The Croatian government has adopted a decision to inject seventy million euros into the loss-making state carrier Croatia Airlines and to covert a further 78.8 million euros in unpaid state loans into equity. The government will provide the funds through recapitalisation, with the seventy-million-euro sum to be spread over two years, amounting to 35 million euros in 2026 and a further 35 million in 2027. Furthermore, three former shareholder loans, totalling 78.837.348 euros, issued to the Croatian carrier will be converted into capital. The airline was granted the loans by the government as part of the Covid-19 support provided to the aviation sector. The loans were originally due to be repaid by the carrier, with the total amount including interest expected to reach 85.831.988 euros.
Croatia Airlines’ finances have been significantly impacted by its decision to transition to an all-A220 fleet by 2027, which has resulted in increased costs and losses. The Croatian government has said its decision to recapitalise Croatia Airlines is based on commercial considerations rather than extraordinary state aid, arguing the move is fully aligned with the “market economy investor principle”. According to the authorities, the flag carrier was generating positive financial results prior to the start of its fleet renewal programme, which underpins the government’s assessment that the investment is economically justified. This claim can, however, be contested, given that since 2018 the airline has recorded a profit only once, in 2023, when the sale of aircraft was included in its net result of two million euros.
The recapitalisation is intended primarily to support Croatia Airlines’ transition to the Airbus A220 fleet, a process which the government says has placed additional pressure on the airline’s liquidity and capital position in recent months. Officials note that the measure is designed to secure the carrier’s ongoing operations while creating the financial conditions for its “long-term development”, with transition-related costs cited as the main driver behind the need for fresh capital. In support of its decision, the government points to a series of business plans approved by the airline’s Supervisory Board, as well as detailed financial projections covering the period up to 2045. These documents indicate that the fleet transition is expected to become profitable “in the near future”.
The government added that its conclusions are backed by independent assessments, including limited assurance reports prepared by Moore Audit Croatia. These reviews covered the airline’s long-term financial forecasts as well as calculations related to investment returns, net present value and internal rate of return, which the authorities say further confirm the commercial viability of the fleet renewal programme.
Imagine putting in 100s of millions of Euros and not changing the top management.... Almost like you want them there... This will be a huge scandal at some point, because no way they aren't back channeling some funds here
ReplyDeleteOh my God. Oh my God. 70 million. This is all I can say. Oh my God.
Delete148 millions
Delete100% some funky business is happening. Sadly the entire government is involved. Milanovoć did the same when he was premier. Sad.
DeletePlease stop the mantra "they are all the same" because they are not. Milanović helped Kučko to became CEO. Kučko cleaned the mess Mišetić left and managed to bring totally destroyed company to positive zero. During Milanović/Kučko the state didn't give single cent to OU. Don't you really understand that criminal organization is ruling in Croatia, with the same mindset as KPJKPH in 1950's but today tied with Mafia. And it's their mantra "they are all the same", which obviously have success with general population, you included
DeleteKućko was a bagage handler before being promoted to OU CEO. Only got the job because he was childhood friends with Milanović, so yeah, the same.
DeleteHeathrow slot selling got him to breakeven. Also got booted from Gulf Air because of corruption.
^ he was not a baggage handler he was head of the airline's Benelux office in Amsterdam.
DeleteOU management has changed drastically, changes they have made plus all the cuts they did made Croatia Airlines what it is today. Attack as much as you want attack them, but results are there.
DeleteYeah, results are there: more corruption and more losses, combined with disastrous LF and tragical 13 % market share! Brilliant! Wonderful results! Warm regards to Buzin and Središnjica @
Delete13.35
DeleteAre you telling us that Gulfair and Air Mauritius couldn't do better than to have baggage handler for CEO? And Kučko stabilized Gulfair and paved the way for New York service, recently opened. And shame on you for deliberate lies with purpose of advocating real criminals and real incompetence
Shame shame shame
DeleteA nice 148 million present for Jasmin & Co.
ReplyDeleteHow convenient that losses are blamed entirely on the A220 transition, as if mismanagement played no role at all.
DeleteBingo! The A220 is being used as a convenient excuse to cover years of strategic mistakes and weak competitiveness.
