Croatia Airlines privatisation suspended
Croatia Airlines' privatisation process has been suspended until further notice due to the impact the coronavirus Covid-19 has had on the airline industry. In a statement, the Croatian Ministry for Sea, Transport and Infrastructure, said, "Based on our discussions, the inter-agency privatisation committee has decided to alter the dynamic of the entire process by suspending it until further notice due to the risks and unfavourable circumstances currently prevalent in the aviation sector. The committee will continue to monitor the situation in the industry". The Croatian government previously set a deadline to privatise or recapitalise the airline, which registered a 10.7-million-euro loss last year, by June 2020.
Greece's largest airline Aegean and Spanish regional carrier Air Nostrum had both expressed interest in acquiring shares in Croatia Airlines. In January, Aegean said, "Any significant decision on whether or not the company is likely to participate in the next phase of the privatisation process will be taken in the coming months, following the provision of information and discussions, in accordance with the procedure set by the Republic of Croatia". The next phase of the process was to involve the government announcing a tender for the submission of binding bids and setting out the number of shares it is willing to sell in the company. It previously noted it would offer a stake of up to 70%.
Late last year, the Croatian government granted aid amounting to 33.7 million euros to Croatia Airlines in an attempt to create favourable conditions for its sale. The capital injection has since been converted into a shareholder loan. The grace period on the loan has been set to two years with a fixed annual interest rate of 2%. The Ministry for Sea, Transport and Infrastructure said other terms and conditions would be negotiated with Croatia Airlines at a later date. The European Commission, which has strict guidelines on state aid, said last October it was “in close contact with Croatian authorities” after the government approved the aid package. The burden of the loan’s repayment was to fall onto Croatia Airlines’ new owner. However, this has now been brought into question due to the suspension of the privatisation process.
Croatia Airlines has said it is currently experiencing a 17% decline in booking numbers over fears associated with Covid-19. “During February we saw a modest decrease in bookings being made for March and April, as well as the coming months. This shows that our passengers are hopeful the situation with the coronavirus will improve as time passes by”, the airline said. The decline in bookings has been recorded both on the carrier’s international and domestic flights. “The situation can change for the better or worse, depending on weather the virus will further spread”, the company noted. The airline industry is facing its worst downturn since the 2008 financial crisis as a result of Covid-19. The International Air Transport Association (IATA) is forecasting a 113 billion US dollar decline in airline passenger sales as a result of the virus.
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