The flag carrier of Croatia is seeking a fresh injection of capital in order to avoid the same fate as regional counterpart Adria Airways. According to FlightGlobal, Croatia Airlines disclosed on September 19th that it is working with the government on a Kn250 million (US$37 million) recapitalization plan.
Seeking an injection of capital
FlightGlobal also reports that Croatian Prime Minister Andrej Plenkovic has set out the conditions for the initial phase – a Kn100 million ($14.8 million) injection. Apparently the government has embarked on a strategic partnership process for the carrier.
This fresh injection of funding is intended to support the expansion of the carrier’s network as well as renew its fleet and develop its technical services. In order to secure this funding, the airline is required to provide all relevant financial records and documents to the Ministry of Transportation. The ministry will assess whether or not the funds have been spent properly and appropriately.
The Prime Minister insists that Croatia “needs a national carrier” in order to provide connectivity and to strengthen trade and tourism. Plenkovic also recognizes the economic importance of the airline and the jobs it provides. Efforts to financially stabilize the airline are intended to gain more funding as it attempts to make itself more attractive to “other interested investors”.
Avoiding Adria’s fate
This move is particularly timely as Adria Airways recently folded due to insufficient funds. In fact, the hub airports of the two airlines are 120km away from each other – a drive of just under two hours.
Earlier this month, Adria Airways, the flag carrier of Slovenia, filed for bankruptcy. Bankruptcy proceedings were initiated by the management of the company because of the company’s insolvency. The Slovenian Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act (ZFPPIPP) obligates the management of a company in the position of Adria Airways to file for bankruptcy.
In addition to competing against many budget European carriers, Croatia Airline’s activities are highly seasonal as more than 50% of its passenger traffic takes place in the third quarter. Competition is fierce during the summer season. FlightGlobal reports that 100 carriers operate in the Croatian market during this time compared to just 15 in the winter time.
According to the airline’s webpage on ownership structure, this is how ownership is divided among the largest stakeholders:
|Review of shareholders and their share in stock capital||Number of shares||% Ownership|
|THE MINISTRY OF STATE PROPERTY||27.010.821||97,2033|
|HPB FOR THE REPUBLIC OF CROATIA||173.768||0,6253|
|CROATIA INSURANCE D.D.||10.270||0,0370|
|HRVATSKA LUTRIJA D.O.O.||4.000||0,0144|
|ASTRA INTERNATIONAL D.D. IN BANKRUPTCY||3.682||0,0133|
As you can see the state owns much of the airline while the Zagreb airport is the next largest shareholder at only 1.7%.
More about the airline
According to the airline’s website, Croatia Airlines is a Star Alliance member whose fleet now consists of twelve aircraft. They are as follows:
- four Airbus A319s,
- two Airbus 320s,
- and six turboprop Dash 8-Q400 aircraft.
The Airbus aircraft are named after the Croatian cities (Zagreb, Split, Zadar, Pula, Vukovar and Dubrovnik) while the Q400 aircraft are named after Croatian regions. This season, Croatia Airlines flew to eight domestic and 30 international destinations and directly connects Croatia to 24 countries.
Do you think Croatia Airlines has what it takes to fight this recent trend of airline collapses? Or will it suffer the same fate as Thomas Cook, Aigle Azur, XL Airways and several other airlines this year? Let us know in the comments.
We reached out to Croatia Airlines for comment but have not heard back. This article will be updated if we receive any response from the airline.