Croatia Airlines resumes search for strategic partner
Croatia Airlines is due to select a privatisation advisor by the end of the month as the government seeks to increase funding for the carrier. The company is due to choose a financial institution within weeks, which will formulate the best privatisation model for the airline. According to media reports, frontrunners include Deloitte, AT Kearney, PwC-a and Boston Consulting Group. A future strategic partner is expected to recapitalise the airline, in order for it to launch new routes and expand its fleet. According to Croatia Airlines' CEO, Jasmin Bajić, the carrier requires a recapitalisation of some 33 million euros. LOT Polish Airlines and 4K Invest have been singled out as prospective buyers who have shown interest in the carrier. The previous government, which unsuccessfully attempted to sell the airline once, selected the International Finance Corporation (IFC), the World Bank’s investment arm, to act as a consultant and seek out potential investors by October 2015. However, its search failed to provide any satisfactory results.
The President of the Croatia Airlines Supervisory Board, Zlatko Mateša, previously said the company is preparing for what will be a difficult privatisation process, with interest from foreign carriers expected to be low. "It would be best for the airline to be recapitalised because it will be difficult to find a strategic partner. This is because the European Union has a rule which states that carriers from outside the block cannot own more than 49% of a company from inside the Union. This immediately rules out carriers from places such as China, Japan and the Philippines which have shown interest in Croatia Airlines but cannot be serious partners as they are unable to control a majority stake", Mr Mateša said. According to the President of the Supervisory Board, recapitalisation and a partnership with a European airline, for example from Poland, would be a good solution for the carrier. Recapitalisation would entail changes to the airline’s capital. This may occur, for instance, when a creditor exchanges a loan for a stake but does not require changes to the company’s management structure.
Meanwhile, the Croatian government will hold talks with the European Commission over increasing funds for Croatia Airlines through its Public Service Obligations (PSO) contracts. In order to maintain appropriate scheduled air services on routes which are vital for economic development, the Croatian carrier currently receives some ten million euros per year from the state. In addition, the Croatian National Tourist Board will provide an additional one million euros for joint advertising.
Following the completion of Croatia Airlines' restructuring process in 2015, the carrier has seen its passenger numbers and profit margins grow. It has also expanded its destination network for three consecutive years. On January 1, 2018, the airline completed the two-year monitoring of the implemented restructuring plan. Croatia Airlines' CEO, Jasmin Bajić, said, "The key goal of the privatisation is for this reputable partner to increase our share capital and future business operations. In other words, to find strategic partner(s) that will assist with the implementation of our fleet plans and provide synergies for the company, while also taking into consideration the wider impact of such a transaction".
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