State revives plans for Croatia Airlines - airport merger



Croatia’s newly elected government has revived plans for the potential merger of Croatia Airlines and a number of state-owned airports into a holding after the coronavirus pandemic halted the carrier’s privatisation process. The Minister for Sea, Transport and Infrastructure, Oleg Butković, said a “solution” for Croatia Airlines would be outlined by the end of the year. “What is most important and what is giving us the biggest headache at this moment is Croatia Airlines and how to stabilise the company which was already struggling and is now worse off because of corona. We are preparing a wide-ranging and comprehensive process together with the Ministry of Finance”.

Mr Butković noted that Croatia Airlines cannot survive in its current form in the long-term. “This was clear even before corona, so we started our search for a strategic partner. This process has been halted due to the pandemic. It is obvious now that we will have to restructure the entire aviation sector in the country, not just Croatia Airlines but also the airports. We have to come up with a model that will be sustainable and in line with European Commission guidelines. I believe that in September or October we will propose concrete solutions which will aim to safeguard both Croatia Airlines and the entire aviation industry which has been hard hit. The state has to offer a final solution. We are thinking about perhaps merging some airports and entities with Croatia Airlines, but we will see which ones”.

The Minister noted the state would not abandon Croatia Airlines. “We will not give up on our national carrier. We are seeking the best possible solution to stabilise it”, Mr Butković said. Croatia will receive 22 billion euros from the European Union’s Covid recovery fund, which will be made available nest year. In late 2019, the Croatian government considered forming a holding company comprised of the national flag carrier and six state-run airports in a bid to recapitalise Croatia Airlines. The formation of a holding company would have resulted in the Croatian government maintaining effective control over both the airline and airports. The proposal was criticised at the time by several airports including Split and Dubrovnik, which are the country's most profitable.

Comments

  1. Anonymous09:02

    I hope it doesn’t come to this.

    ReplyDelete
    Replies
    1. Anonymous09:03

      The government needs to find a way to keep OU operational.

      Delete
    2. Anonymous09:09

      This would be more effective than having only foreign airlines serving the country.

      Delete
    3. This is a brilliant idea! The airports make a great profit from the foreign carriers and can not supplement their profit to OU. The only question is whether this is LEGAL under EU rules?

      Delete
    4. ČSA and Prag airport did that several year ago.

      Delete
    5. Anonymous14:17

      What happened with ČSA and Prag? :)

      Delete
    6. Anonymous14:22

      Purger,

      The information about Prag and CSA was given today before you repeated it 3 times

      Delete
  2. Anonymous09:05

    I fail to see what good this might bring. It may just cause problems for the airports.

    ReplyDelete
    Replies
    1. Anonymous09:40

      OU is obviously in terible condition and only airports could save them.

      Poor airports - now their hard work must be used for supporting loss making airline.

      Delete
  3. Anonymous09:05

    The "other ententes" will probably be the pensions fund.

    ReplyDelete
    Replies
    1. Anonymous09:23

      And the marinas - Adriatic Croatia International (ACI).

      Delete
    2. Anonymous09:25

      It is more likely that they would create a holding with a number of companies and then sell it to the pension fund.

      Delete
  4. Anonymous09:05

    Ok, fine. They are going to give OU the money they need to survive corona but the markets won't recover for another 3 to 5 years. What happens then? More pumping of funds for an airline that has failed in almost all domestic markets? For an airline that's keeping LCCs away from ZAG?

    This seems like a really bad deal.

    ReplyDelete
    Replies
    1. Anonymous09:41

      +100

      Delete
    2. Anonymous09:50

      OU is not keeping LCCs out of ZAG!!!

      Delete
    3. Anonymous09:57

      @9.05 Your perceptions on whether they failed or not and the actual data don't really align.

      Delete
    4. Anonymous10:23

      More pumping of funds for an airline that has failed in almost all domestic markets?

      Yes, OU is a failure, but are you sure that they failed in almost every domestic market? Its not like they stoped flying on some of the domestic routes...

      Delete
    5. Anonymous10:29

      Because they receive PSO money to fly on each domestic route!

      Delete
    6. Anonymous10:37

      That doesnt means they failed on these routes. These routes are not made to be profitabile for the airline but they have importantce for locals in terms of connectivity. As far I know and Wideroe and SAS are also getting PSO money for domestic routes.

