Croatia Airlines is in negotiations with European plane manufacturer Airbus over the cancellation of its order for four A320neo aircraft. The first two A320neos were scheduled to arrive in Zagreb in 2022, while the other two were due a year later. The carrier has so far deposited 8.5 million euros for the four jets. The total value of the deal has never been made public. The carrier commenced negotiations over the termination of the order just prior to the coronavirus pandemic. “Negotiations concerning the Termination Agreement, which will result in the cancellation of the A320neo order and the use of the deposit for other Airbus services are currently on hold due to Covid-19 and will resume as soon as possible”, Croatia Airlines said.
Croatia Airlines successfully converted a 2008 order for four A319s to the neos in 2015. Although the new aircraft were originally to be delivered by the end of 2013, their arrival was put on hold and the deal was renegotiated. The carrier put off the arrival of the jets due to the company's financial situation at the time. The Croatian carrier currently boasts a fleet of five A319s, two A320s and six Dash 8 Q400 turboprops. The latter's operating lease agreement was extended in 2018. In addition, the airline has been wet-leasing two CRJ1000 aircraft from Spain's Air Nostrum over the summer season between 2016 and 2019. Plans to lease an additional Dash 8 this summer have been cancelled as a result of the pandemic.
Based on the company’s five-year business development plan (2020 – 2025), it intends on renewing its fleet with mid-age A319 and A320 aircraft, as well as replace wet-leases with long-term dry-leases. The current average age of Croatia Airlines’ fleet amounts to 15.7 years. The A320s are currently the oldest, averaging 20.8 years, followed by the A319s at nineteen years and the Dash 8s at 11.3 years. Out of 255 carriers operating the A320 aircraft, Croatia Airlines ranks 223rd in terms of the age of the jets, while out of the 125 A319 operators, the Croatian carrier ranks 113th in the world. Among airlines utilising the Dash 8s, Croatia Airlines has one of the younger fleets of this type in the world, ranking 31st globally.
Ouch. This hurts.
ReplyDeleteAirlines have made it a horrible a/c for passengers. With 31 rows is very tight legroom, very uncomfortable for legs.
DeleteThey can't pay for them. It was obvious from the beginning.
ReplyDeleteWhat was the point of ordering them then?
DeleteI understand the cancellation but the replacement plan I don't like. "it intends on renewing its fleet with mid-age A319 and A320 aircraft". So it will be same old same old at OU for the next god knows how many years.
ReplyDeleteIf you understand the cancellation than what did you expect for replacement?
DeleteQuite frankly, it was a smart move. OS will be able to purchase slightly used from a bankrupt carrier for a much better price than it would have last year. Other carriers in Ex-Yu should take note and do the same.
DeleteThis sucks
ReplyDeleteThe saga with this order should really come to and end. Its been going on for 12 years.
ReplyDeleteCouldn't they have taken out a loan to replace them?
ReplyDelete* I mean to replace the Airbuses and get the neos.
DeleteAnd who would repay that loan?
DeleteOwners obviously, they are the ones choosing CEOs
DeleteBanks don't want to issue OU loans that easily anymore. They require government guarantees and the government can't give them guarantees under EU rules.
DeleteWhat other "Airbus services" could they get with 8.5 million?
ReplyDeleteAnd what will happen to deposit?
ReplyDelete“Negotiations concerning the Termination Agreement, which will result in the cancellation of the A320neo order and the use of the deposit for other Airbus services"
DeleteIt means actually nothing specifically.
DeleteSeems like being lost.
That is great news for Croatian tax payers!
ReplyDeleteFantastic news, "we've thrown 8,5 million EUR of your money straight into the sea".
DeleteYes, that's not a small sum for OU.
DeleteThere are always costs related to such on-going orders.
DeleteWhat I find interesting is that this order would have been cancelled regardless of corona.
ReplyDeleteBecause regardless of corona the airline didn't have the money to pay for them.
DeleteA320neo is suited for Croatia Airlines. Pitty.
ReplyDeleteThey need more 100 seater jets not A320neos.
DeleteWhat they need is more CRJ planes if you ask me. Lower capacity plus cheaper.
DeleteAgain with what money? As you can see they don't have the cash for these Airbuses or extra new planes.
DeleteThe current A319/A320s are getting quite old
ReplyDelete"Out of 255 carriers operating the A320 aircraft, Croatia Airlines ranks 223rd in terms of the age of the jets, while out of the 125 A319 operators, the Croatian carrier ranks 113th in the world".
