The Croatian government will recapitalise the national carrier by converting its outstanding state loans into equity, as the airline’s losses and debt continue to mount. On December 29, Croatia Airlines’ management is expected to approve a 43 million euro increase in share capital through a debt-to-equity conversion. The move will see a 33.2-million-euro state loan, along with 9.8 million euros from another government loan, transformed into equity by issuing new shares. The newly created shares will be taken up by the Republic of Croatia.
While the government is not injecting fresh cash into the airline, it is strengthening the company’s balance sheet by converting existing state loans into share capital, increasing equity and reducing liabilities. This is a standard form of recapitalisation often used for loss-making or financially strained state-owned carriers. The total value of outstanding loans from the state owed by the airline currently exceeds 78 million euros. Since 2019, the government has provided support to the airline through a mix of direct grants, capital injections and shareholder loans.
In 2019, Croatia Airlines received a 33.2-million-euro shareholder loan from the Croatian government intended to stabilise the company ahead of a planned privatisation process, which was later abandoned due to complications caused by the coronavirus pandemic. The loan was originally due to be repaid several years ago, but the airline secured multiple deferrals. It will now be converted into equity. The Croatian government had previously pledged to closely monitor spending at the national carrier under the terms of the 2019 state loan agreement, which was coordinated with the European Commission. However, the state auditor later found that this requirement was never properly enforced. Under the agreement, Croatia Airlines was supposed to submit detailed monthly reports on the use of the funds by the fifteenth of each month, but this did not happen. According to the auditor, the airline submitted only two such reports.
Croatia Airlines is on track to post its weakest financial result in four years, with its ongoing fleet transition placing significant pressure on costs and expenses. The carrier has recorded annual losses every year since 2018, with the sole exception of 2022, when the sale of five Airbus A320 aircraft temporarily pushed the airline into the black.
From shit to gold in single stroke of pen. Great job!
ReplyDeleteSame probelms still there. This money was given to them to improve the business and they got nothing to show for it. Just extending their life support.
DeleteSoon, there will be few almost new A220 on the market...
Delete@ 09:02 no way, there is no limit until when ADZ government is ready to keep their uhljebs in OU afloat.
DeleteThe problem is the population who keep voting for these crooks.
DeleteThe best part is how they use words to play it off. It's not giving fresh cash. Just strengthening the balance sheet. These people very creative with words
DeleteI am totally against what they are doing, but this is not creative at all. It is basic accounting. It is a standard process.
DeleteSo it is normal practice to get tens of millions of euros in state loans which you should have repaid years ago and then the government, which gave you the loan, just says "don't worry about it"?
DeleteYes, recapitalisation is a standard business process. Next question?
DeleteHow many times in five years has it been recapitalised?
DeleteSDP and Milanović disnthe same thing!
DeleteSDP and Milanovic did not do the same thing. While Kucko was CEO the "state" didn't finance OU with one single cent. That's why Kucko had to do so many painful cuts. Because after Mišetić, he found completely devastated and almost dead. And managed to bring OU to "positive zero" with solid base for growth on healthy bases. But then, criminal organization, the same one which wants all to believe that "they are all the same ", and that's the reason for the above post, so then Mafia took over again and today we have again what we had during Mišetić. Congratulations!
DeleteDo we know the current share structure? Isn't goverment already a 100% owner of Croatia? In that case, how is this possible? If not, then how the share structure is changed?
ReplyDeleteIt is the owner of 99.2%. The rest is owed by state owned Airport Zagreb D.O.O and other state owned companies.
DeleteYou can always change the share structure through dillution.
DeleteWell, yes, technically you can do dilution, but it's meaningless with effectively single owner. You get more numbers, but same 100% ownership.
DeleteCroatia does not own 100%.
DeleteVodi me strina u cirkus Kolorado!
ReplyDeleteAgree, 100 percent!
DeleteCirkus Adria, preciznije, ili cirkus Croatia, još preciznije
DeleteJust don't pay government debts and you are fine!
DeleteThis is their fifth bailout in 6 years.
ReplyDeleteThey are not getting any money this time. The money was already given. So this is not a bailout.
