We had an opportunity to do a Q&A with Mr. Jasmin Bajic, CEO of Croatia Airlines.
- Does Croatian Airlines agree that air travel recovery starts with regional flying?
Yes. We believe that travel will start on a local basis, domestic first, then within Region and community like the European Union. So regional flying will be the first to pick up but due to lower demand, smaller capacity will be used. The reason for that is the expected customer’s behavior. While corporate demand will depend on business activities, at the leisure market people will still feel fear of leaving their homes and they will prefer shorter flights, not to be far from home.
- Regional flights are typically connectors – from small communities to a hub. So, it is important when restarting air travel operations; talk to us, from a perspective of rebuilding connectivity that has taken many years to build, how Croatian Airlines fulfills its role.
Besides connecting their communities to a hub, we should never disregard the importance of regional carriers in Europe in supporting local businesses providing direct links within the community, or providing a direct link from one small community to the other. This is an essential role of a regional carrier, being a part of traffic infrastructure where the local small or medium enterprises may do business and connect with their counterparts across the country, region, or the EU. Croatia Airlines is a regional carrier with the prime purpose to connect Croatian people with Europe and the rest of the world through major European hubs and with connections to our Star Alliance partner’s flights primarily. We will continue to connect to major European hubs and as this is our strategy and will not change, but we will also provide connections for Croatian people to fly within the country, we will continue to provide direct links for Croatian touristic destinations from around Europe. We expect also that the choice of further destination will be upgraded at a certain pace, depending on demand and local regulations but certainly within Europe first and we will adapt to this, following demand. We believe that hub and spoke system will survive, no one can predict the time when everything goes back to 2019 figures but we believe it will come back. Croatia Airlines is a strong Regional operator with a clear goal and also being well connected with many other airline partners through its interline and codeshare agreements and part of the best Alliance in the world – Star Alliance
- In terms of the market overall, how does Croatian Airlines view competition from other airlines that may be larger and better funded? Are they perhaps constrained by larger aircraft in the markets it serves?
All airlines have problems on a larger or smaller scale. Airlines that were in good shape and positive in liquidity before the crisis have an advantage. More and more we see the importance of national carriers and after this crisis, we can see that governments really realize that and support airlines. This refers also to Croatia Airlines as it has a strategic role, which was shown also after the war back in the 90s and it will prove it now as well.
Comparison between the scale of airlines is difficult but we certainly see the advantage of a small airline with clear purpose and goals as Croatia Airlines. We agree that large airlines and those with large new orders especially on the long haul segment have more problems to solve. We are seeing predictions of reducing capacity, most large airlines are announcing a reduction of their fleet, and postponing orders. Older fleet types will retire such as B767, A340. So maybe at least for a while, smaller is better. We certainly see the advantage of having regional aircraft and regional operations. We can see the advantage also in the fleet ownership, a good mix between owned and leased units.
- Talking about competition, what does Croatian Airlines view as its best attributes to survive through the pandemic and come out stronger?
Being a small airline may be the advantage to survive the global turmoil – we can be more flexible during this time, we can also be more spirited in grabbing any market opportunity. There is a downside as well – the lesser ability for any investment compared to the big airlines. We are considering a few scenarios for post-pandemic Croatia Airlines and the goal of every one of them is to position Croatia Airlines at new markets and to strengthen the position at current markets.
- Tourism is important to Croatia. Clearly 2020 will be a wipeout year. But looking forward, what can the airline do to manage through 2020, and what strategies are important to overcome these challenges?
Croatia Airlines operates in a market with extreme seasonality. The demand for destinations served by Croatia Airlines is mostly limited to a peak summer period and our exposure to seasonality is much higher than for most of the other airlines in Europe. Considering the current situation with COVID-19 pandemic, border-crossing regulations, and availability of touristic infrastructure in Croatia, we believe we will still carry tourists from June onwards. As an important part of the Croatian air traffic infrastructure, we will be eager to strongly support Croatian tourism by placing sufficient capacity where needed. Of course, those numbers will not be even similar to the last years.
To manage through 2020, cost-cutting will be of the highest importance. We did many moves on this, from the cost of the labour force to contracts with suppliers.
- From the limited view everyone has of a recovery, when does the airline’s management see the recovery start?
The pre-recovery has started and for real recovery, our industry will need two or three years. We are gradually adding more flights into the distribution systems and we see the positive market response. I would say that the main question is not when the recovery will start but how long will it take to recover. I and my management team are confident that we can reach our 2019 figures by the year 2022. Personally, I would not be surprised to see main Croatia Airlines figures reaching 2019 numbers by the end of 2021 but we all agree that the recovery will be a long-lasting process during which we may be exposed again to another wave of the virus spread. Having said that, I also want to emphasize that, besides “U” shape and “V” shape scenarios, we need to be prepared for other scenarios too. This applies to many airlines around us, many airlines will have to downsize for the undeterminable period of time.