Croatia’s Super Brand

As Croatia’s first airline, Croatia Airlines has achieved steady growth since its inaugural commercial flight in 1991. In its first year, it carried 140,000 passengers, and just three years later, it welcomed its millionth passenger, a significant milestone for a new airline. Last year alone, more than 1.9 million passengers boarded Croatia Airlines aircraft. Unique in the air transport industry, the airline has never recorded a decline in passenger traffic.

An IATA member since 1992, the airline, which connects Croatian cities to the most prominent European destinations, has achieved some industry firsts. One of the most noteworthy occurred in 1996 when it opened an office in Sarajevo, the capital of Bosnia and Herzegovina, becoming the first airline in the world to establish regular civil air traffic for this city after the war in that country. In 2006, it was the first carrier in the region to introduce and fully implement electronic ticketing. In its own right, Croatia Airlines can be viewed as a trendsetter.

Croatia Airlines President and Chief Executive Officer Krešimir Kučko

The airline, chosen as a Croatian super brand a number of times, has earned numerous awards in a variety of categories. Its introduction of IPTV service on MaxTV won it the Telsa Silver Egg Award in the e-innovation category. The airline also received the Best Buy Award after Croatian citizens rated it as the carrier offering the best value for the money in the Croatian market. Last year, the Skytrax World Airline Awards recognized Croatia Airlines as Europe’s fourth-best airline.

In a recent interview with Ascend, Croatia Airlines President and Chief Executive Officer Krešimir Kučko explains the factors at the heart of his airline’s success, as well as current and future strategic initiatives.

Question: Your airline has realized steady growth year after year even in recent years when many airlines were operating in the red, struggling to survive and, in some cases, closing their doors. To what do you contribute this type of long-term, continuous success?

Answer: The growth trend was achieved by continuously improving service on the ground and in the air ... researching the market and adapting services to the latest needs of our passengers. Furthermore, the strategic positioning of the company was attained when we joined the Star Alliance in 2004, which gave us the opportunity to develop the network carrier and destination business model while generating numerous customer benefits. As part of the Star Alliance, Croatia Airlines has become a regional leader in terms of number of passengers carried and total revenues. Last year was a record year based on number of passengers carried — a total of 1,951,501 passengers were transferred, which is a 4 percent rise compared to 2011.

Q: Your airline is undergoing some restructuring. Why was this necessary, and what is involved in the restructuring initiative?

A: Croatia Airlines is undergoing a company restructuring process to consolidate operations and maintain its competitiveness in the market. One of the main objectives of the restructuring is to increase capital as well as refinance company debt and improve business operations. To continue successful operations, the airline must make significant changes to its current business model, which means repositioning in terms of strategy and market; three fundamental profit centers (network, seasonal and charter flights); and airplane maintenance for third parties.

A key segment of the restructuring was the recapitalization of Croatia Airlines, which the majority owner, the Government of the Republic of Croatia, carried out at the end of 2012. This established the financial preconditions for restructuring. At the same time, the company prepared for long-term sustainable business operations in accordance with European regulations and practices. In brief, we were given a clean start.

Q: How will the restructuring initiative improve your airline and your customers’ travel experience?

An Industry First In Sarajevo

Croatia Airlines has reached many milestones and achieved several industry firsts. In 1996, it opened an office in Sarajevo, becoming the first carrier in the world to set up regular commercial air transport services for this city since the war in this country.

A: Our expectations are primarily directed at increasing productivity and competitive abilities. We are striving to make our company solvent — to create conditions for starting investment cycles, that is, to ensure positive business trends and thereby the existence of the company. Croatia Airlines is recognized in the European airline industry for safe flying, accuracy, staff professionalism and high-quality services. As part of restructuring, we will provide passengers with an even better product. Our business operations directly and significantly affect the economic situation in our country. This is not only an additional incentive for us, but also an obligation to continue to produce quality results and advance the company’s business operations.

Q: How has your airline’s membership in the Star Alliance and its codeshare relationships with several carriers such as Austrian Airlines, Lufthansa, TAP Portugal, Swiss International Air Lines and US Airways enabled you to grow and provide better service to your customers?

A: As part of our codeshare relationships, especially with Star Alliance members, we offer passengers services of recognized quality and standards. Each of our passengers is also a Star Alliance passenger, and they receive the numerous benefits of a global product, such as:

  • An extensive selection of destinations throughout the world;
  • Joint Star Alliance airport terminals;
  • Online flight registration, priority check-in and through check-in services;
  • Air miles on any Star Alliance member’s flights.

The company thereby establishes a presence in markets where it does not fly directly. These partnerships increase our competitiveness, build our international reputation, generate additional publicity, achieve savings related to operating costs and utilize our global expertise as well as a joint IT system.

Q: Croatia is joining the European Union this year. What does this mean for your airline?

A: With Croatia’s accession to the European Union, we will receive the status of “Community Carrier,” that is, the airline will be registered with the European community of countries. This will open new flight opportunities for us within the European Union and give us the freedom to fly from any country in the European Union to Bosnia and Herzegovina, Kosovo, Macedonia, Serbia and Albania.

At the same time, all certificates that we possess relate to the operative arrangements connected to the use of aircraft, equipment and licensed staff with subjects in E.U. member states. We expect an increase in the number of passengers due to increased air traffic while competitive pressure should remain steady. The company has already been operating a more competitive environment since 2006 when the European Union-Croatia open-sky policy went into effect and air traffic was fully liberalized.

