[COMMENT] Croatia Airlines and Aegean Airlines – why the Greek carrier is interested in a strategic partnership with the national airline

Representatives of the government of the Republic of Croatia recently revealed that negotiations would soon continue regarding Croatia Airlines entering into a strategic partnership. Let us remind you that before the corona crisis, the biggest interested party in this strategic partnership was Greek Aegean Airlines. All this is supported by public rumors of Aegean being a potential buyer of CTN.

But why is Aegean interested in a stake in Croatia Airlines and how could the two companies function in the event of entering into a partnership? The goal of this article is to briefly analyze the companies by individual segments and try to come to a conclusion “what if”. The article is written in the comment format and does not necessarily represent the opinion of the editors’ desk of the avioradar.hr portal.

The first fact that puts Aegean in a favorable position in the possible purchase of shares is that Aegean is an EU company, that is, it can acquire majority shares within CTN. Unlike the “non-EU” companies that can acquire maximum of 49% of shares. In addition, Croatia and Aegean are airlines that operate in extremely seasonal countries oriented towards tourism, where the majority of passenger traffic happens in the summer. Aegean has an advantage with the experience of managing an airline that operates successfully in those conditions.

As for the fleet, currently, Croatia Airlines and Aegean Airlines have identical fleets, consisting of the A320 and DHC 8-400 aircraft families. This would enable the exchange of aircraft and, if necessary, crews and technical personnel between carriers. However, it is known that Croatia Airlines is in the process of renewing its fleet. Although it has not been decided which type of aircraft will be the new “backbone” of Croatia Airlines fleet, it is almost certain that it will not be the A320 or the DHC 8-400. At the same time, this could mean that it is possible that Aegean or any potentially interested party, requested fleet change before the official acquisition.

For Aegean, this would mean that it is not crucial for them that CTN operates the same types of aircraft as the parent company, and that they are not interested in shared fleet and exchange of aircraft, crews, and technical personnel. The only thing that might interest them is that the cost of renewing the fleet is on the current owner.

What would happen to flight operations in case Aegean becomes Croatia Airlines’ strategic partner? Most likely nothing spectacular. Aegean and Croatia fly to a similar network of destinations and both carriers are members of the Star Alliance. It is expected that if Aegean, as a generally more successful carrier, would make corrections in the flight schedule, create a code-share for Aegean flights from Croatia to Greece or operate them with Croatia’s aircraft. More emphasis would probably be placed on Croatia Airlines’ seasonal destinations and that passengers (with the implemented corrections to the flight schedule) would fly via the Aegean hub in Athens (the upcoming implementation of the Schengen cross-border regime will benefit this). In addition, it is to be expected that there will be a certain expansion of destinations in the Croatia Airlines flight network, considering the increase in the number of aircraft and overall capacity.

In this case, it is somewhat disappointing that Aegean currently does not have any wide-body or other “long haul” aircraft, which at the moment eliminates the old wish of Croatia to start flying across the ocean. Even if Aegean moves in this direction, it is more likely that it will develop such traffic from its busier hub, Athens, which in the pre-pandemic year of 2019 counted over 25 million passengers. In the same year Zagreb achieved slightly less than 3.5 million passengers (Zagreb has a significantly weaker network of transoceanic flights compared to Athens, which is served by American Airlines, United Airlines, Delta Airlines, Air Canada, Air Transat and even Emirates on the Dubai-Athens-New York flight ).

We are of the opinion that the new strategic partner would probably keep the brand of Croatia Airlines, the “livery”, and the overall “brand awareness” of CTN. This is very likely, considering that Aegean is a Greek national name, and the average traveler when traveling to a country, first searches for flights of that country’s carrier.

What could be of additional interest to Aegean is the technical business sector of Croatia Airlines, being the only profitable segment of the carrier that performs lucrative business, and that has permanent foreign clients who bring regular business to that segment of the company. The new strategic partner would probably not “touch” the technical part of the company in the sense of moving the service, considering the fact that the technique of Croatia Airlines is the only MRO (Maintenance and Repair Organization) at Zagreb Airport.

What would be changed is most likely the administration. It is possible that the new majority owner would make cuts in the number of people and that only employees necessary for the functioning of the company would remain in Croatia Airlines (those who would carry out the decisions made in Athens). What would remain in Zagreb are services such as engineering, passenger service, crew organization, etc. The rest of the management would most likely be performed by the majority owner’s administration.

In addition to all of the above, it is likely that Aegean would unify the passenger service between the companies, which would certainly be good for Croatia, given that Aegean’s passenger service and in-flight service are better than those of Croatia Airlines.

In the end, it is certainly important to note that any potential strategic partner, including Aegean, knowingly enters into negotiations despite the fact that Croatia Airlines is not rich in terms of its assets. Croatia Airlines owns only the equipment (hangars and surrounding land), a certain number of Airbus planes that have not been sold under the “Sale and Lease Back” model (which will probably be scrapped by the time the strategic partner arrives) and slots on some European airports. Everything else (administrative building in Buzin, areas at the airports, DHC 8-400 fleet, and part of the Airbus fleet) is leased. In simpler terms, potential strategic partners are interested in the national carrier as such and its recognition, position, “know-how” techniques, etc., not the value of the company’s assets.

What is almost certain is that passengers (and almost certainly employees too) will feel the difference, hopefully for the better.

Odgovori