Croatia Airlines Privatization Delayed Over Coronavirus Issues

Small European carrier and Star Alliance member, Croatia Airlines will not be privatized this year as planned. This is coming from a Croatian government announcement that was made earlier this week. So what has coronavirus got to do with it?

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Croatia Airlines will not be privatized this year, but is it because of coronavirus?. Photo: Croatia Airlines

Another failed privatization attempt

Croatian business daily Poslovni dnevnik reports that the Croatian government has decided to “indefinitely” delay the search for a “strategic partner” that would enable Croatia to privatize its national carrier, Croatia Airlines.

Croatia has been trying to privatize Croatia Airlines for almost the entirety of the last decade, but unfortunately for the government, this has never yielded success. Now, it seems that the process may not happen for several more years.

To aid the privatization process, a Committee was formed in the Croatian Ministry of Sea, Traffic and Infrastructure. The committee met this week to discuss the progress of the privatization process so far. It concluded that the privatization process should be halted due to the outbreak of coronavirus.

This comes just a day after British regional airline Flybe ceased operations, also as a result of unfavorable developments in the industry that coronavirus has brought about.

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Croatia Airlines continues has limited capital to expand operations and so continues to stagnate. Photo: Jakov Fabinger, Simple Flying

Croatia Airlines is not very attractive

As a reminder, Croatia Airlines received an injection of 250 million Kuna (almost 40 million USD) from the Croatian government this year to cover its operational losses. This was supposed to make the airline more appealing to potential bidders, and was intended to speed up the privatization process.

Croatia Airlines previously reported that it was suffering softer advance bookings as a result of coronavirus causing uncertainty.

However, the airline can rely on a boost in demand on some of its feeder flights, resulting from Lufthansa canceling most of its twice-daily services between Frankfurt and Zagreb in March. Croatia Airlines code-shares on the route with Lufthansa and offers three daily flights year-round. Therefore, the reduction in overall capacity should dampen the impact of demand for aviation travel falling in the market overall.

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Air Nostrum expressed an interest in buying Croatia Airlines, but privatization is now off the table. Photo: Getty

Aegean and Air Nostrum were interested

Simple Flying previously reported on the two airlines that expressed an interest in purchasing Croatia Airlines: Aegean Airlines and Air Nostrum of Iberia.

Aegean was interested because Croatia and Greece are such similar aviation markets, with tourism being the primary economic activity in both of these markets. When it comes to tourism, air traffic is fairly very seasonal. The fleet of these two airlines is almost identical, with the only difference being that Aegean has the Airbus A321.

As for Air Nostrum, it was interested because Croatia Airlines could have been converted from an effective Star Alliance feeder airline to an IAG feeder. This would mean that Air Nostrum and Croatia Airlines would have functioned as one: two regional airlines operating feeder flights for the major IAG players and their oneworld partners.

The impact of coronavirus on the aviation industry is proving to be a very serious one. However, this is likely not the reason why Croatia Airlines will not be privatized. After all, the Croatian government halted the privatization process before either Aegean or Air Nostrum announced that their expression of interest no longer applies. So what is the Croatian government really up to?

Do you think coronavirus will have more impact on the aviation industry in the coming months? Let us know in the comments below.