Croatia Airlines’ Supervisory Board has adopted a post-Covid strategy drafted in cooperation with the Boston Consulting Group (BCG) over the past few months. The strategy, which will be implemented over a three-year period, says the company needs to improve its efficiency and competitiveness as it faces key operational and structural challenges that include fleet renewal and the optimisation of its year-round route network. "Taking into account visible trends on the highly competitive Croatian aviation market, fuel prices and CO2 emissions, as well as the goals set through 'green' EU policies, the defined strategic initiatives have no alternative, and their implementation will utilise the opportunities which will be available over the next two years as air traffic recovers", Croatia Airlines said in a statement.
The Croatian flag carrier did not go into detail over the contents of its post-Covid strategy but said it would further digitalise its business by switching to a new SAP system (Systems Applications and Products), a widely used enterprise resource planning software, as well as study and analyse data in more detail, improve management skills at all managerial levels, increase productivity, focus on quality, entrepreneurship, cost awareness and innovation. “With the adoption of the post-Covid strategy, Croatia Airlines will enter a new development cycle that will include a real transformation of its current mode of operations, which will run over the next there years. It is estimated to take this long to implement the most important strategic initiatives”, Croatia Airlines said.
The Croatian carrier will now forward its post-Covid strategy to the Croatian Ministry for Sea, Transport and Infrastructure for approval. “We will inform the public of all upcoming steps in due course”, the company noted. Croatia Airlines recorded a net loss of 19.6 million euros during the first half of the year and has warned its business could be further impacted by the spread of new variants of Covid-19. The airline’s financial performance is an improvement on last year’s loss of 23 million euros but still behind its 2019 half-yearly result which amounted to a 12.1 million euro loss.
Bravo Hrvatska!
ReplyDelete+1
DeleteWhat does route network optimization mean?
ReplyDeleteProbably even more cuts and focusing on LHG hubs.
DeleteI wouldn't be surprised.
DeleteIt says "optimisation of its year-round route network."
DeleteIt means that they will try and reduce seasonality. Which in all honesty is something they really need to do. So I support that move.
Good luck with that...
ReplyDeleteAnd they needed BCG to tell them this?
ReplyDeleteEven worse...they paid them for this.
DeleteLOL
I'm guessing they will replace the almost 25 year old Airbuses with younger leased planes. They said they would do that anyway after they cancelled the neo order.
ReplyDeleteOr they could retire the A320, keep the A319s and get additional Q400s.
DeleteI agree that more Q400s are necessary. They proved very valuable through this covid crisis.
Deletethey will be leasing mid-age A319s and A320s in the future. At least that's what they said a couple of months ago.
DeleteOU needs 100-seaters.
DeleteWhat they need is more CRJ planes if you ask me. Lower capacity plus cheaper.
DeleteThe current A319/A320s are getting quite old
DeleteGet Airbus and Q400 out and buy regional jets instead. A220 or Embraer.
DeleteA220 would be ideal for OU's fleet but it is expensive. Don't know how they would manage to finance it.
DeleteMaybe they can renegotiate with Airbus? The neos could be substituted for the A220s.
DeleteThey can always go for the Sukhois :D
DeleteKucko was actually interested in them a few years back.
DeleteKucko was interested in so many things but ultimately did so little, except to sell OU assets in order to make up for the operational shortfalls
Delete"improve management skills at all managerial levels"
ReplyDeletewhat does that say about the management.
So get rid them and hire in people who already have a high degree of management skills and competency. Cheaper and faster to do so than waste another 12-24 mths trying to upskill people who in the end, may well fall short of the requirements
DeleteYou really think the government is going to allow people who are affiliated or close to their party and are in management roles to be fired?
DeleteOfcourse they won't. If that was on the agenda, they would have done so a long time ago ... I was merely stating the obvious if we were in a parallel universe - which sadly, we are not
DeleteMy advise to them would first be to replace the management and those that make the decision behind the scenes. A lot of issues would be resolved that way.
ReplyDelete+1
DeleteEasier said than done unfortunately.
DeleteThis process is moving so slowly. If the government now has to adopt this plan, it probably means that its implementation won't start until summer 2022. By that time, Ryanair will probably announce another 10 routes from Zagreb.
