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.
I hope it doesn’t come to this.
ReplyDeleteThe government needs to find a way to keep OU operational.
DeleteThis would be more effective than having only foreign airlines serving the country.
DeleteThis 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?
DeleteČSA and Prag airport did that several year ago.
DeleteWhat happened with ČSA and Prag? :)
DeletePurger,
DeleteThe information about Prag and CSA was given today before you repeated it 3 times
I fail to see what good this might bring. It may just cause problems for the airports.
ReplyDeleteOU is obviously in terible condition and only airports could save them.
DeletePoor airports - now their hard work must be used for supporting loss making airline.
The "other ententes" will probably be the pensions fund.
ReplyDeleteAnd the marinas - Adriatic Croatia International (ACI).
DeleteIt is more likely that they would create a holding with a number of companies and then sell it to the pension fund.
DeleteOk, 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?
ReplyDeleteThis seems like a really bad deal.
+100
DeleteOU is not keeping LCCs out of ZAG!!!
Delete@9.05 Your perceptions on whether they failed or not and the actual data don't really align.
DeleteMore pumping of funds for an airline that has failed in almost all domestic markets?
DeleteYes, 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...
Because they receive PSO money to fly on each domestic route!
DeleteThat 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.
DeleteEx-yu airlines were in bad shape even before corona.
DeleteWhy does OU need PSO during summer for ZAG-DBV?
DeleteIt is always full and they actually receive money for nothing.
I really dont know, but clearly they didnt not fail on every domestic matket, because as you said, their flights are full.
DeleteLet's try once again.
DeletePSO 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.
During a season. You need more money for these domestic flights than for international ones.
DeleteIf 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.
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?
DeleteBut you said OUs flights from the coast to ZAG are full.
DeleteNo, I said from DBV and not from coast. Read carefully.
DeleteHe 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%?
Delete15%
DeleteWho cares, it's still a pathetic number and doesn't justify all this money being thrown at them.
DeleteI can only conclude that all the ex-Yu airlines are in really bad shape.
ReplyDeleteThe entire aviation industry across the world is in really bad shape.
DeleteIt’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...
ReplyDeleteand in Slovenia too
DeleteYes, 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.
DeleteThere is something called: the point of no return.
ReplyDeleteI fear we are long past this point right now for OU. It will take a lot of money to save them.
Do they have any credit lines?
DeletePurger,
DeleteDo you know the answer on this question?
Don't understand question. Credit lines by who and for what?
DeleteI'm sure local governments and municipalities are trilled about this news.
ReplyDeleteI'm sure local governments and municipalities are trilled about this news.
DeleteHope OU is not just bungled in some holding. This way the company will progress much slower than it should
ReplyDeleteWithout it they are gone
DeleteYes, OU has always been an example of prosperity. Would be such a shame to stump its growth.
DeleteStay away from the airports. They do well on their own.
ReplyDeleteeveryone but Osijek.
DeleteThey 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..
DeleteYou mean because of 20% market share OU has in Croatia? Sure.
DeleteWell LDRI isn't in its best condition too.
DeleteDestructive decision for the airports.
ReplyDelete+1
DeleteThe airports shouldn't be dragged down to help OU.
But all those airports depend heavily on OU and will be affected if it wasn't around.
DeleteNo they dont.
DeleteThey do. OU is the number one airline at almost all Croatian airports - Dubrovnik and Split included.
DeleteThat is small percent of all.
DeleteHow 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.
DeleteI think OU has a lot of potential. Unfortunately I don't think it will happen by being run by airports.
ReplyDeleteGood luck OU!
ReplyDeleteThe saga continues.
ReplyDeleteWhat they are looking for - capital without any decision making imput - can only come from another government run business.
ReplyDelete"...how to stabilise the company which was already struggling and is now worse off because of corona."
ReplyDeleteHow about shutting it down?
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?
DeleteWhat qualifications does Butkovic have to make decisions about OU's future?
ReplyDeleteHe is a member of party which is currently Croatian Government.
DeleteWhat difference will this make for the airline?
ReplyDeleteAbsolutely none.
DeleteThey do not have to worry about business result anymore. Airports are there to cover their losses.
