Financing models for the acquisition of six Airbus A220-300 aircraft are still under consideration, Croatia Airlines has told EX-YU Aviation News. Delivery of the jets is due to commence in 2024. Potential financing options include an operating lease, finance lease, as well as sale and leaseback agreements. The A220-300 aircraft is valued at approximately 91.5 million US dollars per unit at list price, before the customary discounts, bringing the Croatian carrier’s order for six to over half a billion dollars at list price. The airline also has plans to lease an additional nine A220 jets in order to operate a single-type fleet by 2026. The pace of deliveries over the two-year period has not been made public.
The exact details of Croatia Airlines’ contract with Airbus remain largely unknown after the order was firmed up in Zagreb last week without the presence of any members of the press. However, it is believed the Croatian carrier received extremely favourable terms from Airbus. The airline has also converted a historic ten-million-dollar deposit it made to the European plane manufacturer, for a 2008 aircraft order that never materialised, reducing the overall price tag of the A220 acquisition. Furthermore, the carrier is believed to be leaning towards an operating lease of the aircraft for a period of twelve years with an option of extending it for a further twelve.
Croatia Airlines has been negotiating its fleet renewal with manufacturers for over a year, with three plane makers submitting their offers to the national carrier. They included Airbus, Embraer and Boeing, although the latter dropped out of the race early on. The carrier opted for the A220 due to favourable terms, as well as crew and maintenance commonality with its current fleet. Late last year, Croatia and France inked a strategic partnership agreement, with Croatia becoming France’s privileged partner. The A220s are expected to reduce Croatia Airlines’ operating costs as well as improve the company’s environmental efficiency and competitiveness while improving passenger comfort.
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Any idea how big the discount could be on the list price?
ReplyDeleteUsually airlines get a 50% discount on the total order.
DeleteThanks. I still think it is too much money for OU to come up with.
DeleteLike it says it will be through a leasing arrangement. It means they won't own the planes but will pay a sum each month for using the planes. Same as with the Dashes.
DeleteHaha, too much money for OU to come up with!! The State will sort out the financing as the majority stakeholder, this amount represents a half of VAT the State collects from Christmas shopping in December alone!
DeleteState can't buy them new planes.
DeleteNo, no , no .... No discount. The provision is payed as a fraction of the price. Less discount. Not good.
DeleteThe State IS buying them new planes!
Delete"@Anonymous13:32
DeleteThe State IS buying them new planes!"
No, Croatian airlines will be recaptilized, https://vijesti.hrt.hr/gospodarstvo/drzava-ce-dokapitalizirati-croatia-airlines-s-296-milijuna-kuna-10453913, https://www.croatiaairlines.com/resources/dokumenti/godišnje-izvješće-za-2019.-godinu.pdf.pdf
In 2022 Airline was given 300 million kuna, €40 million and it is quite likely it'll be given another tranche of €40 million in 2023 and about same amount in 2024. Airline can sell 5 Airbus A320/319 aircraft and remaining 16 engines, for around €75 million if they need to, but with Croatian government recapitalizing national airline, it won’t be needed.6 A220 300 will cost OU around €300 million in total, including 12 engines, OU will outright buy 3 A220s and remaining aircraft will need to be repaid over set period of time. Lease of 9 A220-300 will be bit of an issue for paying back 3 A220 300 (€150 mill) spread over 10 years, will drain OU’s finances a bit, however is Q400s are retired in 2026, than cost of lease will drop significantly, in 2019. In 2019, OU had turnover of €237 million, of these, €35.5 million was paid for lease of 6 Q400 aircraft, considering total OU losses in 2019 were €10 million, and you can see how leasing aircraft could reduce airline’s ability to remain profitable.
Now question remains, how much the lease of 9 A220 aircraft will be, normally when airlines lease large noumber of aircraft they get massive discount, 9A220 will cost at least €20 million per year, could be as high as €30 million per year. However if Croatian Airlines wants to capture large market fast, and maintain large share of Croatian air travel market, it might be forced to do so. Still, looking at OU financial records, Airline spent €52 million on aircraft in 2019, and accumulated €10 million loss, wonder what kind of losses it’ll have with 9 A220 300 which are leased?
Don't be silly, of course they spent a fortune repairing old planes!! These costs will not occur with the new aircraft, naturally!!
DeleteThey have placed an order for jets without knowing how they will pay for them?
ReplyDeleteI find it odd too.
DeleteTo quote Croatia Airlines' famous words "it is too early".
DeleteOmg, I can’t wait Pozdrav to commet :)
DeleteToday, and concerning original 09.02. post, one single word only : Mafia
DeleteRijeka, you really are aberrant!