ReplyDelete+1
DeleteWhy are you surprised. It is taking them almost a year to develop a new website.
Deletehttps://www.exyuaviation.com/2021/08/croatia-airlines-developing-new-look.html
Their clock is ticking
DeleteAgain, they hired some external advisors to give them millions for an outcome that most likely won't be worth it.
ReplyDeleteYes typical consultancy rip off. Anyone on this forum can come up with such strategy in 3 mins without consultancy advice.
DeleteBut remember not only did they give advice that is probably worth millions, they will also sell their software to them.
DeleteConsultancy role is to provide advice. If the client chooses to ignore or not implement their recommendations, it is not the fault the consultant.
DeleteIn the end, this is simply window dressing - to be seen to be doing something without actually doing anything and instead, keeping the status quo in place
They should explore new market opportunities i.e new routes.
ReplyDeleteSuch as?
DeleteTake your pick. There are so many. But window for them opening new routes is becoming smaller with Ryan launching so many.
DeleteIn the end, nothing will change.
ReplyDeleteJudging by their track record where I have seen very little change at OU in the past 15 years, I doubt it will.
DeleteI really don't see why an external entity has to do their job for them.
ReplyDeleteHope for the best.
ReplyDeleteI hope things improve
ReplyDeleteTime to revisit plans to open a base in LJU.
ReplyDeleteThere is still an opportunity there.
DeleteI think it is too expensive to do something like that with limited chances for success.
DeleteW pattern flights:
DeleteLJU-SPU-ZAG-SPU-LJU.or ZAG-SPU-LJU-SPU-ZAG.
Surely there are more perspective destinations for Ljubljana than Split and I doubt anyone from LJU would bother to fly to Zagreb via Split. I think they could easily base one Q400 in Ljubljana and launch several cities. It would not be that expensive. Their catering in economy is now non-existent anyway (they now offer former economy box meals in business and hand out water in economy) so you don't have that cost associated. Your biggest cost would be accommodation for crew and one mechanic.
DeleteWill they make the document public?
ReplyDeleteI doubt an airline will willingly publish its future strategy for competitors to see.
DeleteSomeone from the government will spill the beans. They always do.
DeleteAnd they needed Boston CG in order to realize this? hahaha omg
ReplyDeleteIt seems they have found the solution to pay someone externally. We already had two privatization advisors paid for unsuccessful privatization attempts. Since it would be hard to justify another privatization advisor, I guess this will do.
DeleteI wonder how much this contract is worth.
Deleteconsultants are great to tell you things you should already know or to take the blame on making hard decisions.
Delete^ Amen.
DeleteWell at least it seems BCG didn't conclude that feeding LH hubs is the best way forward and the only way to make money.
ReplyDeleteI think this is a positive step. Let's hope for a good outcome.
ReplyDeleteWhat can Croatia Airlines realistically do to turn things around?
ReplyDeletePray VERY hard
DeleteLOL
DeleteGood I support this initiative.
ReplyDeleteHopefully some sustainable plan can be made.
ReplyDeleteThis could finally mean and end to the LH feeder model!
ReplyDeleteIf they stick to Star Alliance, there is no alternative to the LH-feeder model.
Delete2209 words to say nothing.
ReplyDeleteThis may turn out to be a very good decision for Croatia Airlines. BCG is a big and successful company and they have advised many large airlines. Hopefully OU can turn things around under their guidance.
ReplyDeleteMcKinsey is an even bigger and more successful company and they have advised many large airlines. One of those airlines is Swissair. We all know where they are today. So it's silly to expect an external consultant to save your business at this stage. They just saw an opportunity for a quick buck.
DeleteUnfortunately, in the middle of the pandemic, I'm not sure OU has the strength to compete against Ryanair in any way. Some very challenging times coming.
ReplyDeleteTheir clock is ticking
ReplyDeleteI only wish they found an external consultant to advise them years ago. It might be late now.
ReplyDeleteNothing would have changed.
DeleteBCG strategy for airline covid recovery - https://www.bcg.com/publications/2020/post-covid-airline-industry-strategy
ReplyDeleteSHUT IT DOWN.
