Croatia Airlines likely to require additional financial support
Croatia Airlines will likely need financial support if existing negative effects such as the Covid pandemic and the ongoing war between Russia and Ukraine continue. According to analytics company Credit Analyst, which reviewed Croatia Airlines’ recent financial reports, the carrier’s business outlook remains negative. “Should the negative trends continue, it is likely that the company will need more external support to stay afloat. This year, it will likely have to invest more, as we think that capital expenditures of approximately 2.3 million euros, as in 2020, will not be enough to cover the whole fleet. One of the Covid loans was supposed to mature in January this year, but it remains unclear whether the loan was refinanced or repaid”, the analytics firm noted. It added, “Liquidity will likely remain stretched during this year, absent of any additional external support. Unfortunately, the company is running out of acceptable collateral, as only one Airbus remains unencumbered. This could significantly limit the company’s future access to capital, in addition to the likely near-term end of the Covid support schemes for the airline industry by regulators”.
Croatia Airlines, which registered a 38-million-euro loss in 2021, warned at the end of last year that, “The company continues to face reduced demand, resulting in low levels of revenue which may raise issues of maintaining liquidity in the coming period". The company will post results for the first quarter of 2022 at the end of this month. “The outlook on Croatia Airlines’ business remains negative. The pandemic started to ease with the omicron variant, however, the Ukraine - Russia war could severely impact bookings for this year. Uncertainty remains a common denominator for many industries, including airlines and tourism, which is another relevant aspect of Croatia Airlines’ business due to its high seasonality linked to the Croatian tourism season”, Credit Analyst said.
The Boston Consulting Group (BCG) was hired last year with the aim of turning around Croatia Airlines’ business. BCG’s post-Covid strategy will be the foundation of the airline's development for years to come. “We continue to take all the necessary measures to safeguard liquidity and optimise the business, as well as undertake rigorous cost cutting measures. In 2021, we worked with the leading international strategic consulting company BCG to develop a post-Covid strategy in order to define strategic initiatives, the implementation of which, with prior consent of the majority owner - the government of the Republic of Croatia - will take three years to enable a sustainable business. In 2022 our focus will be on greater rationalisation of costs and the implementation of the company’s defined post-Covid strategy”, Croatia Airlines’ CEO, Jasmin Bajić, said. The post-Covid strategy is yet to be adopted by the government. It foresees fleet renewal, improvement in efficiency and competitiveness, implementation of new software, as well as the optimisation of Croatia Airlines’ year-round route network. Faced with strong competition from low cost carrier Ryanair at its home base in Zagreb, the airline has announced five new seasonal routes from Split this summer, all of which it had previously served out of Zagreb.
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