DeleteIf they are getting an operational or financial lease, which it most likely is as it is the only way they can finance this, then it means that they won’t actually own the planes that they ordered.
ReplyDeleteYes, then it would be the same like with the Dashes. They were ordered and delivered new to Croatia Airlines but to this day they don’t actually own the planes.
DeleteWith financial lease they will own planes as soon as they pay it in full. Most common way of financing for new planes and contracts are on 10 years.
DeleteAs soon as they pay them the sell and lease back goes into action
Delete"after the order was firmed up in Zagreb last week without the presence of any members of the press"
ReplyDeleteWhy wouldn't you use this opportunity for marketing?
They probably didn't want the media to ask any additional questions.
DeleteI don't think the current CEO has ever given an interview to any media.
DeleteAt least it shows the order is not a PR stunt like some were suggesting.
DeleteThe exact details of Croatia Airlines’ contract with Airbus remain largely unknown after the order was firmed up in Zagreb last week without the presence of any members of the press..
DeleteOdd.
What are the terms of Air Serbia´s leases for the A319? How much do they pay a months? Must be known.
This isn't a lease of mid aged planes. It is a half a billion euro order for an airline on the brink of bankruptcy. So it is a big deal. You are very aware of that.
Delete@11.16 For an airline that has posted 7 years of successive losses and has not improved its finances, yes, it must be known.
Deletewell in comparison to you I can read an think.
Delete"it is believed the Croatian carrier received extremely favourable terms from Airbus"
meaing probably they are not paying nearly close to what you think. But the word extremely and favourable are robably words you only use in different contexts and since cannt grasp the idea of it in financial terms.
What is the difference between operating and financial lease?
ReplyDeleteDon´t ask the question here. Most of the people here are not capable of answering such questions. They think in answers like Mafia, bad and lots of hatred.
DeleteIn both cases leasing company buys the plane. When plane is under operational leasing, carrier is paying for flying aircraft but will never own the plane. This way of leasing has cheaper rates, obviously.
DeleteFinancial leasing is more expensive, but carrier will own a plane after they pay all the money for it. Usually after 10 years.
Thank you for the explanation. Much appreciated.
Delete@An.11.18
DeleteSome people here know a lot about aviation. And in addition to that, they use their heads for thinking and they know to use common sense when dealing with propaganda which tries to presents losses, lost opportunities and crime and corruption as top achievements. On the other hand, we have people here who regularly spit on such people, calling them names, put labels on them and insult them, without one single fact to back up their claims and one single explanation why it would be so.
I just hope these planes actually come.
ReplyDeleteThey will
DeleteThe six A220-300s are 549,000,000 at list price. WOW
ReplyDeleteWell at least you can take off that 10 million deposit OU made :D
DeletePlus at least 30% discount and the money they will get for selling their own, not leased, A319s and A320s!
DeleteYou really think 5 20+ year old Airbus ceo version plane will fetch that much money?
DeleteWhy do you think they got "at least 30% discount"? They ordered six planes, not sixty.
Delete@ vlad, because they placed the order during Black Friday sales.
Delete6x A220 300 won't cost more than €300, that is near certify. List price and actual price airlines pay for new aircraft greatly differ. .€300 is also bit steep imho, but considering that order is only for 6 aircraft and 12 Engines.... 9 A220 Lease to own, will cost additional €40 million per year. In total OU will need to fork out roughly €100 mill per year for new Fleet of A220s for the first 4-5 years. Most likely Croatian Government will pay for purchase of these aircraft.
DeleteI wonder what Embraer's proposal was. I have a feeling it was cheaper than Airbus and probably better in terms of capacity since they have several planes from the same family of different sizes.
ReplyDeletehttps://www.exyuaviation.com/2022/09/embraers-offer-to-croatia-airlines-too.html
DeleteAirbus has a better and superior product compared to Embraer.
DeleteA220 is not Airbus by design.
DeleteI would say Bombardier too.
DeleteThe statement from Embraer about their product being cheaper needs to be taken with a pinch of salt. He doesn't know what discount on the list price his competitor is offering. The price of the aircraft clearly is a major factor and I wouldn't rule out that Airbus offered a lower price.
DeleteBut the E2 (a large regional jet) is cheaper than the physically larger and heavier A220 (a small narrowbody) in terms of fuel burn, airport and ATC charges. That's in spite of the A220 being a clean-sheet design and the E2 being an updated stretch of an older generation aircraft. Bombardier simply went for a lot of room and comfort in their design.
Where is Pozdrav to slander them once again?
ReplyDeleteThey could go for a capital lease. The capital lease (like a loan) provides a way of financing the OU's purchase of the aircraft. For example, at the end of the lease OU has the right to take title to the aircraft for a certain sum, so they will in effect purchase the aircraft in installments by leasing it over time.
