Andrew Doyle/ZAGREB

Croatia Airlines is finalising a strategic tie-up with a major European flag carrier as the next stage in its plans to establish Zagreb as a regional hub for destinations in the former Yugoslavia.

The move comes hard on the heels of the acquisition by the Croatian Government of a majority stake in the national carrier in return for guaranteeing loans used to buy six Airbus narrowbodies.

Croatia Airlines president and chief executive Ivan Misetic says that the carrier had "-come to a point where fresh capital could not be gained in Croatia. The only option was to find an institutional [government] investor". Consequently, the government stepped in to shore up the company's financial position by increasing its stake from just under one-third to 69%. The rest of the shares are held by small private investors.

Misetic says the airline's growth plans hinge on developing the Zagreb hub, serving fewer destinations, but with higher frequency, and building up tourist traffic from northern Europe into the coastal cities of Dubrovnik and Split. He declines to name the carrier with which Croatia Airlines is in link-up talks, saying only that they are close to agreement.

The airline saw passenger numbers increase by 8% during 1998, to 920,000, and this figure is expected to exceed 1 million this year. Turnover last year is expected to come in at $112 million, generating a "small" net profit, compared with $106 million in 1997, when the airline posted a loss.

The carrier operates two Airbus A319s, one A320 (a used aircraft acquired last August), three Boeing 737-200s and three ATR 42s. Two new aircraft - an A319 and an A320 - will join the fleet in June, followed by two more A319s, in May and June 2000, by which time the 737s will have been phased out. Options are held on an additional six A319s, for delivery at the rate of two a year between 2001 and 2003.

Misetic says that Croatia Airlines has held talks with regional jet manufacturers, but has no immediate plans to replace the ATR 42s. "We are pretty pleased with the performance of these aircraft, but we are looking for a potential swap in the future," he says. While the airline has had "some contacts with British Aerospace" about the Avro RJ family, another possibility is to swap the existing turboprops for the -500, the upgraded version of the ATR 42, says Misetic.

He adds that the company has approached other operators in the region with a view to pooling maintenance support for the ATRs, but has made little progress.The airline has decided, meanwhile, not to acquire long haul aircraft. "We are trying to substitute long haul services in favour of co-operation with other airlines," says Misetic.

Source: Flight International