DeleteThis claim can, however, be contested, given that since 2018 the airline has recorded a profit only once, in 2022, when the sale of aircraft was included in its net result of two million euros.
ReplyDeleteAuthor is in danger of never entering Croatia form today onwards
I am sure that would be a huge loss for him
DeleteThis should be automatically contested by the European Commission, but like many decisions, this one is not professional but political. A country without strong ties to the EPP would, in such a case, almost immediately be placed under investigation by the European Commission.
DeleteCroatia spending big in the EU the past week, turning a blind eye here would be part of that agreement for sure!!
DeleteMerry Christmas! Miracles do exist
ReplyDeleteHaha
DeleteI have a feeling more will be needed this year. Ever since we joined the EU the company has been losing money.
DeleteKeep them euros coming...Bravo Croatia Airlines👍
ReplyDeleteThe thing is that the 2012 restructuring also made no difference. The airline just kept making losses.
ReplyDeleteAbsolutely not true. Kučko did some painful cuts but he managed to clean the garbage Mišetić left and mess he created. It was the only period when state didn't inject money into OU and Kučko brought it to "positive zero", with bases for normal continuation of work and growth. With this, everyone should be aware why Kučko is head of CEO, why highly corruptive BCG deal was enforced and why criminal organization is destroying both OU and Croatia. Just don't know what EU prosecutor office in Zagreb is silent. For now.
DeleteEveryone should be aware why Jasmin is CEO, not Kučko head of CEO, typo
DeleteGuten Morgen Ursula, is this legal in the EU?
ReplyDeleteThe same rules applies for Serbia too. The recapitilisation is OK.
DeleteSerbia is not part of the EU and Air Serbia has repaid loans it was given during covid.
DeleteDanke Ursula, danke Deutschland.
DeleteComparing a regional-leader like JU with OU is not realistic. JU is a successful company that has repaid every last cent of its loans and used the money it got constructively and wisely to build up its business. OU, on the other hand, is a lair of incompetent party bureaucrats and should be extinguished to reduce the wastage in the national budget.
DeleteAs long as you support all EPP policies without questioning major political decisions, even when they are not in your country’s interest, you will receive some rewards in return and be able to keep pouring money into your national airline, benefiting your closest political allies, friends, and family members.
DeleteI'm not comparing JU and OU but the rules of financing which are the same for these two companies since Croatia is part of EU and Serbia is associate member which alligned its aviation regulation in the process.
DeleteFirst of all, there is no such thing as "associate member", and secondly, the EU has no authority to impose any penalties or other restrictions on Air Serbia, as they legally have no jurisdiction in Serbia.
DeleteNot as an offical term but Serbia and EU signed Association Agreement. There is a universal jurisdiction under which EU (but also Serbia) can do pretty much whatever they want. Anyone can sanction almost any entity on earth, we see that every day (NIS, anyone?). Of course depending on your power the sanctions will or will not be respected...
DeleteThe fact that you needed to bring Serbia into this to deflect from the topic is telling.
DeleteAnon@09:25 that's recency bias. Before Covid OU and JU were quite comparable in their size, and I can't find data for 90s and 00s, but I bet OU was doing better than airline under sanctions. It's today JU is dominant in the region, not long ago it wasn't.
DeleteAnonymous10:33 - Yes, JU wasn't dominant in the region when oU was doing better or was comparable with JU and the fact that it degraded so much shows that oU is very, very mismanaged and corrupted and it getting worse day by day. They have absolutely no future outside feeder airline and that's a reality.
Delete@10.30 It's not deflecting, just pointing out that same financing rules (I underline: financing rules, not operation rules) apply literally for every airline in the region, being already in EU or being on the puth to EU, being private or state owned. Every entity in the region has, at least, Association Agreement and aviation sector of every entity is evaluated yearly in the country reports, it's regularly reported here at the portal too.
DeleteWe remember some officials during Covid saying "just make it according to EU financing rules", and we remember earlier Etihad couldn't have majority stake in the European airline. Of course EU rules apply in Serbia, I am surprised people are not aware of that.
DeleteDetailed financial projections up to 2045 based on what?
ReplyDeleteHoped and dreams
DeleteIt's projection so it's always an estimation, based on the best knowledge (historical results, growth rate, cost of capital...) All very blurry but that's usual way of evaluating the future performance.