ReplyDeleteWhy didn't they do this with the Dash planes?
Delete^ I find it odd too as it was my understanding that this was the plan.
DeleteBecause a side leasing company was set up who OU paid the lease to who then paid the lease to the leasing company (taking a cut along the way). If OU ended up taking up ownership and stopped paying the lease then, some connected people would have stopped getting paid (#former CEO)
DeleteZar i ti sine Brute? 😃😃😃
DeleteCould OU be sold now to someone who would take over the payment of the order?
ReplyDeleteWhy would anyone buy a loss making business with an expensive plane order to finance?
DeleteThey could become of interest to another airline after the planes start arriving. Before that, little chance.
DeleteI would have thought we may see some significant changes to their network planning and schedules for summer 2023 ahead of the arrival of the A220 next year but I don't see any major differences.
ReplyDeleteThey will launch a couple of new seasonal routes next summer.
DeleteYes, for in total:
DeleteSPU - SKP, OSL
BWK-MUC
DBV-PRG
https://www.exyuaviation.com/2022/11/croatia-airlines-to-launch-three-new.html
I'm guessing BWK-MUC and SPU-SKP will be just one flight per week, and the other two will be two per week. Hardly ground breaking.
Will they sell the planes they own?
ReplyDeleteIf they can find buyers for the A319 and A320 then yes.
DeleteHow old are the Airbuses they own?
DeleteOver 20 years.
DeleteAnd how many in the fleet are actually in their ownership?
DeleteFive.
DeleteA historic 10 million deposit is mentioned in the article, but when you read that 6 new planes cost 600 million, then it just shows how irrelevant those 10 million are, yet we talk about that for years. Funny
ReplyDeleteRead the article, not just your fantasies.
Delete"it is believed the Croatian carrier received EXTREMELY FAVOURABLE terms from Airbus"
You know what a list price is?
That sentence means nothing. We do not know who "believes" it and what "extremely favourable" means.
Deletewell then you can stop reading and believing in all the words of the article. You just read what you want to read.and most is hatred.
DeleteStill think it's very risky to replace entire fleet with the A220s.
ReplyDeleteair Baltic managed to do it successfully.
DeleteAir Baltic used to make profit before, this year, when everything went back to normal, they will post big loss, with only Q3, peak season profitable. 8 of their A220 are grounded, and several services cut. Enough for people who want to understand to understand. But there are some people here who are on duty to advocate fully convicted criminal organization.
DeleteAre you saying Air Baltic is making losses this year because of the A220, but it wouldn't have happened with the fleet of B737s and Q400s?
DeleteLosses due to wrong aircraft type? In 2022 nothing is "normal" like 2019, or have you forgotten the effects of the war, the sharp rise in energy costs, the changing habits of buissnes travel since Covid, the high inflation, etc
DeleteThe order is officially in the Airbus books for November :)
ReplyDelete:)
Delete"The airline also has plans to lease an additional nine A220 jets in order to operate a single-type fleet by 2026."
ReplyDeleteVery interesting and clever indeed. No more silly and small turboprops. Turboprops are more adequate for island hopping rather than European operations.
If they can't fill Dash 8 aircraft, which are cheaper to operate, what makes you think they'll be financially more successful by replacing them with larger aircraft, which are more expensive to operate?
DeleteWhen you say Dashes are harder to fill, which routes are you referring to? Thing is, having a monotype fleet is way much cheaper. Ask your Baltic brothers.
DeleteIt's only cheaper if you can fill the seats.
DeleteI'm interested to see how it will work for them doubling capacity on most routes.
ReplyDeleteThose Q400s can be used for another 8 years without a problem.
ReplyDeleteThey should substitute them wit ATRs, but just as in case of Adria, lobbying within the company brought not optimal fleet. Wait some more years, when 2.5 hour by rail law becomes reality in whole EU, and then praise the jets
DeleteI'm glad that the Q400 is disappearing more and more in Europe. uncomfortable, noisy, cramped, claustophobic. Personally, I find the ATR a bit more comfortable, but neither can be compared to the CRJ700 or, even better, the E175
DeleteThe Q400 is very quiet compared to the ATR!
DeleteOU is not JU to fly 35-years-old planes.
DeleteAir Serbia got rid of 737s and is getting rid of old ATRs. Four newer ATR -600s have arrived with the fifth one getting new paint, to replace old ones by the end of the year. Come 1 January 2023 Air Serbia average fleet age will be younger than Croatia Airlines fleet age. Just a fact.
DeleteAnd from 2024 it will be way less
DeleteNot really, only the first A220 delivery is in 2024, with 6 until 2026 if the schedule holds.
