can only imagine how bad their finances and advance bookings were if they had to resort to such drastic measures, especially now when demand around Europe is growing once again.

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    Replies
    1. Anonymous09:03

      Absolutely every smart airline has tried to renegotiate leasing terms for aircraft. It would be absurd not to.

      Delete
    2. Anonymous09:04

      +100

      Delete
    3. Anonymous09:05

      "especially now when demand around Europe is growing once again."

      Some people live in a dreamland. Demand is generally up on the past few weeks but it is nowhere near to what it was last year and it won't be anywhere near to what it was last year for the whole of 2020. Or you think financial impact of covid shifts from week to week based on demand?

      Delete
    4. Anonymous10:02

      the guy with the "advance booking" mantra again ... you can spot him regularily here

      Delete
    5. Anonymous10:09

      What's surprising about seeing aviation terms on an aviation website?

      Delete
    6. Anonymous10:52

      Airlines around the world are retiring entire fleets of aircraft and making thousands of people redundant, yet “demand is growing” according to some people.

      Well, it is growing. From April 2020 levels, but not from 2019 levels.

      Delete
    7. Anonymous11:02

      Every airline is trying to decrease costs. I don't think there is a single one that isn't so it has little to do with advance bookings.

      Delete
    8. Anonymous11:32

      Renegotiating terms and conditions with all suppliers is a must at this moment.

      Delete
    9. Anonymous11:33

      Especially banks

      Delete
  2. Anonymous09:06

    Smart.

    ReplyDelete
  3. Anonymous09:08

    Good that they managed to renegotiate the lease for the new A319. So I assume we won't be seeing much of it in the air this year.

    ReplyDelete
    Replies
    1. Anonymous09:17

      They won't need to operate their fleet at full capacity and this aircraft being on the ground means they don't have to pay for it.

      Delete
  4. Anonymous09:11

    Can't wait for the neos to arrive.

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    Replies
    1. Anonymous09:17

      +1

      Delete
    2. Anonymous09:22

      I still don't get how they are financing it.

      Delete
    3. Anonymous09:58

      Loans and government aid, they are recording losses for a few years now meaning they have no extra cash to spend on new toys.

      Delete
    4. Anonymous10:31

      Almost every aircraft order in the world is financed through loans.

      Delete
    5. Anonymous10:57

      Yes but OU's issue is that loans are not merely used to renew their fleet, they need it to survive. Why do you think they sold Pleso Prevoz or LHR slots? Surely not for A320neos.

      Delete
  5. Anonymous09:12

    Can someone explain to me how often are engine overhauls done? Each time someone from OU is talking about investments they always talk about engine overhauls every single year.

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    Replies
    1. Anonymous10:56

      Most engines are run “on condition”, so they are replaced when they don’t meet the required standard anymore.

      Wear and tear depends primarily on number of takeoffs (where thrust and temperatures are highest), and what thrust was used for takeoff. So if you operate a lot of short flights with high load and short runways (requiring use of full thrust), engines will not last very long.

      Delete
    2. Anonymous11:08

      Thank you

      Delete
  6. Anonymous09:21

    Good that they managed to get out of the Nostrum and Q400 lease.

    ReplyDelete
  7. Anonymous09:53

    There are way too many airlines in both Europe and ex-YU. Consolidation is long overdue.

    ReplyDelete
    Replies
    1. Anonymous09:58

      +1

      A one or two plane base by Wizz would be much better.

      Delete
  8. Anonymous09:56

    I am not optimistic about their future. Summer is lost and winter is coming when they usually lose everything they make in summer months. I have a feeling losses they will collect this year might put a bit too much of a strain on their future.

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    Replies
    1. Anonymous10:59

      I would agree with you last year, but my experience while working there can give direction. The elections are soon, ruling party will win again. They will throw new money in company and it will continue to exist. This company has a cockroach DNA, nothing can kill it. Trust me..

      Delete
    2. Anonymous11:33

      I really hope the government will help. This is an unprecedented situation.

      Delete
    3. Anonymous11:40

      I have a feeling the losses this year might be well over €30 million because of a wasted summer and spring season. Unfortunately corona hit during the most lucrative part of the year.

      Delete
    4. Anonymous12:52

      In 1st quarter they had loss of aprox €14 million, let us not forget that they continued operating whole time. Pax load, as Im aware is 60percent (Mainly Dash8 ops), 2nd quarter will be loss too. I would expect on year base total above €30 million. Unfortunately

      Delete
    5. Anonymous12:59

      Then it will be in the range of some €70-€80 million.

      Delete
  9. Anonymous10:36

    So what's the fleet size at the moment?

    ReplyDelete
  10. Anonymous11:02

    Kudos OU for the great job they're doing. Those negotiations will most likely last for 3 more years until the A3Ns arrive. OU will likely become quite profitable as of 2024 onwards when it will have much more seats to offer, be competitive in the busy routes and be prepared for an eventual LCC attack such as W6 or FR.
    It's all just a matter of time.
    Star Alliance is also quite beneficial for OU with no doubt.

    ReplyDelete
    Replies
    1. Anonymous11:09

      LOL. In OU dream to be profitable by 2024.

      Delete
    2. Anonymous11:37

      Make some calculations. OUR now has a good fleet but fewer seats. With the arrival of the A3N, maintenance costs will immediately go down and it will be possible to have more frequencies and lower prices. Get rid of the Dash, just like OS did and focus on the A320s. By 2024 OUR will have all its Airbuses available and most likely incure to an expansion and have more availability between the capital and the Coast.

      Delete
    3. Anonymous12:30

      Only flaw in your thinking is that OS is based in Vienna, OU is in Zagreb. One has massive demand which can fill A320s, the other one doesn't really. OU needs regional jets, not extremely expensive neo planes.

      Delete
  11. Anonymous11:34

    The most worrying thing OU must be those A320neo orders. Can they do anything about deferring or cancelling them?

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    Replies
    1. Anonymous11:35

      If I remember correctly one of the main reasons that a strategic partner was needed was because of the fleet and probably paying for this order.

      Delete
    2. Anonymous11:39

      OU doesn't need the A320neo, that's a fact. For them the perfect aircraft is A319 and Q400. Sure they can fill the A320 in summer but what happens once summer goes away? That is why a partner like Garuda was important (or LH or anyone really) so that they can get them out of the deal like Etihad got JU out of theirs. For these smaller airlines bigger planes are a problem. There is a reason why RO got a whole bunch of new ATRs and not B738s.

      Delete
    3. Anonymous12:00

      What makes you think OU doesn't need the 320Neo and why would the Q400 be better in Europe today?

      https://en.wikipedia.org/wiki/List_of_Bombardier_Dash_8_operators

      Less and less European carriers are using it. It's just no longer competitive.

      Delete
    4. Anonymous12:31

      Q400 in terms of capacity.

      Delete
    5. The have been deferring those A320s since 2012.

      Delete
    6. Anonymous14:14

      They've now started paying for them. So they will arrive in 2022.

      Delete
    7. Anonymous20:24

      The fleet needs to be renewed. The Airbus fleet is ageing so the neos will come at the perfect time.

      Delete
    8. Anonymous22:21

      Taking brand new aircraft for small airlines like OU, who barely make any profit every couple of years is insane.

      Delete
  12. Anonymous11:35

    Not bad considering the situation.

    ReplyDelete
  13. Anonymous20:23

    I'm really interested as to what happens with OU in the future. I think a privatization to some major foreign airline is off the table for the time being.

    ReplyDelete
  14. Anonymous20:24

    It's good at least that they are organised and thinking about costs.

    ReplyDelete

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