DeleteI would really like to see estimated cash flows for net present value and internal rate of return. It's arbitrary and I'll come back to this in a year or two to check the work of Moore Audit Croatia, definitelly remember that name.
ReplyDelete+100
DeleteMoore Audit Croatia is another fraud and another deal, similar to BCG single type "consulting", concluded to cover corruption, crime, money laundry, and public money and European funds misuse, in accordance with modus operandi of criminal organization
DeleteWhat have USKOK said about all your allegations PIR?
DeleteI don't care what Party aparatchik "naš dečko" Turudic has to say because he will never accuse members of the same Mafia he is the member
DeleteThey foresee Croatia Airlines being in business in 2045...
ReplyDeleteWith 1945 mindset, they will be in business if criminal organization remains in power until 2045
DeleteWhat a shame!
ReplyDeleteKakve mahinacije. Nevjerojatno.
ReplyDeleteHappy Christmas Jasmin the world's best CEO
ReplyDeleteJooj, kol'ko samo kahve za 70 miljona se mere ispit
DeleteIf Croatia Airlines was truly profitable it wouldn’t need another taxpayer bailout just to survive a fleet transition.
ReplyDeleteInteresting how “market economy investor principle” is always invoked when the state injects money, but never when profits should be paid back to taxpayers.
ReplyDeleteWhich profit? I mean, if they had it, they could pay it to the owner (state budget) who would then use it to, I don't know, build roads which is essentially paying back to taxpayers.
DeleteThis company is only kept "alive" due to nationalist narratives of some petty politicians.
ReplyDeleteAs long as Croatian taxpayers are willing to pay, this will not change. Nationalism comes with an open wallet.
DeleteBravo OU!
DeleteReally pitty…
ReplyDeleteRyanair will definitely challenge this.
ReplyDeleteRyanair can go to hell! If any Airline in the world depends on subsidies, it is Ryanair. Michael O'Leary is the biggest crook in the whole of Ireland.
DeleteThe question is whether management will finally deliver.
ReplyDeleteThe answer is no, they will not. Doing same things expecting different results - no way.
DeleteWhy should they deliver. They obviously have full support of the government when they underdeliver.
DeleteWhy bother even trying to make a good profitable business when the tax payer is always on hand.
DeleteThis won’t be the last capital injection. Mark my words, there will be another “commercially justified” recapitalisation in a few years.
ReplyDeleteThe real test will be whether Croatia Airlines can actually grow revenues with the A220, not just reduce fuel burn.
ReplyDeleteIf the LF goes above 70% I'd be amazed
DeleteIt will not grow. It will decline.
DeleteTheir A220 are even to the hubs like Munich half empty, they use Q400 to the Star Alliance hubs regularly.
DeleteDon't forget that PSO flights are the real cashcow for them too...all together probably over 75mio yearly of free taxpayers money
ReplyDeleteThey do something for PSO money, they have costs to pay, it's not the same as these money burning debt-to-equity schemes.
DeleteImagine the connectivity Croatia would have gotten if they pumped 100 million euros in Ryanair instead...
ReplyDeleteThis is not recapitalisation, it’s a bailout.
ReplyDeleteProfitable “before fleet renewal”? That’s simply rewriting history. One paper profit in seven years doesn’t qualify as a healthy business.
ReplyDeleteIt's for the general public which has no idea that they were profitable a single year and that was due to creative accounting.
DeleteLong-term forecasts up to 2045 are meaningless when the airline struggles to make money next summer.
ReplyDeleteIf Slovenia did the same with Adria we might still have them flying ... Smart accounting, stupid management
ReplyDeleteAdria was a private company when went south so Slovenia couldn't do it just like that.
DeleteSell this airline already.
ReplyDeleteIf any private investor looked at Croatia Airlines’ results since 2018, they would run in the opposite direction.
DeleteYou can't put lipstick on a pig, nobody is going to buy OU
DeleteEven with brand new aircraft an airline with poor network economics will still lose money.
ReplyDeleteThis decision protects management and politicians, not passengers or taxpayers.
ReplyDeleteOne day, when fleet renewal will be completed, LH will step in, buy this empty shell, make it Dolomiti 2, fire all but ops people and kradeze will sell it as sucess story
ReplyDeleteIf OU doesn't own the planes why even bother buying?
