COVID-19 Pushes Small CEE Airlines to the Brink

Miracles needed

In Croatia, flag carrier Croatian Airlines is already receiving state aid but still racking up debt, Bozinovski told BIRN, having never truly recovered from a financially disastrous three years between 2008 and 2011.

In March, with COVID-19 taking hold in Europe, plans to privatise the airline were put on hold and Croatian Airlines asked the government for some 92.7 million euros in state aid, an “astonishing amount,” said Bozinovski.

The company says the money will cover this year’s expected losses and allow for the further development of its fleet.

Bozinovski said Croatian Airlines was still considered “a company of strategic importance for Croatia” but that turning it into a success story would be a “big miracle.”

Schonland said that the current climate may prove tempting for “anyone with the management skills and capital” to get their hands on major assets and at big discounts.

But politics may prove an obstacle.

“For example,” he said,“how would Croatia feel about Croatia Airlines being absorbed into Air Serbia?  You can imagine the political impact of this.”

In Turkey, COVID-19 looks certain to force a rethink at Turkish Airlines on an ambitious expansion strategy over the next four years that would have seen its fleet expand by more than 135 planes.

Like other industry players, Turkish Airlines will now have to rethink its fleet plan given the significant stress in the aviation market due to the pandemic, Moody’s Investors Service toldBIRN.

This may affect the airline’s strong presence in the Balkans, motivated as much by political and geostrategic interests as profits.

“Given the geographical proximity I think the company will continue to stay in the region, and retain its partnership with Air Albania driven by a political will,” saidArtem Yamschikov, Equity Research Analyst at Renaissance Capital in Moscow, told BIRN.

Like other global airlines, it will have to become leaner and focus on its most profitable routes.

“Like all airlines throttled by the virus, Turkish Airlines has to look to where its yield and revenue is greatest – and that’s not in the Balkans,” said London-based Ahmad.

Unlike Turkish Airlines, private low-cost carrier Pegasus may struggle more given it is unlikely to receive help from the state, the Yamschikovwarned.

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