Croatia’s Government Is Injecting Funds Into Its National Airline

• October 14, 2019
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he Croatian Government will be giving 250 million Kuna (33.8 million Euros) to Croatia Airlines over the next two years, ahead of its privatization. The government owns almost 100% of this airline, which last received government funds ahead of Croatia’s accession to the European Union in 2013.

For years, the government has been trying to privatise the loss-making airline. This injection will help to cover operating expenses for the next two years, which the Croatian Government believes will make it easier to sell Croatia Airlines.

Last year, Croatia Airlines recorded a 2% increase in passenger traffic. This modest growth is mostly due to the carrier already operating at full capacity of its fleet. Croatia Airlines has no funds to purchase new aircraft. In 2018, it secured government-backed loans to make payments towards the purchase of new Airbus aircraft, as reported by Index.

The cash injection of almost 34 million Euros was granted by the Croatian Government for the explicit purpose of stabilizing the airline, as reported by Poslovni Dnevnik.

Some of the money is likely to be used to cover last year’s losses. But most of the cash injection will go towards maintenance costs. Two of the engines require a general overhaul, and there are still outstanding debts toward domestic suppliers.

Lastly, also according to Poslovni Dnevnik, 26,3 million Kuna (3.5 million Euros) will be used for debt repayments. This includes payments to Airbus over the order for four Airbus A320neo aircraft.

The use of funds to finance these debts is an unusual step for the Croatian Government to take. This is the first time it will directly inject cash into the national airline since Croatia joined the European Union in 2013.

This extraordinary measure stems from the strong desire of the Croatian government to have the airline privatized within the next 12 months, which they have set as one of their strategic objectives. The hope is that the process of privatization will be made easier for Croatia Airlines if the existent debts are partially serviced by the government.