DeleteNot nice.
This order was a financial burden for OU
ReplyDelete+1 and a big one. Also a burden for any potential partner/investor.
DeleteYou have to be crazy to buy new aircraft knowing the financial status of the company. Better to lease out older planes.
ReplyDeleteExactly. New aircraft are the least necessary thing that OU needs at the moment. These planes are too expensive.
DeleteToo bad they are not changing the order for A220, but probably its too expensive for them.
ReplyDeleteMaybe they could get some "mid-aged" planes cheap now with corona to replace the older ones, but that wont make a big difference in the long run :/
Do they have any open credit line?
ReplyDeleteOU definitely needs a change.
ReplyDeleteHow many planes does Croatia Airlines own?
ReplyDeleteGood question.
DeleteI would add that they even sold and leased back some engines, so it would be nice to know how many of them actually belong to OU.
5 airbuses. 4 A319s and 1 A320.
Delete2 A320s not one.
DeleteThey must act on doing something with their fleet. It is becoming older and older. A strategic partner would definitely help here. They don't have the funds to finance a fleet modernization on their own.
ReplyDeleteThere is no strategic partner.
DeleteTimes of strategic partners for falling airlines has passed. Corona changed everything, no one will step in anytime soon, OU is on its own.
DeleteThis order was destined for failure from the beginning. It was a politically motivated order by the government in 2008 to get French to approve EU membership. No consultations with OU were made about it.
ReplyDeleteThis Airbus order which probably costs over 300 million euros is the worst for attracting any sort of potential investor.
DeleteWhat I don't get is how come this order was a secret? Isn't that against the law since they are a government owned business?
DeleteSmatra se da je taj ugovor zapravo bio politički deal između bivšeg premijera Ive Sanadera i bivšeg francuskog predsjednika Nicolasa Sarkozyja.
DeleteU kuloarima se govorilo da je Sanader na taj način želio pridobiti naklonost Francuske, koja je tada predsjedala EU, i osigurati brži završetak pregovora s EU. Čak se tvrdilo da je tim ugovorom sebi osigurao ulaznicu za Elizejsku palaču, odnosno službeni prijem kod Sarkozyja.
Instead of neos they should have picked the CRJ1000. Good plane, good economics and passenger friendly.
ReplyDeleteIt is also expensive.
DeleteYou can lease them.
Deletethat is a good idea
DeleteCouldn't they have done a sale and leaseback?
ReplyDeleteThe contract with Airbus might not allow it. Sometimes there is such a clause that they cannot do it.
DeleteWhich leasing company is going to buy a brand new A320neo in these times for more than pocket change?
DeleteHope they are not penalized for cancelling the order.
ReplyDeleteIt is for sure they are not getting cash back.
DeleteAnd what's worse this deposit was only made last year! So it isn't some historic money locked up at Airbus.
DeleteWell it's no surprise
ReplyDeleteThose planes are too expensive.
ReplyDeleteI'm interested to see how their fleet will develop in the next few years. The neos would have been a great addition.
ReplyDeleteHow could it?
Delete"Based on the company’s five-year business development plan (2020 – 2025), it intends on renewing its fleet with mid-age A319 and A320 aircraft, as well as replace wet-leases with long-term dry-leases."
Renewing with mid-age planes? If they make reneweing with mid age planes it means only that those currently used are extremely old.
I think they will take 10- 12 years old planes not 20 years old ones.
DeleteExactly. The A319 they leased this year is 8 yrs old.
DeleteAt some point you would hope they would get planes to expand their fleet and open new markets and not just to replace older aircraft.
ReplyDeleteThis is an order they wanted to get rid off for a while but there was no way out of it so they had to go along. It's good Airbus is willing to terminate the deal.
ReplyDeleteThey must get rid of their 319, that aircraft is too heavy for short range and is uneconomical
ReplyDelete+1
DeleteA319 is perfect plane for OU. With regional jets they wouldnt make money on the most of the routes during a season.
DeleteAnd they wouldn't loose all they make in winter with this planes which have too much capacity.
DeleteBest of luck OU
ReplyDeleteA220 would be ideal. But way to expensive.
ReplyDeletethis needs to be printed and put on every wall of surviving ex-yu companies:
ReplyDelete"WE CAN AFFORD ONLY TO LEASE 10+Y OLD AIRCRAFT. WE CANNOT FINANCE NEW BIRDS. NO CASHFLOW FOR THAT"
but nevertheless, i am looking forward to see comments like "ju/mgx/ou needs to buy A350 and fly to canada" ad infinitum
ok so no A350 to Canada. Got it. No problem. 10+Y old A332 to PEK or ORD will have to do.
