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Blerg
Topic Author
Posts: 4259
Joined: Tue Jan 09, 2018 11:42 am

Croatian Government is Considering Merging OU and airports

Tue Nov 19, 2019 1:25 pm

Good afternoon,

In an attempt to save the failing, loss-making national carrier, Croatia Airlines, the government in Zagreb is considering creating a holding company that would be comprised of all the country's airports as well as Croatia Airlines. Once the holding company is formed, it is expected that the consultants will propose its sale to the country's pension fund. All this is done in order to secure additional funding for the airline.

Croatia Airlines has struggled in recent times and by now it has sold most of its assets, they even sold half of their LHR slots in order to secure operational funds. Just recently the Croatian government has provided the airline with €33 million so that they can pay their bills, service the planes and maintain liquidity.

Croatia Airlines' main hub is struggling this year where many airlines have either cut or revised their operations. It started with Emirates which turned ZAG into summer seasonal while FZ was supposed to operate daily winter flights. Shortly after the switch FZ downgraded ZAG from 7 to 4 flights. Korean Air was supposed to operate ICN-ZAG-ZRH-ICN in winter but these flights were also cut with summer flights staying. KLM has downgraded ZAG to six weekly from the start of the winter season while this happened in mid-January last year. More recently Eurowings has decided to suspend Berlin and Dusseldorf flights while summer seasonal flights by LX to ZRH and OK to PRG have also been suspended.

Will be interesting to see what the EU says regarding state aid OU got but also if they allow for the holding company to be formed.

Source: https://www.exyuaviation.com/2019/11/st ... 4595286886
 
BannedUser
Posts: 6
Joined: Thu Oct 31, 2019 9:26 pm

Re: Croatian Government is Considering Merging OU and airports

Tue Nov 19, 2019 4:14 pm

Wow things are not looking good for croatian aviation.

I wonder if Croatia Airlines will be forced to pay that money back. Thats how Malev was bankrupted.
 
Blerg
Topic Author
Posts: 4259
Joined: Tue Jan 09, 2018 11:42 am

Re: Croatian Government is Considering Merging OU and airports

Tue Nov 19, 2019 8:36 pm

BannedUser wrote:
Wow things are not looking good for croatian aviation.

I wonder if Croatia Airlines will be forced to pay that money back. Thats how Malev was bankrupted.


I think it will boil down to politics and how much influence they have in Brussels. Also we will have to see if someone reports them to the European Commission. Overall things are not looking bright over there.
 
ifly747800
Posts: 2
Joined: Tue Nov 19, 2019 8:49 pm

Re: Croatian Government is Considering Merging OU and airports

Tue Nov 19, 2019 8:59 pm

Is Croatia seeing declining tourism? My past two trips to Croatia have been awful, it seems like Croatian's are become more rude year over year....
 
bennett123
Posts: 10051
Joined: Sun Aug 15, 2004 12:49 am

Re: Croatian Government is Considering Merging OU and airports

Tue Nov 19, 2019 9:19 pm

If they own both the airline and the airports, does this create a conflict of interest?.
 
davidjohnson6
Posts: 954
Joined: Mon Jun 20, 2016 10:10 pm

Re: Croatian Government is Considering Merging OU and airports

Tue Nov 19, 2019 11:47 pm

If they merge airline and airports, and then the airline goes bankrupt, what happens to the airports ?
If the airline and airports are the same company, does this mean the management of each airport is implicitly obliged to give OU better terms than other airlines ? How will airlines other than OU react to favoritism ?
Croatia's economy has a high dependency on tourism.
If Croatia considers having continuity of domestic flights in winter to be critical, then by all means issue a PSO for this, but outright protectionism of OU probably won't end well

It all seems like a really bad idea...
 
Blerg
Topic Author
Posts: 4259
Joined: Tue Jan 09, 2018 11:42 am

Re: Croatian Government is Considering Merging OU and airports

Wed Nov 20, 2019 5:29 am

davidjohnson6 wrote:
If they merge airline and airports, and then the airline goes bankrupt, what happens to the airports ?
If the airline and airports are the same company, does this mean the management of each airport is implicitly obliged to give OU better terms than other airlines ? How will airlines other than OU react to favoritism ?
Croatia's economy has a high dependency on tourism.
If Croatia considers having continuity of domestic flights in winter to be critical, then by all means issue a PSO for this, but outright protectionism of OU probably won't end well

It all seems like a really bad idea...


The whole point of this scheme is so that OU doesn't go bankrupt. Seems like they either want profitable airports to fund the airline or for a government to have a channel through which to wire money which is why they are bringing the pension fund into the game.