DeleteOn the other hand Air Serbia will also replace some other planes with younger ones.
ATR72-200??
DeleteATR72-200??
DeleteSo in the end, these planes won't even be owned by OU?
ReplyDeleteYes most likely. Or you expect that to come up with 250 million EUR?
DeleteIt is common that planes are acquired through lease arrangements. Nothing new.
DeleteOU and JU: Yin and yang of aviation industry
ReplyDeleteAs long as they get the planes I really don't care how they finance them.
ReplyDeleteThat's interesting. When JU gets a 20 million subsidy from the state, one can read hundreds of comments by concerned taxpayers. When OU closes a deal worth upwards of 500 million EUR, no one cares how they're going to finance it.
DeleteThere are actually plenty of us who are concerned, unsatisfied, angry, disappointed and sad about crime and corruption which prevents OU from being normal and succesfull airline, despite all preconditions it has to be one. But there are also bots and uhljebs who are here on duty spitting on us and trying to belittle everything we say
DeleteNo one even signs a contract for a new car without thinking how to lease or finance it.
DeleteBuying a fleet of airplanes and saying there is no decision on how to lease or finance it is a lie.
they should leave at least 4 dashas in the fleet, with 2 based in ljubljana, and 2 in the summer in Brac.
ReplyDeleteThey should leave at least 6 and the remaining 2 based in Maribor!
DeleteThey only have 6,dummy!
DeleteWhat are the chances of OU basing an aircraft in LJU?
DeleteSlim to none
DeleteI think it's great that the new planes are coming. I use the plane twice a week. I often fly to Split and Zagreb. Mostly I choose Lufthansa direct with your A320neo. Recently I flew from ZRG-SPU. I felt like I was on a bus. In addition, the heating was turned up to maximum. Maybe someone knows the old buses from the 80s, the technology often did not work so you could leave the heating off or run on maximum. At least the plane was full and also on the return flight on Sunday over 90%. Will avoid Croatia Airlines not only because of the price...
ReplyDeleteIf you have now A220s in your fleet, not all can fly!
ReplyDeleteDue to corrosion and no spare engines available.....
The future doesnt look better for both issues!
Fully agree. But when I wrote few weeks ago E jets, which were 50 % cheaper and better fit for OU because of wider capacity variations, I was called hater and much more. That's why I repeat now once again : The purpose of A220 is not to be the best option for OU, but to continue making money for selected croatian Mafia individuals
DeleteI can just agree with this comment. For an almost bankrupt airline, to get rid of very efficient turboprops in favor of a fency, only for rich countries/airlines, non Airbus-commonality aircraft, is almost a suicidal step.
DeleteFirst of all, for this kind of huge order, you need to decide on the airline operating model. So far, OU is performing Lufthansa feeding model all year round, some additional connectivity during summer and 10 routes sleeping model during winter. For that game, you don’t need the most expensive bird on the market, with a non adequate capacity. During the winter, they don’t even fly jets but turboprops, with a good reason - no passengers. During the summer, they can have excellent loads that would justify A320. To be somewhere in between is to be nowhere actually. Total of 15 planes is difficult to understand - they cannot make a hub/feeding model with one type and p2p flying with 15 aircraft? Where? They have 11 routes during winter, enough to have some 5 aircraft I suppose.
At the end, no financing in mind? This is typical and that is why they already have an advanced payment sleeping at Airbus. In case of the Government or management change, they might end up with just an incresead amount of downpayment staying with Airbus.
One can’t not fail noticing simillarities with purchase of Rafale for the military. Expensive overkill aircraft, far from being most suitable for country in question.
DeleteI'm so glad JU is not that brave like OU and keeps running used equipment at affordable price.
ReplyDeleteWhat is the "crew and maintenance commonality with its current fleet" referred to? Isn't the Q400 such a different aircraft and of a different era that the A220 has as little commonality as the E-jet does?
ReplyDeleteMany people mention its stupid to get rid of Q400, what they miss is that this is not happening next years. Dashes will be the last to be removed from the fleet, meaning next 4-5 years they will still fly, after that all of them should be replaced anyway, because of the age. There is still no new Dash on the market to be bought. Also I guess they are hoping that during 5 years, traffic to and from Croatia will increase in a way to fill bigger planes. And for those few local routes, they operate on PSO plus Croatia can always wet lease some turbofan for Zadar-Pula or sth like that, same as what TradeAir is doing for Osijek route.
ReplyDeleteI really wish them the best, but with current management and in company situation and mentality this makes as much sense as any of us getting a triple 7 and starting long haul.
ReplyDeleteLet's hope they fix a lot of things before this birds arive or it'll be like that song:
Living on borrowed time.