Croatia Airlines will likely need financial support if existing negative effects such as the Covid pandemic and the ongoing war between Russia and Ukraine continue. According to analytics company Credit Analyst, which reviewed Croatia Airlines’ recent financial reports, the carrier’s business outlook remains negative. “Should the negative trends continue, it is likely that the company will need more external support to stay afloat. This year, it will likely have to invest more, as we think that capital expenditures of approximately 2.3 million euros, as in 2020, will not be enough to cover the whole fleet. One of the Covid loans was supposed to mature in January this year, but it remains unclear whether the loan was refinanced or repaid”, the analytics firm noted. It added, “Liquidity will likely remain stretched during this year, absent of any additional external support. Unfortunately, the company is running out of acceptable collateral, as only one Airbus remains unencumbered. This could significantly limit the company’s future access to capital, in addition to the likely near-term end of the Covid support schemes for the airline industry by regulators”.
Croatia Airlines, which registered a 38-million-euro loss in 2021, warned at the end of last year that, “The company continues to face reduced demand, resulting in low levels of revenue which may raise issues of maintaining liquidity in the coming period". The company will post results for the first quarter of 2022 at the end of this month. “The outlook on Croatia Airlines’ business remains negative. The pandemic started to ease with the omicron variant, however, the Ukraine - Russia war could severely impact bookings for this year. Uncertainty remains a common denominator for many industries, including airlines and tourism, which is another relevant aspect of Croatia Airlines’ business due to its high seasonality linked to the Croatian tourism season”, Credit Analyst said.
The Boston Consulting Group (BCG) was hired last year with the aim of turning around Croatia Airlines’ business. BCG’s post-Covid strategy will be the foundation of the airline's development for years to come. “We continue to take all the necessary measures to safeguard liquidity and optimise the business, as well as undertake rigorous cost cutting measures. In 2021, we worked with the leading international strategic consulting company BCG to develop a post-Covid strategy in order to define strategic initiatives, the implementation of which, with prior consent of the majority owner - the government of the Republic of Croatia - will take three years to enable a sustainable business. In 2022 our focus will be on greater rationalisation of costs and the implementation of the company’s defined post-Covid strategy”, Croatia Airlines’ CEO, Jasmin Bajić, said. The post-Covid strategy is yet to be adopted by the government. It foresees fleet renewal, improvement in efficiency and competitiveness, implementation of new software, as well as the optimisation of Croatia Airlines’ year-round route network. Faced with strong competition from low cost carrier Ryanair at its home base in Zagreb, the airline has announced five new seasonal routes from Split this summer, all of which it had previously served out of Zagreb.
Comments
Inflation in the EU is the biggest threat to OU as more and more Europeans can't afford to travel this year. Just look at the heating expenses in the UK!
This is the most worrying part:
Unfortunately, the company is running out of acceptable collateral, as only one Airbus remains unencumbered.
This means that any loan they get will be more and more unfavorable. I fear that the end is near for OU.
I hope EC will react. If they could close Malev, Estonian and Cyprus Airways they can do it with OU as well.
LED was terminated before covid so it's not such a big problem for them. They are relying on Germans, Dutch and Brits to survive so let's see what happens especially with Germans where prices are exploding like a Ukrainian oil refinery after a Russian rocket attack.
I highly doubt transferring through Serbia or Turkey are valid options...
Even BCG will suffer from Croatian incapability!
Russians before war in Ukraine used JU to fly to Montenegro massively, why not to Croatia?
Don't forget that close to 400 new Russian companies were opened in Belgrade and over 2.000 of them moved to Serbia. Most of these locals will fill seats on JU flights.
If the EU wont allow OU more credits, what I doubt anyway, OU soon will be history. In crises, many lose but a few benefit....
No decisions about OU are made in OU. OU is tool in hands of corrupted politicians. Kresimir Kucko was just an aparatchik, like all other "CEO's", who obediently follow orders from sredisnjica adezeja and LH. The only exception being Misetic, still in charge, who came to the position directly from Franjo Tudjman chief of staff. He is the one who sold OU to serve LH for his position in Star Managing Board, he is the one earning on double leases, he is the one will actually decide, not without compensation of course, about future fleet unification (220) in order for Plenkovic to get his armchair in Brussels. Kucko was just a pawn, real Godfathers are way above his league
Until Croatian Gov and the OU management gets it in their heads that they lost monopoly on many of the routes, nothing will ever change.
The only way to survive this storm is to lower they prices and go after the transfer passengers from East, ME and Africa. Until this scenario isn't implemented, they are as good as dead.
I would rather pay £80, hand luggage only ( that's more than enough) to fly with OU from London then getting up at 5 AM to catch Ryanair flight for £40 and wonder if I'll be left stranded..