Adria to suffer worst losses in its 57 years?
Chronic flight disruptions and cancellations, questionable fleet choices and apparent lack of clarity on its course of action suggest that yet another European airline is hanging on a thread.
Slovenian national carrier Adria Airways is expected to post financial losses for the second consecutive year, which could be the biggest in the airline’s history of 57 years, local media reports. Adria is not an airline known for financial stability or profits; however, its course of action in the recent months adds more fuel to speculation about impending bankruptcy, despite the best effort by the airline itself to counter the claims.
Financial life vest is coming
Back in October 2018, the Slovenian Civil Aviation Authority has asked Adria Airways to provide evidence of financial stability and sufficient liquidity by the end of 2018, ultimately meaning that the airline needs to raise some capital, EX-Yu Aviation reported at the time.
The carrier responded with announcement of 10 million euros coming in from its owner, a German company 4K Invest fund. A month later, the carrier announced another cash injection, this time of €4 million. Adria also clarified, that the previously mentioned €10 million are planned for the first quarter of 2019.
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 euros profit was a huge step forward from €9.19 million loss the previous year (2015). In 2014 it also reported profit of €0.9 million, contrary to bigger or smaller losses between 2008 - 2013.
Fuel for doubt
Adria’s CEO Holger Kowarsch said in October 2018 that despite intended post of financial loss, the airline is looking for sustainable growth in the long term. “This year's winter season focuses more on the stability of operations in the segment of scheduled transport and the strengthening of relations with other airlines", EX-Yu Aviation quotes Kowarsch as saying.
Remember that €3.2 million profit in 2016? It came after the airline’s shares were acquired by the 4K Invest fund in August 2016. Such quick turnaround was attributed mainly to the € 7.57 million it got for selling Adria Airways brand in December 2016, the Slovenia Times noted at the time, pointing out continuously lessening passenger and load factor numbers.
But now local media is questioning the 2016 deal, claiming that the brand was sold to a company allegedly affiliated with 4K investment. Which could suggest that in 2016 the struggling airline was not as much financially saved by the coming of investor, as made a trick to improve its balance sheets.
Whether or not these claims are true, Adria’s reputation is definitely suffering strong blows lately.
While passengers numbers are on the rise in Europe, for Adria - it is a whole different story. On the one hand, the airline has to face the same conditions that other European airlines, even major ones like Ryanair, are complaining about. On another, it is also plagued by continuous flight delays and cancellations, that are not helped by crew shortage either.
After publicly apologizing and attempting to explain its “travel irregularities” in August 2018, Adria addressed the issue again in October 2018, this admitting pilot shortage as one of underlying reasons, but claiming the cancellations and delays have nothing to do with its financial situation.
“We fully understand and accept debates on flight irregularities but not also that such are connected to our financial status,” a statement read.
“We wish to clarify that financial status doesn’t influence and is not the reason for flight delays or cancellations as stated by some media. All supervisions conducted by Civil Aviation Authority are determined in valid regulation and the agency is obliged to carry out regular assessments of the air carriers' financial situation related to fulfilling conditions for operating licence. Adria Airways is regularly informing the agency about its financial performance and agency is regularly issuing resolutions and findings which we follow. Agency’s resolution that Adria Airways needs to provide evidence by the end of 2018, that it received funds either through recapitalization or any other way, is not a decision of extraordinary nature and does not mean that Adria Airways is in any worse shape as before or is threatened to ground its fleet as implied by some media. These are regular measures which Adria Airways needs to constantly perform and fulfil”.
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