Croatia Airlines is yet to finalise the cancellation of its order for four Airbus A320neo aircraft. The first two of the jets were scheduled to arrive in Zagreb this year, while the remaining two were due in 2023. Prior to signalling plans to cancel the order, the carrier deposited over eight million euros for the four jets. The total value of the deal has never been disclosed. The airline commenced negotiations over the termination of the order just prior to the coronavirus pandemic, however, a final agreement is yet to be reached. The outcome of the negotiations with Airbus may be tied in with the airline’s fleet renewal plans, as part of its post-Covid strategy. The company continues to hold talks with different manufacturers over a potential order for up to fifteen aircraft.
Commenting on talks with Airbus, the carrier previously said, “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 were put on hold due to Covid-19”. 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.
Croatia Airlines is yet to make a final decision on the future make-up of its fleet. Recently, the carrier said, “Croatia Airlines is currently conducting aircraft market research on possible fleet renewal, as envisaged in the post-covid strategy. In this context, potential options with multiple aircraft manufacturers are being considered and possible fleet renewal scenarios are being developed, which will begin when the necessary conditions are met”. The airline had previously said the Airbus A220 would be a “perfect fit” for its future fleet. The Croatian carrier currently boasts a fleet of five A319s, one A320s and six Dash 8 Q400 turboprops.
This is why I'm certain they will pick the A220. They already have money with Airbus.
ReplyDeleteIt can also be a way to avoid penalties for cancelling the order.
DeleteA220 would be ideal.
DeleteI think they need to invest in more Q400s.
Delete^ Why?
DeleteA220 (USD 70-75 million) is like 30-40% more expensive compared to E195 (USD 55 million), while having the same characteristics. The difference in purchase price for one place is already more than the whole deposit they have with Airbus currently. I believe E195 is best fit for OU.
DeleteQ400s saved them during Covid. The plane can easily turn a profit on thin routes. And let's be honest, the majority of their routes are thin. Especially in winter.
DeleteQ400 is too slow for the longer routes they have. Having the Q400 for the routes to western Europe is a big disadvantage for travellers but also for its own network. Instead of having 6-8 flights per day, this plane could only do 4 to max 6.
DeleteI think Q400 is ideal for OU. This winter it was a regular to CPH and it was sent quite often to Paris and Amsterdam. All of these were between 2 and 2.5 hours on the Q400.
DeleteInvesting in a new aircraft will kill them especially if it is high density A320neo.
A320neo is not in the picture anymore, that's what this article is about. I agree with you that Q400 is a good fit for the shorter routes, but they also need some replacement for the A319 and A320, which would be E195 or A220.
DeleteA220 is a good plane with good economics and passenger friendly.
DeleteIt is also expensive...
DeleteThe saga with this order should really come to and end. Its been going on for 14 years.
ReplyDeleteWhat other "Airbus services" could they get with 8.5 million?
ReplyDeleteA helicopter?
DeleteOver priced airbus support services
DeleteThis order would have been cancelled regardless of corona.
ReplyDeleteThis 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.
DeleteI didn't know that EU membership was so cheap to buy. So Serbia or Montenegro only has to buy a few airbuses and become a member? If only the world were that simple.
DeleteEven at that time almost nobody in europe bought the B737.
Read leaked documents about the decision to purchase Airbus planes. It was published in Croatian media and is well documented. Airbus planes were purchased over Boeing to sweeten the deal to get French parliament to approve Croatia's EU membership.
Deleteand why would the B737 have been a better choice?
Deleteas I said, almost no comparable airline in europe has bought the b737. but whether there was corruption ("commissions") involved in the purchase is another matter.
and why hasn't the european ATR been included in the fleet instead of the q400?
It would have been a more affordable choice with crew and pilots already trained.
DeleteThe current A319/A320s are getting quite old. I hope they hurry up and finally start replacing them.
ReplyDeleteYes, all except 1 A319 are over 20 years old.
DeleteThat one is 9 yrs old, that arrived at OU during Covid.
DeleteHow many planes does Croatia Airlines own?
ReplyDelete5 airbuses. 4 A319s and 1 A320.
DeleteAlso I think the Q400s are on financial lease. So when they pay it off they should become OU property.
DeleteShould have cancelled it in 2015 when they converted it to neos. At least they would have avoided paying the deposit.
ReplyDeleteI doubt they could have predicted the situation with global aviation would turn out like this.
DeleteTheir financial situation would not have been much better. With or without Covid.
DeleteStill waiting for that post-covid strategy to kick in like new routes, aircraft order... so far I have seen nothing but talk.
