National carriers in re-making: Croatia, Slovenia & big backers

Adrian Pingstone

When it comes to the aviation sector in southeastern Europe, it seems that national carriers have as much a tumultuous history as that of their region. There is the struggling Adria Airways, the ally-seeking Croatia Airlines, the newly-minted FlyBosnia and the eager Air Albania. With financial difficulties and developmental gaps, where does Slovenia’s and Croatia’s national carriers stand? There are some new players emerging in the Balkans, but can you really teach an old dog new tricks?

Adria Airways under review

Slovenian authorities have reportedly begun reviewing the finances of the country’s national carrier. According to local media reports, at the end of 2018, Adria Airways submitted evidence of its financial stability, as demanded by the Slovenian Civil Aviation Authority (SCAA). If the airline fails to convince the authorities of its long-term solvency, its operating licence might be at risk, local media news STA writes.

The question of the airline’s finances arose in October 2018, when SCAA asked Adria Airways to prove its financial stability and sufficient liquidity, ultimately meaning that the airline had to raise some capital. The carrier responded with announcement of 10 million euros (about $11.4 million) coming in the first quarter of 2019. The funds are to be provided by the airline’s owner, a German company 4K Invest fund. A month later, the carrier announced another cash injection, this time of €4 million ($4.5 million).

Overall, financial difficulties are no news to the Slovenian carrier. The last time it posted profit was in 2016. At the time, its €3.2 million euro ($3.6 million) profit was a huge step forward from €9.19 million ($10.4 million) loss the previous year (2015). In 2014, it also reported profit of €0.9 million ($1 million), contrary to bigger or smaller losses between 2008 – 2013.

Croatia Airlines: revived for the third time

By the end of January 2019, Croatia Airlines is expected to choose a financial advisor, who is to help it find a strategic partner, according to local media reports. Croatia’s national carrier is looking for a strategic partner that could help expand its network, increase market share as well as recapitalize the company.

While the financial adviser that should assess the amount of capital needed by the airline, its CEO Jasmin Bajic has been quoted by the media as putting the numbers at around $38.5 million (250 million kuna).

This is the third attempt to recapitalize Croatia Airlines within a decade. The first bid was announced in 2013 but failed to attract much interest. In 2015, World Bank fund IFC was hired to help with the task, but recapitalization eventually fell through as well.

In April 2018, the country’s government announced looking for a strategic partner to ensure “future development of the flag carrier”. Subsequently, in August 2018, Croatia Airlines revealed it would seek a financial adviser.

“Croatia Airlines d.d. is preparing a tender call for the procurement of financial advisory services with the aim of developing an appropriate model that the company will use to recapitalise and find a strategic partner,” according to a statement by the airline at the time, as quoted by SeeNews.

Newcomers and renewals: FlyBosnia & Air Albania

A new airline in the making in Bosnia and Herzegovina, called FlyBosnia, was registered in November 2017 and has taken its first aircraft, a 16-year old Airbus A319, in December 2018. In September of last year, Albania’s new national carrier made its maiden flight.

On January 15, 2019, FlyBosnia finally obtained its AOC authorizing the carrier to launch commercial routes. “This is the final stage in the approval process, which allows FlyBosnia to start flying”, commented FlyBosnia’s CEO Chris Gabriel to local media news IBNA. Initially, the airline planned to commence operations (between capital Sarajevo and Riyadh, Saudi Arabia) in June but failed to obtain an AOC at the time.

On the new airline’s plans, Gabriel said: “Operating initially one Airbus A319 aircraft under a dry lease agreement, FlyBosnia will add a second A319 within six to twelve months to provide extra capacity on the Sarajevo – Riyadh route, as well as new destinations when operationally viable… We want the number of flights from Sarajevo to more than double over the next twelve to eighteen months”, the CEO was quoted by EX-YU Aviation News.

The main investors of FlyBosnia, representatives of the Saudi conglomerate Nudžejma Skenderović, and Sulaiman Abdullah Al Shiddi, believe the airline has a chance to become a new flag carrier of Bosnia and Herzegovina since the insolvency of country’s national carrier B&H Airlines in 2015.

A number of Balkan carriers tend to have world leading (and rivaling) airlines as their major investors. Take this: Air Serbia has a strong backing from Etihad, the flag carrier of the UAE, retaining 49% stake in the Serbian airline, whilst Turkish Airlines, also a national carrier, has a 49% stake in Air Albania.

Albania used to have a flag carrier called Albanian Airlines. The carrier changed hands between many owners before it finally ceased operation in 2011. For a long time, the country did not have a national airline. Just as Bosnia and Herzegovina, in fact. The country’s B&H Airlines (originally Air Bosnia) met a similar fate when it was liquidated in 2015.

Air Albania was first unveiled by Prime Minister Edi Rama back in November 2017. In April 2018, the government ordered national air controller AlbControl to negotiate a partnership with Turkish Airlines and the newly-founded Albanian company MDN Investment to create a national airline.

MDN Investment, which holds 41% stake in the new flag carrier (remaining 10% belong to Albcontrol), was registered just a month earlier and had no known assets or previous experience in the air travel business, Balkan Insight wrote at the time.

Initially, Air Albania was to begin flying in the summer of 2018, intending to launch its first transatlantic flights by end of the year. “We will be aggressive in the market,” promised Sinan Idrizi, owner of MDN Investment. Perhaps too aggressive. Albania’s new national airline flew its maiden flight on September 14, 2018 and launched services with one ex-Turkish Airlines A319-100 jet, almost 12 years of age.

To this day, the airline serves just a handful of destinations within Europe. Airbus order book does not list Air Albania as a customer. Turkish Airlines, however, currently has eight A319s, 20 A320s and 68 A321s in its fleet, with an order for 93 A321neo jets. We could see some of these aircraft reach Air Albania in the future.

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