Also one big problem for them is that OU has been more or less kicked out from the coast where most of the tourists go. Croatia Airlines is based in Zagreb which has considerably less demand, this year they are barely going to grow so they should be around 3.5 million passengers which isn't much. Split and Dubrovnik are growing rapidly and next year SPU might even overtake them, especially with so many airlines suspending or reducing ZAG flights.

In the end it will all boil down to what the EU says and if they turn a blind eye to all this. I don't think Ryanair or Wizz Air care as they serve Zagreb through other, neighboring airports.
 
ORDfan
Posts: 659
Joined: Sat Jun 30, 2007 6:02 am

Re: Croatian Government is Considering Merging OU and airports

Wed Nov 20, 2019 5:21 pm

Blerg wrote:

Croatia Airlines' main hub is struggling this year where many airlines have either cut or revised their operations. It started with Emirates which turned ZAG into summer seasonal while FZ was supposed to operate daily winter flights. Shortly after the switch FZ downgraded ZAG from 7 to 4 flights. Korean Air was supposed to operate ICN-ZAG-ZRH-ICN in winter but these flights were also cut with summer flights staying. KLM has downgraded ZAG to six weekly from the start of the winter season while this happened in mid-January last year. More recently Eurowings has decided to suspend Berlin and Dusseldorf flights while summer seasonal flights by LX to ZRH and OK to PRG have also been suspended.


That being said, I don't believe it's accurate to describe ZAG as struggling this year. The statistics certainly don't paint that picture. ZAG had a very strong Q1+Q2 with positive y-o-y growth. True Q3 was a bit softer, with July surprisingly showing a decline vs last year, but the 1st half year pax #'s more than make for that. Movements are also going to be up net y-o-y. Thus far, Sep and Oct both also in the green.

Also I don't think you can have a conversation about Croatia aviation without looking outside ZAG; DBV and SPU have both added a lot of direct service in recent years, and in fact, I'd venture to say ZAG has held up relatively well in the face of increasingly bypassed tourist traffic. Both southern airports have seen multiple years of 10-20%+ annual growth. Needless to say some of this has come at ZAG's expense.

Not saying 2020 can't be weaker, just don't think its accurate to say ZAG has struggled in 2019... at least is has not struggled for pax.

http://www.zagreb-airport.hr/en/busines ... r-2019/558
 
ORDfan
Posts: 659
Joined: Sat Jun 30, 2007 6:02 am

Re: Croatian Government is Considering Merging OU and airports

Wed Nov 20, 2019 5:27 pm

ifly747800 wrote:
Is Croatia seeing declining tourism? My past two trips to Croatia have been awful, it seems like Croatian's are become more rude year over year....


Not it's not; well at least the airport traffic figures and according to numerous sites, 2019 will break another record of visitors; up 5% from last year as of October already.

I agree that locals are not as friendly as they were - I think they are experiencing overtourism and quite honestly, some rude tourists as well.

It's happening all over Europe though, and very similar to what's happening in Spain, France, and Italy - where hostilities towards tourists are rising.

https://time.com/5349533/europe-against-tourists/
 
Blerg
Topic Author
Posts: 4259
Joined: Tue Jan 09, 2018 11:42 am

Re: Croatian Government is Considering Merging OU and airports

Wed Nov 20, 2019 8:52 pm

ORDfan wrote:
Blerg wrote:

Croatia Airlines' main hub is struggling this year where many airlines have either cut or revised their operations. It started with Emirates which turned ZAG into summer seasonal while FZ was supposed to operate daily winter flights. Shortly after the switch FZ downgraded ZAG from 7 to 4 flights. Korean Air was supposed to operate ICN-ZAG-ZRH-ICN in winter but these flights were also cut with summer flights staying. KLM has downgraded ZAG to six weekly from the start of the winter season while this happened in mid-January last year. More recently Eurowings has decided to suspend Berlin and Dusseldorf flights while summer seasonal flights by LX to ZRH and OK to PRG have also been suspended.


That being said, I don't believe it's accurate to describe ZAG as struggling this year. The statistics certainly don't paint that picture. ZAG had a very strong Q1+Q2 with positive y-o-y growth. True Q3 was a bit softer, with July surprisingly showing a decline vs last year, but the 1st half year pax #'s more than make for that. Movements are also going to be up net y-o-y. Thus far, Sep and Oct both also in the green.

Also I don't think you can have a conversation about Croatia aviation without looking outside ZAG; DBV and SPU have both added a lot of direct service in recent years, and in fact, I'd venture to say ZAG has held up relatively well in the face of increasingly bypassed tourist traffic. Both southern airports have seen multiple years of 10-20%+ annual growth. Needless to say some of this has come at ZAG's expense.