ReplyDeleteThe longer we wait the less hope I have in any meaningful change. It has been almost a year since they announced this strategy. This summer, literally every airline is launching new routes. But not OU.
DeleteThe A220 would be a good move by CTN. They actually need a plane between the Dash and A320.
ReplyDeleteBut the plans is to get rid of Dash and A320 family which I think is very risky.
DeleteYou have to be crazy to buy new aircraft knowing the financial status of the company. Better to lease out older planes.
ReplyDeleteThere are many ways they can finance acquisition of newer planes. Loan guarantees by government, sale and lease back arrangements, sale of existing owned fleet....
DeleteBCG proposes that deal to OU with A220 because they will then get a fat provision from Airbus.
ReplyDeleteWell BCG is the main advisor to KLM and have advised them to replace all Boeing short haul planes with Airbus
DeleteIf the rumors I've been hearing about their performance in 2021 are true, then I really do not understand how they plan to renew their fleet. But official results will be released soon so we will see.
ReplyDeleteI've also heard that their passenger numbers increased just 3-4% in 2021 compared to 2020 which would be an absolute disaster. I can't believe it. Like you said, we will see soon enough.
DeleteIt's not passenger numbers we should be focusing on but rather their financial performance. I think that's the worst part.
DeleteBest of luck OU
ReplyDeleteThey should not cancel entire A320neo order. I think they still need some bigger capacity planes, even if they choose A220 for fleet new renewal. Maybe 5 A220s and 2 A320neos would be best. Plus the 6 Q400s.
ReplyDeleteMy suggestion would be: 10 Q400, 6 A220-100 and 2 A220-300.
DeleteThey are actually looking at potentially operating a single type fleet in the next 5 years. Meaning Q400s will likely go.
DeleteOU changes its strategy every few months because they themselves don't know what kind of business they want to be. In the end FR will destroy what little financial performance they have left and they will collapse. After all, OU did perform quite badly last year despite European market recovering from covid.
DeleteMy suggestion would be 6x E175, 4x E190, 6x E195-E2
DeleteAnd what do they do with the Airbus deposit in that case?
Deletethe A220 is $20 million more than the E195-E2. This means for every three A220s you buy, you could have bought an extra E195-E2.
Delete"Potential options with multiple aircraft manufacturers are being considered and possible fleet renewal scenarios are being developed, which will begin when the necessary conditions are met"
ReplyDeleteMark my words, this fleet renewal will never happen.
Unfortunately, you are probably right.
DeleteWay to go for paying a deposit. No strategy at all.
ReplyDeleteDeposit for 4 A320neos won't get them A220s.
ReplyDeleteNo, but it's a start :)
DeleteHow is it possible for the value of this deal never to be disclosed? Isn't that illegal since OU is a government owned business?
ReplyDeleteYou can ask Sanader about this one.
DeleteSame as order for (most probably) A220 will be timed by Plenković for the next election.
DeleteAny wide bodies planned?
ReplyDeleteYes that's really what they need right now...
DeleteWhy not? They could fly to markets which are biggest source of tourism in HR and feed short haul network.
DeleteIt costs a lot to impalement a widebody in the fleet and operate it.
DeleteFor the current financial situation at OU widebodies are the last thing they need.
DeleteAnd what would those widebodies do the other 7-8 months of the year when there is reduced tourist demand for Croatia?
Delete@An.09.59
DeleteIt does not cost lot. The lease prices the lowest ever, due to corona. 330's available to lease on per flown hours bases. CCQ aplies on 320/330, so almost no training costs, major overseas competitors withdrawn from Croatia at the moment, again due to covid scam. The World is opening up. Ideal time to lease 2 330's yesterday, and convert neo order to 321XLR order, plus Embraers for renewal of 319 fleet and regional network expansion. But it will never happen, of course. For their mental condition and state of mind, the only important is they can reach FRA
Long haul obssession is real. You don't need A330 flights to Delhi and Johannesburg to be profitable. OU has a lot more things to worry about right now.
DeleteIf they were profitable feeding LH, I would sign under every single word you wrote. But they are making huge losses with what they do right now and that's why they should try something else. Jo'burg for sure not, but New York and/or Chicago and/or Toronto yes. Even Delhi/Mumbai yes. And it's not my "obsession" with long haul what's the problem here. It's your obsession with remaining feeder loss making model. And one more thing you are right about : OU has a lot more things to worry about : political influence which will once again choose wrong type for wrong model of continuos feeding, crime, corruption, incompetence in "management", inertness, lack of vision and strategy, incapability to adapt and adjust to new reality, nepotism, huge surpluss of administrative working force, low work productivity, mindset stuck between Graz and the past, and much more. If that was different, even Rio and Johannesburg wouldn't be impossible, but unfortunatelly zabokrecina will stay as it is and stink even more in the future
DeleteInstead of buying a whole new widebody fleet, just merge OU with Pragusa. They will take care of all long haul flying!
