The government in Zagreb said it is extending 100 million kuna ($14.7 million/13.5 million euro) in state aid to Croatia Airlines [ZSE:CRAL], which is the first tranche of a pledged 250 million kuna capital injection aimed at helping the flag carrier stabilise its operations ahead of its planned recapitalisation.
The tranche will be paid out from the surplus envisaged in the 2019 budget, the government said in a statement.
The transport and infrastructure ministry will control how Croatia Airlines spends the money, the statement added.
Last week, the government in Zagreb decided to provide the airline with fresh capital needed to provide conditions for its recapitalisation.
Croatia Airlines will use the 250 million kuna to finance aircraft repair, to repay overdue debt to domestic suppliers, to settle credit liabilities and make necessary investments in the coming 12 months.
All further activities aimed at choosing the best possible recapitalisation method for the company will be carried out by the end of the year, with the aim of launching the recapitalisation process by June 1, 2020 at the latest, transport minister Oleg Butkovic said last week.
In February, the government decided to launch a procedure for selecting a strategic partner for Croatia Airlines. In April, it picked a consortium of Privredna Banka Zagreb and DVB Bank SE (part of Germany-based DZ BANK Group) to provide consultancy services for the planned recapitalisation and to help the company identify possible strategic partners.
Croatia Airlines’ net loss widened to 89.4 million kuna in the first six months of 2019, from 79.6 million kuna in the like period of 2018
The airline transported 961,000 passengers in the first six months of 2019, up 1.3% on the year.
The company’s shares last traded on the Zagreb bourse on Tuesday, closed up 44.6% at 48 kuna.
The government controls a stake of almost 99% in the airline.