      Delete
    7. Anonymous11:04

      Ex-yu airlines were in bad shape even before corona.

      Delete
    8. Anonymous11:19

      Why does OU need PSO during summer for ZAG-DBV?

      It is always full and they actually receive money for nothing.

      Delete
    9. Anonymous12:03

      I really dont know, but clearly they didnt not fail on every domestic matket, because as you said, their flights are full.

      Delete
    10. Anonymous12:19

      Let's try once again.

      PSO is the way to support airline to operate non profitable routes that are from national interest.

      1. ZAG-DBV is not route that makes losses especially during winter.
      2. With the help of Government and PSO money they can make tickets cheaper and it automatically makes planes full. And then you believe that thes did not fail because planes are full. If you delete PSO from equation you would see how "successful" they are on domestic market.

      Delete
    11. Anonymous12:28

      During a season. You need more money for these domestic flights than for international ones.

      If they failed there, why are flights full but tickets are not cheap?

      I didnt say they are successful on the domestic market, I said they didnt fail there and you are proving that because as you said flights are full during a season.

      Overall I dont know what do you want to say.

      Delete
    12. Anonymous12:40

      Domestic routes are not profitable for OU because OU itself flies from the these domestic destinations (coastal cities) to European hubs, killing its own market (transferring passengers from international to domestic and vice versa). How can one expect such a stupid model to work?

      Delete
    13. Anonymous13:06

      But you said OUs flights from the coast to ZAG are full.

      Delete
    14. Anonymous14:24

      No, I said from DBV and not from coast. Read carefully.

      Delete
    15. Anonymous16:03

      He said almost all domestic markets, not all. Please read more carefully. And the first poster is correct, look at OU's marketshare on the coast. How much is it in summer? 13%?

      Delete
    16. Anonymous08:00

      Who cares, it's still a pathetic number and doesn't justify all this money being thrown at them.

      Delete
  5. Anonymous09:08

    I can only conclude that all the ex-Yu airlines are in really bad shape.

    ReplyDelete
    Replies
    1. Anonymous09:13

      The entire aviation industry across the world is in really bad shape.

      Delete
  6. Anonymous09:08

    It’s not so related to this, but it would be a good idea to make a state-owned company which would run all current state owned airports in the country. Something like Swedavia, Avionor, Finnavia or Oman Airports...

    ReplyDelete
    Replies
    1. Anonymous14:20

      and in Slovenia too

      Delete
    2. Anonymous10:14

      Yes, I'm sure that would be a great idea in Croatia, where there's no corruption and nepotism. For it to work, there has to be a high degree of acountability with company prosperity as a primary goal. Not personal gain. ZG Holding is a shining example how that model doesn't work in this neck of the woods.

      Delete
  7. Anonymous09:09

    There is something called: the point of no return.

    I fear we are long past this point right now for OU. It will take a lot of money to save them.

    ReplyDelete
    Replies
    1. Anonymous09:42

      Do they have any credit lines?

      Delete
    2. Anonymous14:20

      Purger,

      Do you know the answer on this question?

      Delete
    3. Don't understand question. Credit lines by who and for what?

      Delete
  8. Anonymous09:12

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

    ReplyDelete
    Replies
    1. Anonymous09:17

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

      Delete
  9. Anonymous09:17

    Hope OU is not just bungled in some holding. This way the company will progress much slower than it should

    ReplyDelete
    Replies
    1. Anonymous09:42

      Without it they are gone

      Delete
    2. Anonymous10:16

      Yes, OU has always been an example of prosperity. Would be such a shame to stump its growth.

      Delete
  10. Anonymous09:17

    Stay away from the airports. They do well on their own.

    ReplyDelete
    Replies
    1. Anonymous09:20

      everyone but Osijek.

      Delete
    2. Anonymous09:28

      They are doing well because of OU. Just check what happened with airport LJU after Adria demise. It would be the same story with Croatia's airports..

      Delete
    3. Anonymous09:43

      You mean because of 20% market share OU has in Croatia? Sure.

      Delete
    4. Anonymous09:56

      Well LDRI isn't in its best condition too.

      Delete
  11. Anonymous09:20

    Destructive decision for the airports.

    ReplyDelete
    Replies
    1. Anonymous09:47

      +1
      The airports shouldn't be dragged down to help OU.