DeleteUmm when you convert debt into equity it is absolutely a bailout.
DeleteI remember when people were claiming that they would actually pay back these loans.
ReplyDeleteAhahahahahahah
Deleteand also arguments that the EU would never let OU not to repay these loans....
Delete@Anon 09:47: EU can still determine this was illegal in a few years and effectively bankrupt the airline over night (see Malev, Estonian Air, etc.).
DeleteDefinition of an endless money pit
ReplyDeleteI would have no problem if Croatia Airlines had actually done something in the past 6 years. Other than leasing expensive new planes that has created even more need for bailouts and cash injections.
ReplyDeleteAnd that is how it's done ladies and gentlemen.
ReplyDeleteAll you avion experts here (mostly key board experts) don't know jack s**t, compared to these guys at OU management! Lol
Jasmin Bajic certainly seems to be an expert at burning through state funds over and over again.
DeleteI doubt he understands what is going on. He is clueless beyond belief.
DeleteMa nije ba, nema samo čovjek vremena za sve to, pije kahvu
DeleteThese guys probably can't even use a keyboard properly, so all of us here are actually better.
DeleteThis should not be allowed.
ReplyDeleteWe all saw that Malev, Estonian, Cyprus Airways were closed due to the same reasons - they did not have enough money.
Same rules should be applied here especially as it as an EU company.
You cannot apply the same rules because this is absolutely not the same scenario. OU is not getting any new money this time around. Malev declared bankruptcy because it was asked to repay the money that it got against the rules. Croatia Airlines never got any money against the rules. It burns crazy amounts of money but not against the EU rules for state intervention.
DeleteIt has received over 78 million in direct cash in just 6 years under the understanding it would pay it back and report on what it is spending. It has done neither.
DeleteClearly against EU regulation.
DeletePlease explain what EU regulation this is breaking. I will wait.
DeleteThe Croatian state is distorting competition by constantly giving loans to the flag carrier which it then "converts into equity".
DeleteIt's technically legal but goes against EU rules on state support. Otherwise Malev could have done the same. Ryanair will have a field day in the courts with this one.
Government will keep doing those things as long as EU allows them. Other options are issuing bonds like Air Baltic did, or some form of merger with Croatian airports etc. Real question is why is EC allowing it?
DeleteAnother recapitalisation and still no real change. They keep throwing money at the airline without any clear strategy. Same story for the past 20+ years.
ReplyDeleteNo additional money is being given this time. Did you not ready the article?
DeleteYes I did. Of course they have been given money because they won't repay 43 million euros they owe to the state of Croatia.
DeleteOf course it means giving them the money and it makes no difference if it was now or couple of years ago.
DeleteThey got the money they do not have to pay back. Full stop.
You can think what you want but your lack of understanding of this process does not change reality. No new money is being given this time.
DeleteThey are being allowed to keep 43 million euros they got. You can spin it whichever way you like.
Delete+100
DeleteThis was expected. The A220 transition is costing them a fortune and the losses keep piling up. Government has no choice but to keep them afloat.
ReplyDeleteWhy should taxpayers pay for a company that keeps losing money year after year? Either privatise or shut it down.
ReplyDeleteConnectivity is important, especially for tourism. Better this than Croatia relying only on foreign carriers.
DeleteCroatia already relies on foreign carriers. OU has a market share of something like 10%.
DeleteActually it would be much better to rely on foreign carriers because they bring more tourists and they do not need such high subsidies as OU does.
DeleteBy connectivity you mean feeding Minken and Vrankvurt, correct?
DeleteMe above
DeleteThank you for letting us know PIR
DeleteThanks Pozdrav, I'd have never thought it was you.
DeleteConverting loans to equity is just moving numbers around on paper. Doesn’t change the core problem:
ReplyDelete+1
DeleteWhat’s the alternative? Give everything to Ryanair and let them dictate prices and routes? National carrier needs support, period.
ReplyDeleteThis argument is ridiculous. Croatia is served by SEVENTY airlines and it has over 500 routes.
Deletehttps://www.exyuaviation.com/2024/04/over-500-routes-and-70-airlines-to-fuel.html
That is during peak summer months. Rest of the year is very different.
