Croatia Airlines’ financial reports for 2025 and the first quarter of 2026 show a dramatic deterioration in the national carrier’s business performance, while also raising the broader question of whether its continuous financial reliance on the state can still be justified. After Croatia Airlines ended 2025 with a net loss of €38.7 million at company level, or €38.4 million at Group level, it posted a further net loss of €29.9 million in just the first three months of 2026. In other words, the loss generated in a single quarter of 2026 reached roughly three quarters of the loss recorded during the entire previous year. That figure can hardly be interpreted as a temporary weakness or ordinary seasonality, especially as it follows an already extremely poor 2025.
In 2025, Croatia Airlines increased the number of passengers carried to 2.043 million, 11 percent more than a year earlier. Available capacity, measured in available seat kilometres, rose by 9 percent, while the passenger load factor increased from 65.1 to 66.3 percent. At first glance, these are indicators that should suggest recovery and business stabilisation. The financial side of the story, however, shows exactly the opposite. Total revenue increased from €267 million to €292 million, but total costs simultaneously jumped from €286 million to €331 million. The operating result deteriorated from minus €16 million to minus €36 million, while the net result worsened from minus €20 million to minus €39 million.
What is particularly problematic is that traffic growth failed to stop the decline in profitability. In 2025, passenger yield fell from 16.0 to 14.7 eurocents per RPK, while unit operating revenue per ATK decreased from €1.2 to €1.1. This means Croatia Airlines was carrying more passengers, but was unable to monetise them sufficiently. Such a business pattern is especially dangerous at a time when the carrier is undergoing an expensive fleet transition, because capacity growth without corresponding revenue only deepens the financial pressure.
The first quarter of 2026 showed that this problem is not easing, but accelerating. Between January and March, Croatia Airlines generated total revenue of €50.6 million, 6 percent more than in the same period of 2025, but total costs rose to €80.5 million, an increase of 26 percent. The net result deteriorated from minus €15.9 million in the first quarter of 2025 to minus €29.9 million in the first quarter of 2026. EBIT fell to minus €26.5 million, while EBITDA declined to minus €17.5 million.
During the same period, the carrier transported 405,160 passengers, 23 percent more than a year earlier, while the passenger load factor increased from 59.9 to 63.9 percent. Here too, the same pattern seen in 2025 is repeated, traffic indicators appear better, but the financial result becomes significantly worse. This imbalance is particularly uncomfortable because it shows that a higher number of passengers does not, by itself, mean healthier business performance. On the contrary, in the case of Croatia Airlines, higher traffic is currently accompanied by an even greater loss.
The report for the first quarter of 2026 also clearly shows that the company is facing a decline in unit revenues. Operating unit cost per ATK decreased from €1.54 to €1.49, but operating unit revenue fell even more sharply, from €1.14 to €1.01. Passenger yield decreased from 16.3 to 14.7 eurocents per RPK. In other words, although certain cost indicators appear more favourable on paper, the revenue side of the business is deteriorating faster than costs can be controlled.
In its first-quarter report, Croatia Airlines states that it recorded an operating loss of €22.1 million during the period, while the total loss, including the net financing result, amounted to €29.9 million. Net financing costs were €7.3 million higher than in the same period of 2025, primarily due to negative exchange rate differences caused by the strengthening of the US dollar. According to the report, exchange rate differences alone increased the total loss by around €6.2 million.
However, exchange rate differences cannot explain the entire problem. Operating revenue increased by 10 percent, but operating expenses rose by 19 percent. Flight operations costs increased from €13.9 million to €16.9 million, maintenance from €11.3 million to €14 million, air traffic services from €11.2 million to €13.4 million, and depreciation from €7.8 million to €9 million. According to the report itself, the largest absolute increase in costs was recorded in fuel, air traffic services, maintenance and depreciation, with these items together accounting for around 76 percent of the increase in operating expenses.
The comparison between 2025 and the first quarter of 2026 is therefore devastating. In the whole of 2025, Croatia Airlines recorded a net loss of €38.7 million at company level, or €38.4 million at Group level, while in the first quarter of 2026 alone, the loss had already reached €29.9 million. If this pace continues, 2026 could prove financially even more difficult than the previous year. Naturally, the aviation industry is highly seasonal and the first quarter is traditionally weaker than the summer period, but the scale of the deterioration compared with the first quarter of 2025 cannot simply be relativised by seasonality.
These results are particularly important in the context of the recent state recapitalisation, or more precisely the conversion of state claims into equity stakes. At the end of 2025, it was announced that the Republic of Croatia would convert €43 million of claims against Croatia Airlines into new shares, meaning the company would no longer have to repay that debt, while the state would in return further increase its already dominant ownership stake. The conversion concerns two previously approved state loans, one amounting to €33.2 million and the other to €9.8 million, with the new shares being issued exclusively to the state, without a public offering.
In other words, while the financial reports show ever-deeper losses, the state is simultaneously continuing to convert Croatia Airlines’ liabilities into capital. Formally, this is a strengthening of the company’s balance sheet and capital position. In substance, however, such a move means that debt owed to the state is being converted into an ownership stake in a company that continues to generate losses. This is not a classic market recapitalisation in which a new investor injects fresh capital expecting a return based on a convincing business plan, but rather a continuation of state support for a national carrier whose operations have depended on similar interventions for years.