      Delete
    2. Anonymous09:48

      But all those airports depend heavily on OU and will be affected if it wasn't around.

      Delete
    3. Anonymous09:53

      No they dont.

      Delete
    4. Anonymous09:54

      They do. OU is the number one airline at almost all Croatian airports - Dubrovnik and Split included.

      Delete
    5. Anonymous10:03

      That is small percent of all.

      Delete
    6. Anonymous16:04

      How can they depend greatly on OU when OU has like 13% marketshare in summer? They even failed to get that charter contract from SPU in winter.

      Delete
  12. Anonymous09:21

    I think OU has a lot of potential. Unfortunately I don't think it will happen by being run by airports.

    ReplyDelete
  13. Anonymous09:26

    Good luck OU!

    ReplyDelete
  14. Anonymous09:26

    The saga continues.

    ReplyDelete
  15. Anonymous09:26

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

    ReplyDelete
  16. Anonymous09:27

    "...how to stabilise the company which was already struggling and is now worse off because of corona."

    How about shutting it down?

    ReplyDelete
    Replies
    1. Anonymous14:24

      Haven't you learned anything about how countries function in the last months? Do you really think a country can afford not having an airline?

      Delete
  17. Anonymous09:30

    What qualifications does Butkovic have to make decisions about OU's future?

    ReplyDelete
    Replies
    1. Anonymous10:00

      He is a member of party which is currently Croatian Government.

      Delete
  18. Anonymous09:31

    What difference will this make for the airline?

    ReplyDelete
    Replies
    1. Anonymous09:36

      Absolutely none.

      Delete
    2. Anonymous09:44

      They do not have to worry about business result anymore. Airports are there to cover their losses.

      Isn't that great?

      Delete
  19. Anonymous09:36

    Stupid idea

    ReplyDelete
  20. Anonymous09:37

    I don't understand how Dubrovnik Airport could participate. Since they have built up the airport with EU funds which stipulates there must be no changes in the ownership structure.

    ReplyDelete
    Replies
    1. Anonymous09:46

      DBV's ownership structure would not change.

      Delete
    2. Anonymous09:49

      The airports will do what they are told by its owner which is - the Croatian government.

      Delete
  21. Anonymous09:37

    To me it looks like this will be another failed privatization.

    ReplyDelete
  22. Anonymous09:55

    The government will make some deal for OU in the end. Remember that if OU collapses the government will have to make big payouts to the concessionaire of Zagreb Airport. That's part of the deal.

    ReplyDelete
    Replies
    1. Anonymous09:58

      Smart thinking by the French.

      Delete
  23. Anonymous10:12

    Is there a current example anywhere in the world of airports running an airline?

    ReplyDelete
    Replies
    1. Anonymous10:16

      Lufthansa owns a share in Fraport doesn't it?

      Delete
    2. Anonymous10:16

      Yes 8.44 %

      Delete
    3. Anonymous10:25

      The situation in Croatia is opposite from LH / Fraport deal.

      It is more close to Prague case where it miserably failed.

      Delete
    4. It was in Czech Republic, ČSA and Prague airport

      Delete
  24. Anonymous10:13

    There must be some better solution than this.

    ReplyDelete
  25. Anonymous10:17

    I also don't see how this would work since it's against the EU rules. Airports shouldn't own an airline. it's against competition rules.

    ReplyDelete
    Replies
    1. Anonymous10:20

      Like someone wrote, LH owns shares in airport operator Fraport. So it does not seem to be an issue for the EU.

      Delete
    2. Anonymous10:22

      But Fraport has no shares in Lufthansa!

      Delete
    3. Anonymous10:52

      Butkovic said a decision would me made in line with EU rules. So they are aware of them.

      Delete
    4. Anonymous11:18

      They would say it in any case.

      Delete
    5. There was same deal with ČSA and Prague Airport. No problem there with EU.

      Delete
    6. Anonymous13:39

      No need to mentioning it more times. Just to ask, will you write a text about OU plans for LJU base tomorrow?

      Delete
    7. Question was asked 3 times. So what you suggest, to ignore it?

      Text abut Croatia LJU base already done:

      https://tangosix.rs/2020/21/07/kolumna-alena-scurica-treba-li-sloveniji-nacionalni-avio-prijevoznik/

      Delete
    8. Anonymous08:01

      Answer it once, no need to write it each time especially since you were not asked directly.

