Croatia Airlines to cover losses from reserves
Croatia Airlines has announced it will cover its net loss of 11.2 million euros accumulated in 2018 by delving into its capital reserves. The carrier's financial performance from last year marked its worst since 2012. At the end of the first quarter of 2019, Croatia Airlines' reserves amounted to fifteen million euros. The decision to cover last year's losses will be put to a vote at the airline's shareholders' meeting on July 7. The company currently has payments due on loans amounting to 19.1 million euros, of which 10.5 million are long-term loans, while the rest are short-term. The carrier recorded a net loss of 13.3 million euros during the first three months of this year.
Croatia Airlines' CEO, Jasmin Bajić, recently said the carrier requires some 33 million euros in order to launch a new investment cycle and better compete against its rivals. "The situation is not good because we cannot develop. Currently, we can only stagnate and shrink. Therefore, we need a new investment cycle and capital. The ownership structure should change through recapitalisation", Mr Bajić said. He added, "Croatia Airlines' main issue is the losses it accumulates over winter. During this time of year, when Croatia Airlines has no competition and faces only ten carriers who maintain services to the country, we generate losses. When we compete against a hundred airlines in the summer we attempt to make up for those losses. During the summer season we handle almost half of our annual traffic. The key problem are the economies of scale because we are leasing more expensive aircraft, buying more expensive fuel and paying for more expensive services than our competition, who find it more affordable due to the amount they purchase, so the economy of scale gives them an advantage".
Commenting on the company's financial performance earlier this month, the Croatian Minister for Sea, Transport and Infrastructure, Oleg Butković, said, "In the long-term it will be difficult for Croatia Airlines to survive without a partner. I can't comment on how long but they are not in a position that would see them go bust tomorrow if no partner is found. However, under our national reform program, the company's privatisation process should be completed by the end of the year, and I believe we will deliver within the set timeframe". Croatia Airlines recently selected a consortium made of the Privredna banka Zagreb and Germany's DVB Bank to act as its privatisation advisor. During the first phase of their work, the advisors will analyse Croatia Airlines' business and results. The second phase will involve identifying the best privatisation model, while the third will include the transaction itself. The consortium will be paid up to half a million euros for their services and will receive a bonus if Croatia Airlines is successfully privatised.
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