The context is even more sensitive because the state was already almost the sole owner of Croatia Airlines before this conversion. According to the 2025 annual report, the Republic of Croatia held 99.159 percent of the company’s share capital as of 31 December 2025. This means that such results are not merely a question of one company’s business policy, but also a question of responsibility towards public ownership and taxpayers. When a company loses almost €39 million in one year, the state then converts €43 million of claims into capital, and a new loss of nearly €30 million is generated in just the first three months of the following year, this is a pattern that requires a far more serious explanation than general references to fleet transition and unfavourable market conditions.
It is particularly uncomfortable that the state “recapitalisation” took place at a time when the problems were already clearly visible. In the first nine months of 2025, according to data available at the time and reported by AvioRadar, the company recorded an operating loss of €21.5 million, with operating revenue growing by 3 percent and expenses increasing by 9 percent. The 2025 annual report now confirms that this negative trend deepened further by the end of the year, while the report for the first quarter of 2026 shows that the new year has not brought a turnaround, but an even stronger deterioration.
Taken together, the two financial reports point to the same underlying problem. Croatia Airlines is growing in passenger numbers, increasing capacity and undergoing the most important fleet renewal investment cycle in its history, but its business model has so far shown no ability to turn that growth into sustainable profit. In 2025, the company ended the year with higher revenue, more passengers and a larger fleet, but also with an almost doubled net loss compared with the previous year. In the first quarter of 2026, the picture is even sharper, as 23 percent passenger growth resulted in an almost doubled net loss compared with the same period of the previous year.
In its reports, Croatia Airlines presents the transition to the Airbus A220 fleet as the foundation of long-term stability, competitiveness and cost optimisation. The figures so far, however, show that this transition is extremely expensive and financially painful in the short term. At the end of 2025, the fleet numbered 16 aircraft, including seven A220s, while the company simultaneously retained older A319, A320 and Q400 aircraft. Such a mixed transitional fleet objectively increases operational complexity, which makes the question of transition planning and management all the more important.
The Government’s decision to further increase its ownership stake in Croatia Airlines by converting claims into capital can be interpreted as a signal that the state does not intend to allow the national carrier to sink financially. Such a move can be justified by the need to preserve a strategically important national airline, the country’s transport connectivity and a national presence in European airspace. At the same time, however, it also raises the question of whether the purpose of such balance sheet “cleaning” is to create an apparently tidier position for a possible future sale or strategic partnership. But that immediately leads to the key question, who would buy Croatia Airlines today with financial results like these?
If the company is viewed strictly through its business indicators, its market value can hardly be built on profitability, because there is none. Under such circumstances, a potential sale would not be a classic sale of a successful airline, but rather a possible takeover of a company with its liabilities, operational problems and difficult legacy. In the bluntest business logic, such a company is not sold for an amount reflecting strong earning capacity, but potentially for a symbolic price, together with the assumption of debt, obligations, contracts, employees and restructuring. The structure of assets is an additional problem. At a time when the fleet is being renewed through a leasing model, the aircraft are not real assets of Croatia Airlines in the traditional sense. What remains as tangible value is far more limited, primarily land and technical infrastructure, including hangars at Zagreb Airport.
This leads to an uncomfortable but legitimate question, why would a potential strategic investor rescue Croatia Airlines as an existing company if it can wait for further weakening or even the complete collapse of the business model? In such a scenario, the same investor could, at least theoretically, take over part of the market space without assuming historical debt, employment relationships, internal structures and the political burden that comes with a national carrier. If the aircraft are leased, they can in any case be returned to the leasing companies, while a new carrier, especially one that already has its own fleet, could open a base in Zagreb or another Croatian air hub without needing to buy the entire company. In other words, what Croatia Airlines has today, market positions, slots, operational experience, technical capabilities and a national brand, may have value, but the question is whether that value outweighs the burden a new owner would have to assume.
In addition, it is necessary to ask who within the European Union would currently have both the willingness and the interest to undertake such a move. Due to ownership and control rules in European air transport, any potential buyer seeking to take over a controlling stake would have to be from the EU, or at least structured in such a way as to satisfy European rules on effective control and majority ownership. Major European airline groups already have their own networks, as well as their own problems with fleets, capacity, costs and labour. For them, Croatia Airlines could be interesting only if it brought a clear strategic benefit, such as control over a certain market, feeder traffic to larger hubs or a stronger presence in the region. But given the current losses, limited asset base, dependence on state support and expensive fleet transition, it is questionable whether such interest would be strong enough to justify taking over the company as a whole.
This is precisely why the state’s debt-to-equity conversion does not solve the fundamental problem, but merely postpones it. It can stabilise the balance sheet in the short term and send a political message that the state stands behind Croatia Airlines, but it does not answer the key question, is there a sustainable business model? If the goal is to preserve the national carrier, how much will that cost in the long run? If the goal is preparation for a sale, why would a potential buyer take over a company that generates heavy losses instead of entering the Croatian market without the burden of its past?
In conclusion, Croatia Airlines’ financial reports for 2025 and the first quarter of 2026 leave no room for cosmetic interpretation. The company is carrying more passengers, but generating ever greater losses. Revenue is rising, but costs are rising faster. The new fleet is supposed to form the basis of future efficiency, but for now it is producing strong financial pressure. At the same time, the state continues to increase its ownership stake by converting debt into capital, formally improving the balance sheet while failing to address the central question, whether Croatia Airlines can operate without continuous state support.
The strongest message from the entire comparison is the fact that the loss from just the first quarter of 2026 has already come close to the loss recorded for the whole of 2025. When the recent conversion of €43 million in state claims into equity is added to this, the financial picture becomes even more serious. For a national carrier in the middle of a major investment cycle, this is not merely a poor result, but a warning that the cost of Croatia Airlines’ business model is once again being shifted, directly or indirectly, onto the state and taxpayers.