      Delete
  26. Anonymous10:17

    If this actually happens it would also mean none of the state owned airport could be put up for concession at any point in time.

    ReplyDelete
    Replies
    1. Anonymous10:20

      I don't think there is any plan to put any of the airports up for concession.

      Delete
    2. Anonymous10:21

      There is no need for a concession on any of curretnly state owned airports. And in my oppinion, who needs another ZAG?

      Delete
  27. Anonymous10:51

    Without SPU and DBV, the holding will have no value.

    ReplyDelete
    Replies
    1. Anonymous10:29

      ...which is exactly why they will be a part of the holding. So their profit can finance parts of the business which is not profitable (RJK, OSI, OU, ...)

      SPU & DBV are not private companies, even though many people like to look at it from that perspective. The very reason for their existence is NOT to make profit, but to provide essential services. SPU&DBV just happen to make money while providing these services because of their location.

      Delete
  28. Anonymous10:58

    Well at this point I don't see any other solution other than this merger.

    ReplyDelete
  29. Anonymous11:24

    Purger

    "A konzorcij zračnih luka, kao istinski dobra ideja, može se ostvariti, ali bez Croatie Airlines, businessa koji se ne treba petljati sa zračnim lukama, koji nitko ne petlja sa zračnim lukama".

    https://tangosix.rs/2019/19/11/kolumna-alena-scurica-dvojbeni-plan-za-croatiu-airlines/

    ReplyDelete
  30. Anonymous11:55

    Excellent, finally a way to fund a National Carrier which is NEVER profitable, especially in the Balkans, look at Adria, Air Serbia, same issues... this will consolidate OU for a long future!

    ReplyDelete
    Replies
    1. Anonymous12:04

      Same story as everywhere at the Balkans...

      Delete
    2. Anonymous12:09

      When EU money is provided to EU membrs then Croatia is Europe.
      When national airline needs to be eternally financially helped by taxpayers, airports etc. then Croatia belongs to Balkans.

      How convinient.

      Delete
    3. Anonymous12:23

      Is Croatia in the European Union? Yes.
      Is Croatia part of the Balkan peninsula and has it mentality? Yes.
      Are the state-owned airlines places where cousins are employed? Yes.
      Are OU, YM and JU places where counsins employed? Yes.
      Are these local airlines just using taxpayers money for survival? Yes.

      Delete
    4. Anonymous12:26

      Is it allowed in EU to have such a behaviour combining EU rules and corruption mentality? NO

      Delete
    5. Anonymous12:35

      Of course its not, so whats your problem then? Why are you talking about this?

      Delete
    6. Anonymous12:39

      Because it is exactly what has been combined in this case.

      Delete
    7. Anonymous15:01

      Its 100% LEGAL in the EU to create a holding that contains airports and airlines, sorry for the trolls that want to see OU fail, won’t happen in this lifetime, Croatia Airlines is Croatia, its more than just a bunch of planes.

      Delete
    8. Anonymous16:00

      You forgot to mention that it is in DNA of Croats

      Delete
    9. Anonymous18:12

      Geography check: there is no Balkan peninsula. It's a political concept.
      There is no "Balkan mentality". It's again made up to sum up all the bad influence from socialism and east in the last 100 years.
      Let's not label a whole nation and its people and call things as they are. In this case with OU it's socialism again which always and everywhere fails when it runs out of other people's money.

      Delete
    10. Anonymous18:22

      "Balkans, the the countries occupying the part of SE Europe lying south of the Danube and Sava Rivers, forming a peninsula bounded by the Adriatic and Ionian Seas in the west, the Aegean and Black Seas in the east, and the Mediterranean in the south".

      https://www.encyclopedia.com/places/spain-portugal-italy-greece-and-balkans/balkans-physical-geography/balkan-peninsula

      Delete
  31. Anonymous13:49

    Someone asked if this is done elsewhere ... the answer is it is done in plenty of places. Best example is in the Middle East. In Qatar, airline is hugely loss making, but it is part of a holding entity which also owns the profitable duty free business, airport and many other associated businesses. On a consolidated basis, the "group" makes money (or so we are led to believe). Same model was applied in Dubai, Abu Dhabi, Oman and Saudi Arabia. Govt owns all these businesses and subsidises the "un-healthy" businesses with the "healthy" profitable ones.

