- Wednesday, April 24, 2013 6:12 PM
Zagreb, 24 April 2013 (MIA) - Croatia is looking to sell a stake in troubled Croatia Airlines, joining the regional struggle to keep small and ailing carriers in the former Yugoslavia in the air.
Since being formed after Croatia gained independence in 1991, the almost entirely state-owned flag carrier has largely survived on government subsidies to keep it airborne in the face of competition from larger budget airlines.
But it will run into trouble from July 1 when Croatia joins the European Union, which bans subsidies on individual companies.
If no strategic partner is found, Croatia Airlines will have to finance some 50 percent of the cost of a restructuring plan already in place to sack 200 workers from a total of 1,100 and cancel some flights.
Even before the sale, Croatia needs to boost capital in an burdened by a debt of 1 billion kuna ($171.14 million).
"We will fight for CA to survive, but if you're following the regional markets, you have to know that all regional airlines are in a bad shape and are struggling to find strategic partners," Transport Minister Sinisa Hajdas Doncic told Nova TV television late on late Tuesday.
He said the government was already in preliminary talks with "potential strategic partners". No names have yet been floated by the media or sector analysts.
"If (the strategic partner) is from outside the European Union, the maximum stake we'd sell would be 49 percent. If it is from the EU, the stake can be up to 100 percent," he said.
The airline has fleet of 3 Airbus A-320 and 4 Airbus A-319 and 6 smaller Dash 8 planes. It flies inside Europe and is a member of Star Alliance with Germany's Lufthansa.
The restructuring has to be approved by Croatia's competition watchdog and is due to be completed by 2015.
Croatia's problems are mirrored across the region. Serbia, which kept the Yugoslav-era JAT, has been trying to sell the airline for years.
Last month, Belgrade said it was ready to take on 170 million euros of the carrier's debt, pay leases for six new aircraft from EADS's Airbus and secure severance payments for redundant workers.
JAT is seeking a strategic partnership with Etihad Airways from the United Arab Emirates.
Bosnia's indebted BH Airlines has been struggling after Turkish Airlines pulled out of a joint venture last year and handed its 49-percent stake back to the government.
BH Airlines was grounded in March after its accounts had been frozen over an outstanding bank debt but resumed flying after the government clinched a deal to repay the debt through the sale of the company's two aircraft.
However, technical problems grounded one, and the other is in Germany because of a lack of cash to bring it back to Bosnia.
The Bosniak-Croat federation government subsidises BH Airlines with 7 million Bosnian marka ($4.6 million) a year but that is not enough, Transport and Communications Minister Enver Bijedic said.
"It's difficult to maintain the airline, it's an expensive toy," Bijedic told Reuters by telephone on Wednesday. ba/18:11
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