DeleteNo company buy planes anymore today. It's lease, in 95 %. And I am suggesting limited time lease for 330 and long term lease for 321 XLR. Also, I don't consider your Pragusa joke very funny. Actually it is funny how you try to move the focus from criticism of existing company which bleeds money and achieve no results, to joke about phantom startup which will probably never take off
DeleteI agree with pozdrav. In aviation today it is "pukovnik ili pokojnik". Companies work their way up with huge number of destinations and frequences, bigger and more diverse fleet, launching the long haul, introducing premium economy and so much more... And at the end of the day, they profit so little, because profit margins are going down year after year. The second model is obviously LCC. The third way doesn't exist.
DeleteSo, the only way for OU is to work tirelessly in the following 2-3 years, and to pray to have a lot of luck down the way. And to change management ASAP, that's conditio sine qua non.
I agree with pozdrav too, but i don't think leasing 2 A330s and launching long-haul operations overnight will save OU with one foot in the grave. Long way to go before long-haul. Also pozdrav i'm anon 14:24, anon 21:02 is someone else.
DeleteCan they get a capable manager from Airbus for a lease with 8.5$? That would be better investment than any possible airplane.
ReplyDelete+100
DeleteI haven't seen any positive development at OU for the last 3 years. This A320 order has been a burden and the sooner they get rid of it the better.
ReplyDeleteLots of talks and no action.
ReplyDeleteIf they were to order the A220 as early as today, when is it realistic that the aircraft could be delivered?
ReplyDelete2024 at the earliest, 2025-2026 more realistic
DeleteThat's a very long way off!
DeleteThey would have been better off dry leasing an a320neo from a lesser with the 8.5 million rather then use it as a downpayment
ReplyDeleteThat's what will probably happen in the end.
DeleteIn my opinion this will is a win or bust moment for OU. They definitely need new planes and the A220 is a very nice bird. If they play it right, launch new profitable routes then it could work, although I think a change in management would be required. But it could also be a bust moment. These aircraft could be a huge financial burden if they are unable to generate a profit.
ReplyDeleteSomehow in aviation tends to be more important that bird is 20 million cheaper, per piece, than to be nice. It's contradictory to everything else you said, and I agree with everything else
DeleteThe cooperation Croatia Airlines has with Airbus and the deposit they have with them will help get the A220 deal moving.
ReplyDeleteNope, money will help the deal moving
DeleteIt has been 5 months since Airbus sent an A220 to Zagreb for demo and there is still no progress.
DeleteI would rather they take time to make the right decision than rush anything. Their current fleet is enough to suit their current needs.
DeleteFleet should suit market needs not company needs.
DeleteThey have been an Airbus customer for decades and bought planes directly from them so I'm sure they will manage to sort things out.
ReplyDeleteTell that to Qatar Airways :D
DeleteThe A220 is the best jet replacement on the market for the A320s.
ReplyDeleteIsn't it smaller than the A320?
DeleteA220-300 is comparable with A320, it goes up to 160pax. While A220-100 is smaller (cca 100-130 pax)
DeleteUnfortunately I think this deposit will result in them getting the A220. The alternative is probably them losing the deposit and having to pay penalties.
ReplyDeleteI would love to see Boeing make a comeback to OU fleet. With MAX jets no less :D
DeleteThe 8M Airbus deposit will be used for A220. Sale of existing A319/A320 will add funds. State guaranteed commercial loan will be used to finance the rest; or used for sale-and-leaseback deal with some of the leasing companies.
ReplyDeleteWould be cool if they could work out a deal with Airbus and start replacing existing fleet.
ReplyDeleteHope something will happen
ReplyDeleteCan somebody please explain to me what is happening here. One minute I am reading that OU is loosing money and needs aid to inject cash flow the next minute I am reading that they are considering renewing their fleet.
ReplyDeleteThere are various ways you can finance fleet expansion. But they announced they would expand their fleet back in September and we it is now 10 days until March and nothing has happened. I am starting to think more and more that this will end up like their announcement to open bases across the Balkans which never happened either.
DeleteNo matter the outcome, at least something is finally happening at OU.
ReplyDeleteBut so far nothing has happened.
DeleteNo matter the outcome, absolutely nothing is happening in OU, except they will continue to feed LH on expense of tax payers with new and more expensive planes, if at all
DeleteNo Bravo Hrvatska guy today?
ReplyDelete😃
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