ReplyDeleteWhat I find amazing reading above, is the fact that OU now has to seek approval from the Ministry for this BCG plan. If that is the case, then what is the role of Supervisory Board ? I mean, why have one at all, if all decisions need to be made by the Minister ? They should just become a Govt dept, get rid of the spongers on the Supervisory Board and with that, you could probably save a shit load of money that is being paid to people who have no real decision making authority.
ReplyDeleteThat should have been the first recommendation made by BCG ....
Probably because government will have to give cash for this new strategy.
DeleteWell government is the owner and largest shareholder (only shareholder). So it makes sense they need to approve it.
DeleteAnon @ 12.21 - did you actually read (or even understand) the original post ? If the govt has to decide on every decision bcoz (as you say) they are the largest (single) shareholder, then you actually don;t need a Supervisory Board bcoz they don't make any decisions. Get rid of it ! Imagine how much money you would save !
DeleteIt's just a formality that the government needs to approve it.
DeleteThere needs to be a slight correction here.
ReplyDeleteSAP is not an acronym for; Systems Applications and Products
SAP is an acronym for; Suck All Profits
Does BCG consult any other airline?
ReplyDeleteYes, KLM.
DeleteThey say they have consulted many companies but usually client list isn't made public. KLM has said they are consulted by them and they just recently extended their agreement.
DeleteYes they renewed KLM contact in June.
DeleteHere is the link
Deletehttps://news.klm.com/klm--bcg-extend-partnership-for-digital-airline-operations/
Anyone could have told them this.
ReplyDeleteI'm sure they were aware of it themselves.
DeleteOf course BCG suggested technology innovation since the company sells a suite of products for planning and control for airline operations. So even more money for BCG.
ReplyDeleteInteresting.
DeleteHundreds of millions will be needed for replacement aircraft, consulting, IT migrations, management training etc. EU rules prohibit government funding. Company is already in debt. There is no way out.
ReplyDeleteThe Croatian government has continually pumped money in the airline in the last 2 years despite EU rules on government funding. They will do it again.
DeleteAirline can be retroactively required to pay all that help back. This is how Malev, Estonian Air etc. went bust.
DeleteSo basically nothing will change until next summer at least. That's a year too late.
ReplyDeleteUnfortunately I don't see a way out of this for OU. Sooner or later they will cease operating and Ryanair will completely take over.
ReplyDeleteMy thoughts too. How will they survive the winter season?
DeleteSame way they survived the rest of them.
DeleteState aid?
DeleteWhy would Ryanair allow state aid to Croatia Airlines? They could complain to EC and stop state aid. Ryanair already complained to EC regarding aid to other airlines.
DeleteThey have also complained about OU
Deletehttps://www.exyuaviation.com/2021/05/ryanair-appeals-against-croatia.html
In my opinion they should get another 4 Q400s and limit Airbus fleet to 4 planes max.
ReplyDeleteIt's easy to throw around terms like "fleet renewal", "innovation", "network optimization". The question is with what money are you going to do it if the government can't give you anymore and I'm not sure how willing banks will be to give out loans.
ReplyDeleteWhile many things can be said about how good or bad the Montenegrin govt was in responding to the collapse of Montenegro Airlines, they launched a new airline within 6 mths. When the Serbian govt made the decision to partner with Etihad - they managed to shift course and launch Air Serbia within 4 mths.
ReplyDeleteAnd to implement a new strategy within the same airline to respond to the times we are in, BCG and the Govt of Croatia are talking about doing it over 3 years !
Even I could run an Airline like this; Have a bunch of incompetents hired that keep the company name alive (even by losing 20M a year) but, since they are from my party and there are 4M people paying taxes, they can always tell the banks and the people to refinance it.
ReplyDeleteThe incompetents do not know how to run an airline but they heard that, by spending even more money, they can hire another company (BCG) so that people think that somebody competent is making a good plan (like implementing an ultra expensive SAP system that only companies that earn yearly more than the whole Croatian country).
This goes on for decades and reminds me of Alitalia who was failing for 50 years but was always saved by the government.