Croatia Airlines is confident it may return to profitability in 2012 after significantly narrowing its losses in 2010 despite high fuel prices. The Croatian flag carrier is banking that it is future fleet plan, which focusses on replacing three A320s with four A319s, will result in further improvements in profitability since it will be able to better match capacity with demand. New routes towards the east are also planned – including Moscow, St Petersburg and Sofia – to balance a network that is now primarily focussed on The european union.
Croatia Airlines, which launched services in 1991 in the same way Croatia declared independence from the former Yugoslavia, has incurred losses every year since posting a breakeven result in 2007. Croatia Airlines CEO Sre?ko Šimunovi? expects the carrier to finish 2011 with a loss of EUR9 million (USD12 million).
This loss represents a significant improvement over the EUR21 million (USD27 million) loss incurred this year. He says the government-owned carrier was initially aiming to breakeven this year, a goal it could have met if it weren’t for the rise in fuel costs.
The higher than anticipated fuel prices has forced Croatia Airlines to test their boundaries its target for a breakeven or better give you 2012. “Next year the target is for the first profit after 4 years,” Mr Šimunovi? told CAPA during an interview with the Star Alliance meeting in Ethiopia latest research by.
While still in the red, Croatia Airlines has become able to significantly improve its financial position this year following adjustments to its schedule and network, who have driven a 16% growth in revenues and 11% growth in passenger traffic. Mr Šimunovi? expects Croatia Airlines to finish 2011 with EUR195 million (USD255 million) in revenues and 1.95 million passengers carried, in comparison to EUR168 million (USD219 million) in revenues and 1.76 million passengers this year.
The increase in revenues comes after a time period of five years in which revenues in local currency terms were relatively flat. Revenues decreased slightly this year as Croatia’s economy slipped right into a recession. The country recorded negative GDP growth in both 2009 and 2010 but a small increase in GDP is projected for 2011, ultimately causing a better demand environment.
In reaction to improved demand, Croatia Airlines launched in 2010 year-round service from Zagreb to Istanbul in addition to several new seasonal routes including Dubrovnik-Belgrade, Rijeka-London Heathrow, Zadar-Munich and Zagreb-Belgrade. Additionally, it increased capacity on several year-round routes from the main Zagreb hub. The carrier currently operates almost all of its international routes from Zagreb but carries a secondary hub at Dubrovnik and a few point-to-point primarily seasonal international routes from Rijeka, Split and Zadar.
Croatia Airlines adds capacity by improving utilisation of turboprop fleet
Mr Šimunovi? says the increase in the carrier’s capacity this year was achieved primarily by increasing utilisation of its Bombardier Dash 8-Q400 fleet. He calls the turboprop “a workhorse” and says the carrier now uses its six Dash 8s an average of 8.6 hours per day.
The 76-seat Q400s were added in 2008, replacing smaller, slower and older ATR 42s. A year ago Croatia Airlines recorded a normal daily utilisation of 7.9 hours for the Q400 fleet.
The Q400 will remain a backbone of the carrier’s domestic and regional international operation through at the very least 2018, when leases on the fleet expire. Together with replacing ATR 42s, Croatia Airlines has used the Q400 to replace jets on select frequencies in international markets like Brussels, Istanbul, Munich, Paris and Zurich, particularly during the slower winter months.
Unusually, Croatia Airlines now gets higher utilisation beyond its turboprop fleet than its jet fleet, which currently includes four 132-seat A319s and three 162-seat A320s. Mr Šimunovi? says the carrier’s average utilisation rate on its A320 family fleet happens to be only 7.8 hours daily.
He says the carrier is not able to get higher utilisation on its Airbus fleet because during wintertime months there is not enough demand in the Croatian market to keep all seven of its A319/A320s flying. The market in Croatia is quite seasonal with monthly traffic figures at Croatia Airlines during the peak summer months typically twice the winter figures.
Such seasonal fluctuations ensure it is very difficult for any carrier to be profitable on a year-round basis. Even during the peak summer months, market the weather is challenging in Croatia because low-cost carriers and charter carriers from throughout Europe add large amounts of capacity.
“In the summer season in Croatian skies we’ve 86 competitors – each of the main low-cost carriers, all the main legacy carriers and many types of main charter carriers,” Mr Šimunovi? explains. “They are supported by local authorities – the airports, etc. They may be given a lot of money [in incentives].”
As a result, foreign carriers can capture a majority of Croatia’s tourism market. Mr Šimunovi? estimates that Croatia Airlines now only captures 30% of the tourist market. As it is for the Adriatic coast, Croatia is a popular beach place to go for Europeans. Mr Šimunovi? says the nation attracts about one million tourists annually, with the majority coming during the summer season.
The local Croatian market is relatively as minute as the country’s population is only about 4.5 million. While foreign carriers take into account the majority of the inbound tourist market, Croatia Airlines is defined well for the local market given its domestic operation, its year-round presence in any way of Croatia’s main airports and its particular presence on all the major short-haul business routes, writes tagza.com.
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