Not saying 2020 can't be weaker, just don't think its accurate to say ZAG has struggled in 2019... at least is has not struggled for pax.

http://www.zagreb-airport.hr/en/busines ... r-2019/558


Most cuts and downgrades have been announced in 2019, very few airlines are immediately stopping all flights once the suspension is announced. For example EW announced last week that they will stop flying to ZAG in Mach 2020. So in that sense the airport has struggled to attract new customers so as to compensate for the loss of the old ones. Also, October was around 3.9% increase which was probably caused by Adria's bankruptcy. Ljubljana is around 120 km from ZAG so the two have overlapping catchment areas.

Also don't get me wrong but what has DBV got to do with ZAG? Have you seen how far apart the two airports are? If you are looking at softer growth in Zagreb then you have to look at neighboring airports such as Tuzla, Banja Luka, Ljubljana ... and even Belgrade which attracts many passengers from eastern Croatia. Also, growth at coastal airports has been mostly fueled by tourist flights heading to the beaches and islands so I hardly believe Zagreb interests them as a point of entry since it's not really close to where they want to go. Even if DBV is closed tomorrow people would still not fly to ZAG but rather to SPU, TIV or OMO.
 
ifly747800
Posts: 2
Joined: Tue Nov 19, 2019 8:49 pm

Re: Croatian Government is Considering Merging OU and airports

Fri Nov 22, 2019 9:28 pm

ORDfan wrote:
ifly747800 wrote:
Is Croatia seeing declining tourism? My past two trips to Croatia have been awful, it seems like Croatian's are become more rude year over year....


Not it's not; well at least the airport traffic figures and according to numerous sites, 2019 will break another record of visitors; up 5% from last year as of October already.

I agree that locals are not as friendly as they were - I think they are experiencing overtourism and quite honestly, some rude tourists as well.

It's happening all over Europe though, and very similar to what's happening in Spain, France, and Italy - where hostilities towards tourists are rising.

https://time.com/5349533/europe-against-tourists/


I did some research after a wrote this (should have done this before posting) but good feedback. It does show increase, I just see they could do so much more if they were better hosts. To your point it could be overtourism, I can understand that.
 
DTVG
Posts: 61
Joined: Sat Aug 17, 2019 10:06 pm

Re: Croatian Government is Considering Merging OU and airports

Sat Nov 23, 2019 5:11 pm

Bundling an airline and multiple airports and “selling“ (aka forcing) it to the country’s pension fund.
How many conflicts of interests exist here. In any functioning country the alarm bells would be ringing.
 
Dieuwer
Posts: 2489
Joined: Tue Dec 26, 2017 6:27 pm

Re: Croatian Government is Considering Merging OU and airports

Sat Nov 23, 2019 8:47 pm

1) Alitalia will shortly received its 8th "bridge loan". Seems like OU has a ways to go...
2) Why is SPU not the main base of OU? Would make more sense to me.
 
BannedUser
Posts: 6
Joined: Thu Oct 31, 2019 9:26 pm

Re: Croatian Government is Considering Merging OU and airports

Sat Nov 23, 2019 10:42 pm

Dieuwer wrote:
1) Alitalia will shortly received its 8th "bridge loan". Seems like OU has a ways to go...
2) Why is SPU not the main base of OU? Would make more sense to me.


SPU can't be the main base for OU because Split is a ghost town during the winter. Less than 40k pax in the months of January and February for example.
 
Dieuwer
Posts: 2489
Joined: Tue Dec 26, 2017 6:27 pm

Re: Croatian Government is Considering Merging OU and airports

Sat Nov 23, 2019 10:50 pm

BannedUser wrote:
Dieuwer wrote:
1) Alitalia will shortly received its 8th "bridge loan". Seems like OU has a ways to go...
2) Why is SPU not the main base of OU? Would make more sense to me.


SPU can't be the main base for OU because Split is a ghost town during the winter. Less than 40k pax in the months of January and February for example.


Then move winter operations to ZAG.
 
Blerg
Topic Author
Posts: 4259
Joined: Tue Jan 09, 2018 11:42 am

Re: Croatian Government is Considering Merging OU and airports

Sat Nov 23, 2019 11:20 pm

Dieuwer wrote:
1) Alitalia will shortly received its 8th "bridge loan". Seems like OU has a ways to go...
2) Why is SPU not the main base of OU? Would make more sense to me.


OU tried but they were kicked out by the competition. If I am not wrong it was mostly easyJet, they are quite a big player over there (the Adriatic coast).

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