DeleteIsn't that great?
Stupid idea
ReplyDeleteI 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.
ReplyDeleteDBV's ownership structure would not change.
DeleteThe airports will do what they are told by its owner which is - the Croatian government.
DeleteTo me it looks like this will be another failed privatization.
ReplyDeleteThe 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.
ReplyDeleteSmart thinking by the French.
DeleteIs there a current example anywhere in the world of airports running an airline?
ReplyDeleteLufthansa owns a share in Fraport doesn't it?
DeleteYes 8.44 %
DeleteThe situation in Croatia is opposite from LH / Fraport deal.
DeleteIt is more close to Prague case where it miserably failed.
It was in Czech Republic, ČSA and Prague airport
DeleteThere must be some better solution than this.
ReplyDeleteSuch as?
DeleteI 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.
ReplyDeleteLike someone wrote, LH owns shares in airport operator Fraport. So it does not seem to be an issue for the EU.
DeleteBut Fraport has no shares in Lufthansa!
DeleteButkovic said a decision would me made in line with EU rules. So they are aware of them.
DeleteThey would say it in any case.
DeleteThere was same deal with ČSA and Prague Airport. No problem there with EU.
DeleteNo need to mentioning it more times. Just to ask, will you write a text about OU plans for LJU base tomorrow?
DeleteQuestion was asked 3 times. So what you suggest, to ignore it?
DeleteText abut Croatia LJU base already done:
https://tangosix.rs/2020/21/07/kolumna-alena-scurica-treba-li-sloveniji-nacionalni-avio-prijevoznik/
Answer it once, no need to write it each time especially since you were not asked directly.
DeleteIf this actually happens it would also mean none of the state owned airport could be put up for concession at any point in time.
ReplyDeleteI don't think there is any plan to put any of the airports up for concession.
DeleteThere is no need for a concession on any of curretnly state owned airports. And in my oppinion, who needs another ZAG?
DeleteWithout SPU and DBV, the holding will have no value.
ReplyDelete...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, ...)
DeleteSPU & 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.
Well at this point I don't see any other solution other than this merger.
ReplyDeletePurger
ReplyDelete"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/
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!
ReplyDeleteSame story as everywhere at the Balkans...
DeleteWhen EU money is provided to EU membrs then Croatia is Europe.
DeleteWhen national airline needs to be eternally financially helped by taxpayers, airports etc. then Croatia belongs to Balkans.
How convinient.
Is Croatia in the European Union? Yes.
DeleteIs 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.
Is it allowed in EU to have such a behaviour combining EU rules and corruption mentality? NO
DeleteOf course its not, so whats your problem then? Why are you talking about this?
DeleteBecause it is exactly what has been combined in this case.
DeleteIts 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.
DeleteYou forgot to mention that it is in DNA of Croats
DeleteGeography check: there is no Balkan peninsula. It's a political concept.
DeleteThere 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.
"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".
Deletehttps://www.encyclopedia.com/places/spain-portugal-italy-greece-and-balkans/balkans-physical-geography/balkan-peninsula
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.
ReplyDeleteSame 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.
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 ?
DeleteEverything you said is correct, there are aviation companies made up from airlines and airports which are profitabile, but...
DeleteEvery 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.
Good idea if done properly. It's a state-strategic infrastructure anyway.
ReplyDeleteSeriously...22 Billion Euros in aid for a country of less than 4 million?
ReplyDeleteNo 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...
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.
Deletecrazy idea, but desperate times call for desperate measures...
ReplyDeletehopefully, they will make it. however, the minute the obligation to keep OU alive disapeares (5y?) the future owner will shut it down
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.
DeleteBut 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!
Very double standards!
DeleteAirports 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.
DeleteIn 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.
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 .
ReplyDeleteAustralias big Croatian Diaspora can easily fill 777s .
Nobody wants to buy them
DeleteSo encouriging to see so many Balkan experts on this blog.
ReplyDeleteAre you also a Balkan expert since you are giving your opinion here?
DeleteTerrible idea. Really terrible idea. I did not expect anything else from HDZ geniuses, "big Croats" with communist mindset. Unbelievable...
ReplyDelete