DeleteAnd what about profitability? JU currently losses money on their only long haul route so I dont expect to make any money at PEK/PVG/YYZ/ORD/LAX...
DeleteWho was talking about JU?
DeleteBetter that than leasing 20+ years old aircraft
ReplyDeleteBalkans is the replacement for a boneyard. Instead of leaving a 30 years old plane in desert for scrappage as in a real boneyard, find a Balkan airline who will keep flying it.
ReplyDeleteWhat can they get from Airbus for those 8.5 million?
ReplyDeleteDumping 363m EUR onto your balance sheet while trying to avoid bankruptcy was ludicrous.
ReplyDeleteWhere did you get that figure from?
DeleteI support this decision. They had no choice.
ReplyDeleteAgree. This offer would have been a nail in the coffin.
DeleteOffer?
Delete*order
DeleteIt is a pity that the airline industry of such a tourism powerhouse is in such state...what went wrong?
ReplyDeletePoor politically appointed management happened.
DeleteHow else will we provide jobs we promised in order to gain power? Where will my cousin work?
DeleteShould have cancelled it in 2015 when they converted it to neos. At least they would have avoided paying the deposit.
ReplyDeletethey probably thought the situation would improve.
DeleteVery bad decision, they dont see how much they will safe fuel and oil with the neos compared with the ceos!
ReplyDeleteYes but if you can't pay for them, what are you gonna do
DeleteNew aircraft only make sense if you have high utilisation (think LCCs with 12h+ per day) and can get good finance on it or even buy it in cash.
DeleteSo for the next five years we probably can't hope for anything younger than 10 yrs.
ReplyDeleteA rational decision that should have been taken much earlier.
ReplyDeleteI think they need to invest in more Q400s. Routes that can sustain A319 can just get extra frequencies and there we go. As for FRA, LH is more than welcome to give OU a better deal otherwise they will keep on losing money on the route. It's not a long-term solution for them. I feel OU is just living from one day to another, no long term strategy and vision. This will be very much needed now after corona.
ReplyDeleteBtw, is it true that there is a quarantine for the UK and Slovenia if you come from Croatia ?
ReplyDeleteAnd if, how does it affect the coast ?
Yes there is from tomorrow. Most flights from Croatia to the UK are sold out today. There is a record number od cases and I'm not surprised since our government opened everything and barely tests anyone. Our testing capacity is much larger but...
DeleteAh, so its true !
DeleteLittle to nothing of information on the internet .
I will fly into Britain, thought about going to Croatia for a week ...
That must be a pain in the ass to have practically only a single day for leaving .
Imagine that with children .
Will the travel ban for Brits be a problem for Croatia Airlines ?
DeleteAnd what is with BA and Easyjet flights ?
Easyjet is the second biggest airline in Croatia, that must be bad for them .
Everybody wants to visit beautiful Croatia .
DeleteIf Brits leave others will come to replace them !
Incompetent management pushing airline beyond the point of no return. Sold engines, sold LHR slots, unable to get NEOs, expecting more money from taxpayers. Someone should just pull the plug on this misery of an airline. Does anyone have decency and common sense to admit it was good while it lasted but it is time to end it? There is no future for OU.
ReplyDeleteBiggest problem of pulling the plug if a national airline would be detrimental for Croatia. Pulling the plug on the way it is run is the way forward. Cut the middle management and better utilisation if aircraft and more power-by-the-hour arrangements.
DeleteOn face value and without reviewing the statistical details, I believe OU need to fill two holes in the market. The 50 to 100 seat markets. Q400 would continue to be the obvious choice but, another smaller aircraft to meet demands of shoulder and low seasons. Shame that 200-300 series Dash 8, are no longer produced. They are utilised very well on low capacity routes as seen in small regional community markets in Australia.
ReplyDeleteThe Airbuses do need to be upgraded eventually. This will be very important. Power-by the-hour arrangements will work here, which I hope they will utilise the 8.5 million on (provided they are credited their deposit).
Better utilisation of crew, higher load factors and removal of many middle management positions will be critical to realising a future profit.
Such a pity, they would have been better off dry leasing an a320neo from a lesser with the 8.5 million rather then use it as a downpayment... now its just going to be used for over priced airbus support services
ReplyDelete