DeleteWell obviously yes. Do you think tourists go to the Adriatic coast in January?
Delete09.28
DeleteNational carrier needs support, I fully agree. But for results in return. Not for being shameful feeder, wasting more and more public money and doing nothing to increase market share, load factor, and overall business results
Excellent point 11:20.
DeleteThis still doesnt solve the liquidity issue. More debt or less, how do they expect to survive the winter only with their remaining 12 million euros??
ReplyDeleteSomething else must be around the corner...
They need to sell the airline ASAP. I know it is hard to find a buyer, but it seems as if they gave up on this idea, no one is mentioning it. You can not run the airline with unprofessional management - the end of the story.
ReplyDeleteYou don't have to sell company in order to change management. But you people don't understand that incompetent management is part of long term strategy for OU in order to remain LHG feeder. It's not accidental, it's not about lack of competent people, it's simply deliberate act with aim of filling pockets of LHG in Deutschland and few selected individuals in Rvacka
DeleteThis A220 gamble better pay off because there’s no more room for excuses once the old fleet is gone.
ReplyDeleteEvery airline in Europe struggled with COVID. The difference is that others recovered, Croatia Airlines just kept sinking.
ReplyDeleteI think they still have less passengers than in 2019.
DeleteMaybe the strategy is to survive long enough until someone finally figures out how to run an airline.
ReplyDeleteOU’s biggest competitive advantage is that the government will never let it die.
ReplyDeletetata, i ja bi to radio...
ReplyDeleteI tata bi to sine.
from the movie, Ko to tamo peva...
da se malo nashalimo,
Deletebut what is the alternative for OU and their boss?
Look at Slovenian scenario, that is bigger insanity.
like this, each Croatian citisen is charged 3Euro per year to have the national airline and the tourism sector is directly supported.
It is a sname that they don't know how to make money out of it, but OU existing is always better than it's bancrupcy.
no one says its better as bankrupt. we say give it to professionals. I am sure there are professionals on market that are eager to rise OU as phenix. Yes it will take time, but its not impossible. Government has to decide what is more important, strong carrier or company that will feed hundreds of voters.
Delete"like this, each Croatian citisen is charged 3Euro per year to have the national airline and the tourism sector is directly supported."
DeleteTourists come with Ryanair, easyJet, British Airways, Lufthansa, KLM, Iberia, SAS, Air France, Jet2, Eurowings, Volotea, Aegean etc. Most Croatia Airlines passengers to the Adriatic coast or actually Lufthansa's passengers who are only on OU planes because of the codeshare.
Just convert all of it into equity every few years and pretend everything is fine.
ReplyDeleteThey need strong leadership, not more accounting tricks to delay the inevitable.
ReplyDeleteEvery year we hear about “turnaround”. When does the turnaround actually turn?
ReplyDeletenot yet too soon.
DeleteListen, listen, I have great idea. Why dont we sell our planes to lease company and then re-lease them from it? By that, we will do wonders.
ReplyDeleteThat's what the meeting Buzin went like 3 years ago.
DeleteOn the path of Adria Airways...
ReplyDeleteIf the EU truly enforced their own state aid rules, OU would have been gone a long time ago.
ReplyDeleteFully agree.
DeleteOU will never go bankrupt. It is a symbol of Croatian independence and directly linked to HDZ. it is political decision that even SDP would struggle to go after. Simple as that.
ReplyDeleteWhat a sick way of thinking. Your train of thought is exactly why this airline is the way it is and why you will clap bravo no matter what.
DeleteIronically, the symbol of Croatian independence might end up being shut down by the EU, whose independence trumps Croatian independence.
DeleteThere is not one single reason for OU to go bankrupt. With competent people in management and without political influence it could be triple bigger and profitable company. With Kradeze way of rule and mindset, it is not going to happen. Is there enough will and strenght within Croatia to change things, and not only in OU, remains to be seen
DeleteI, for one, fully support the unconditional support for our national carrier!
ReplyDeleteBeeeeee
DeleteOnly very limited persons with very serious problems do things unconditionaly
Delete