Croatia Airlines' privatisation is back on the agenda, helped by restructuring and return to profit

Croatia Airlines celebrated its 25th anniversary this summer, after reporting a return to profit in 2013 and a narrowing of losses in the seasonally weak first half of 2014. It also underwent a recapitalisation in 2013 and the Croatian government now appears to be ready to restart the on-off privatisation of the airline.

Potential acquirers will be encouraged by the improving profit trend, driven mainly by cuts in unit costs (CASK). However, Croatia Airlines still has one of the highest levels of CASK in Europe.

Moreover, the balance sheet may be out of intensive care after the recapitalisation, but it is in need of further strengthening, given that the airline has four Airbus A319s due for delivery in 2015 and is considering a further order of aircraft to fill the gap between its Airbus fleet and its Bombardier Q-400s.

In this first of two reports, we analyse Croatia Airlines' finances and its track record of unit revenue versus unit cost. This analysis will be followed by a second report looking at its network and market position.