DeleteThere might be some value in the pilots and cabin crew already trained, ready to operate flights with existing frames based in Croatia.
DeleteOU has an overbloated workforce. Half the people working there need to be let go.
DeleteJatovanje 2.0
ReplyDeleteCan an economist help out here?
ReplyDeleteIf the Government of Croatia converts 78.8 million euros in unpaid state loans into equity - while they already own 99.16% of the company - does this mean that they are buying some (or all) of the remaining 0.84% and paying 78.8 million for it?
It means they dilute the initial 99.16% holdings. In other words what they hold in shares is now worth less. (Paid more but worth less)
DeleteThat's even worse. That means they can forever go on converting unpaid loans into equity, which is capitalist speak for "throwing money away". We need a revolution.
DeleteIn theory yes, but in reality why would anyone burn so much money really - that's destroying your balance, credit rating, reputation, future... You know, if someone wants to go to Branko's bridge and throw away to Sava the bag with million dollars, how to stop him? And why, at the end of day... Only if that money is mine I would be interested, so the ball is in the court of Croatian taxpayers...
Delete@1400 what is happening at OU is not Capitalism its socialism to its core. Same as all the "stimulus" introduced during covid and the GFC in 2009. Capitalism in the western world now does not exist. Socialism mixed with greed is why the west in now broken. Bad businesses, be it an airline or a world bank would die with bad business practices if the west was really capitalist.
DeleteYou all must understand that OU is a 'child' of HDZ, CRO war for independence, FT legacy, logo of CRO itself as independent state. Hence, it will NOT go under. It is pure political decision. Also, I assume there was a deal in 1991 with Germany for recognition, and deal probably included: You have to be a 'feeder' for LH under LH rule among many other requests from Germans. They said: Yes. So there it is.
ReplyDeleteDoubt very much Germany was concerned about OUs 5 planes in the early 90s. OU was free to do whatvever it wanted just unfortunately has become a way for people to pay themselves a lot of public money.
DeleteYou are correct, but I noted 'among many other requests from Germany'. So I assume OU was mentioned on a sideline as Germanys knew Adriatic coast potential hence put OU as a part of the 'package'.
DeleteWhat's also really amazing is that OU tried so hard to distance itself from old socialist-impotent JAT airways as being western-lean-modern. They seemed correct in the 1990s and early 00s vs. Serbian JAT which was a disaster. But look now, OU looks like old socialist run-down JAT and AS looks like a modern-efficient-growing company from non-EU country. Amazing.
ReplyDeleteTrue that. Croatia Airlines is the last remaining SFRY company (boy, that's a twist)
DeleteThat is a big irony, although there are many SFRY companies left with their mentalities and business-approach. All SOEs (State owned enterprises) are being usurped for party interests, with profitability being on the bottom of their priorities.
DeleteProfitability and productivity. Sad again when you see how many profitable start-ups croatia has all private companies but when it comes to what the state runs, disaster everywhere.
DeleteDa citiram kolegu koji se često javlja: Bravo Hrvatska!
ReplyDeleteHahahaha nema ga danas 🙄
DeletePerhaps they can invest some of this money on an improved business class catering. I was handed a cardboard box with some dry things in it ZAG-LHR and handed a lukewarm glass of white vinegar when asking for white wine. LF about 50% for both classes.
ReplyDeleteOn July 30 2024 during delivery of first A220, Prime Minister of Croatia, Andrej Plenković, congratulated the carrier. He noted, "The existence of Croatia's national carrier will never be brought into question and the government will always support its flag carrier. This will continue in the future".
ReplyDeleteTwo completely different approaches:
ReplyDeleteOU - we have our business plan laid out several years ago and financial projections for up to 2045 and we are sticking to it no matter what.
JU - today market is completely volatile and planning even a year ahead is pointless with so many major disturbances every year, so we are flexible and adapt as we go.
OU is also flexible, they are open to receive government support even when not planned. On 13 Feb of last year, Minister for Sea, Transport and Infrastructure, Oleg Butković, ruled out the need for the carrier to be recapitalised by the state in the coming period.
DeleteSee how adaptable and flexible OU is?