    Same was applied in SIngapore until both businesses (ie. airline and airport) were profitable and then "de-coupled" to become stand alone businesses. This is also the case elsewhere throughout Asia.

    China of course, is the other country where everything is in the same bucket so you never really know what is profitable or not.

    I think this model would be good - afterall, the Govt owns all of these assets so it should make the best use of them in whatever way it thinks will best serve the national interest and no one should have an argument or issue with that.

    The only caveat I would make, is if they were to do this, then they should absolutely go out and get the best management team that they can get to run their airline. The present one is useless and would risk bringing down the rest of the profitable businesses in such a portfolio.

    The Middle East model showed the way forward - bringing in the best foreign talent to build great airlines - which all of them are.

    ReplyDelete
    Replies
    1. Anonymous14:05

      Not sure I totally agree. But what I do agree with, is in changing the current OU senior management who have proved themselves to be totally incompetent when times were good, so we sure as hell don't need them now when we have to rebuild our airline. If JU can have a British CEO and other non-Serbs in key management positions, then why can't we have the best CEO that we can get, even if he isn't Croatian ?

      Delete
    2. Anonymous14:21

      Everything you said is correct, there are aviation companies made up from airlines and airports which are profitabile, but...

      Every example you mention has an airline which has a hub in the airport which is part of the same company. This will not be a case with Croatia, because major hub of OU is at the private run airport (ZAG) who will not be a part of "the state aviation company", so make a system like in Oman, Watar or Singapore would be imposibile. You can only than move OUs hub from ZAG to SPU to make a system like in Qatar or Oman.

      Delete
  32. Anonymous14:33

    Good idea if done properly. It's a state-strategic infrastructure anyway.

    ReplyDelete
  33. Seriously...22 Billion Euros in aid for a country of less than 4 million?

    No wonder Croats can hocus-pocus all day. They can now demolish and rebuild all their Airports 10 times in a row :-P

    That cash sounds more like a Marshall Plan! I am now curious about the interest rates...

    ReplyDelete
    Replies
    1. Anonymous16:06

      They won't get it all in one day, it will be spread out over 7 years. Also the European Parliament still has to ratify it and they seem to be opposing it.

      Delete
  34. crazy idea, but desperate times call for desperate measures...

    hopefully, they will make it. however, the minute the obligation to keep OU alive disapeares (5y?) the future owner will shut it down

    ReplyDelete
    Replies
    1. Anonymous18:27

      Why should they make it? When the news are about SKP, everyone glorifies Wizz and how smart it is they don't have a flag carrier at SKP. When the news are Montenegro, most people suggest subsidy to foreign airlines would be cheaper than sinking hundreds of millions into YM. You are the first one to deny JU's reason to exist and the first one to attack mere cents of your taxes being used to support it.

      But now that the topic is OU, you hope they will make it (!!!) by using a scheme where government owned airport generating revenue to the government (basically equivalent to revenue from taxpayers) is then used to sink money into unprofitable government airline. Double standards? Oh yes!

      Delete
    2. Anonymous20:58

      Very double standards!

      Delete
    3. Anonymous23:59

      Airports need their money not just to cover expenses and pay employees, they need it to invest in renovation and expansion of airport facilities as traffic grows. Once their money is being redirected to Croatia Airlines using announced scheme, Cro airport(s) will have to beg government for money to expand airport facilities. Government will then use taxpayer money to give airports for expansion projects.

      In the end, TAXPAYERS in Croatia will end up paying for support of OU but not directly, as EU would not allow it, but through airport intermediary. Basic money laundering.

      Delete
  35. Anonymous18:46

    Better the government sells OU to Garuda from Indonesia, they can make an alliance where the Garuda flies to Zagreb and OU to feed their flights .
    Australias big Croatian Diaspora can easily fill 777s .

    ReplyDelete
    Replies
    1. Anonymous20:59

      Nobody wants to buy them

      Delete
  36. So encouriging to see so many Balkan experts on this blog.

    ReplyDelete
    Replies
    1. Anonymous08:02

      Are you also a Balkan expert since you are giving your opinion here?

      Delete
  37. Anonymous22:42

    Terrible idea. Really terrible idea. I did not expect anything else from HDZ geniuses, "big Croats" with communist mindset. Unbelievable...

    ReplyDelete

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