Croatia Airlines: Zagreb hub strength, but growing LCC competition & high CASK a challenge

Reports that Croatia Airlines' long running search for a strategic partner may be returning to the top of its agenda once more throw the spotlight on the Zagreb-based flag carrier. Croatia has enjoyed healthy growth in its aviation market in recent years, driven by strong inbound tourist traffic. However, Croatia Airlines' growth has not kept pace. It is still the biggest airline in this market, but its seat share has halved since 2008.

Codeshare relationships with fellow Star Alliance members help to shore up Croatia Airlines' position at Zagreb, where it is still the biggest airline. However, LCC competition dominates its other two international bases in Split and Dubrovnik. Competition in the very seasonal Croatia market is particularly fierce in the summer months.

Croatia Airlines has managed to remain in profit since 2013, when it recovering from a previous four year period of loss-making, but with wafer thin margins. A key challenge for Croatia Airlines is that it has a high level of unit cost, even by comparison with full service airlines, and with a very large gap to LCC unit cost levels.