Q: Naturally, safety is a priority for your airline. What steps do you take to ensure the safety of your customers and employees? How does the airline’s level of safety training set it apart from competitors?

A: The company complies with specific international aviation safety regulations and standards that apply in the European Union. We continuously invest in the training of flight, cabin, ground and technical staff, and we carefully maintain the professionalism of other staff. Furthermore, we strive to provide a superior level of aircraft maintenance. Our safety criteria are top-notch in all segments of business operations. Since 2001, our technical center in Zagreb has been certified to perform base and line maintenance for other carriers’ aircraft. This means we are also responsible for the passenger safety for Lufthansa, Thomas Cook and numerous other airlines.

Q: Among the many awards your airline has received is an award in the e-innovation category. What has your airline achieved in terms of e-commerce? What trends can be traced back to your airline in your region?

A: With the introduction of our FlyOnLine service in 2002, we became the first airline in the region to enable passengers to book their tickets online. Soon after, passengers also had the option of paying online. The simple process of flight registration via a home or office personal computer enabled us to introduce Web check-in several years ago, followed by the sale of electronic tickets through the ATM network of our partner bank. In 2009, our first mobile services, or mService, came to life, including free SMS and SMS PNR information, followed by the first interactive IPTV service at the end of 2010. Everything has been set up in accordance with the highest security standards in e-commerce.

Q: In today’s digital world, a large percentage of air travelers have access to information via smartphones, tablets, etc. How have you leveraged new technology, and what changes have you implemented to better serve your customers from a digital perspective?

Aircraft Naming And Baptizing

Croatia Airlines names its aircraft after Croatian cities and the region as a way to promote the country even before passengers reach their Croatian destinations. In addition, since the purchase of its first aircraft in 1992, the airline has made it a tradition to bless and baptize every aircraft, wishing the aircraft many successful departures and arrivals.

A: As of 2011, passengers have at their disposal an iPhone application, which was adapted last year for use on iPad devices as well. At the same time, we introduced a mobile application for a wide spectrum of mobile devices running on Android OS. In this manner, we are continuing our application of the latest technologies and offering passengers simple, fast, effective and location-autonomous access to the latest travel information. Moreover, it is important to emphasize our interactive website, which enables the simple planning and organization of travel itineraries, as well as the purchase of flight tickets.

Q: Croatia is highly dependent on travel and tourism (approximately 15 to 20 percent of the country’s gross domestic product), especially during the summer. In what ways does your airline contribute to the country’s economy?

A: More than a third of all tourists traveling by air to Croatia annually arrive on our aircraft. Last year, we were the seventh largest exporter in the Republic of Croatia. As opposed to foreign airlines, which usually disappear after the tourist season, our airline connects all Croatian cities throughout the entire year, providing the country with continuous airline service. In addition, we have played a significant role in the development of other areas of Croatia’s civil aviation, including airports, air traffic control facilities, suppliers, etc.

Q: For a number of years, your airline’s pricing and revenue management functions have been handled manually. What kind of process changes do you believe will be necessary as your company implements Sabre® AirVision™ Revenue Manager and Sabre® AirVision™ Fares Manager? What results do you expect from these solutions?

A: Croatia Airlines is implementing these systems with a single most important goal in mind — improving revenues and contributing to our bottom line. As we move from manual control and processing to the automated systems, we expect significant process changes. For Croatia Airlines, this will be a giant leap forward in the way we handle our daily work and manage revenue, which will result in considerable improvements in work efficiency and revenue generation.

Automated forecasting and optimization in Revenue Manager brings huge benefits in terms of more accurate predictions and establishment of appropriate inventory allocation levels. Furthermore, our revenue management specialists will be able to focus on flights with the greatest revenue potentials rather than daily routine tasks.

Our aim in implementing Fares Manager is the enhancement of pricing efficiency and time to market. With the automated system support, our pricing specialists will be able to react quickly to competitor changes as well as efficiently construct and manage complex strategic and proactive fare changes. Croatia Airlines operates in an extremely competitive environment, and increasing productivity in fare construction and distribution coupled with shorter time to market is essential to maintaining our competitiveness.

Another area where we consider Sabre Airline Solutions® a key partner in support of our processes is consulting and operations research. Having a team of experienced experts to help set up the system and implement advanced processes, as well as identify appropriate key performance indicators to reach our revenue goals, will be one of the most valuable benefits to arise from this project.

Zagreb-based Technical Center

Since 2001, Croatia Airlines has performed base and line maintenance for other airlines, including Lufthansa, Thomas Cook and many others, out if its Zagreb-based technical center. The airline’s high level of safety standards applies not only to its aircraft but to that of the other companies it serves.

Q: Your aircraft are “blessed” and “baptized.” What does this mean, and why is this important to your airline and relevant to your customers?

A: Blessing and baptizing aircraft is part of a tradition that began with the purchase of our first aircraft in 1992. It is a symbolic act by which, in accordance with Christian tradition in this region, we wish the aircraft many successful take-offs and landings. In addition to airplanes, in Croatia, boats and ships are also baptized. Of course, the technical maintenance of our aircraft, which is conducted in accordance with the highest international standards and procedures, is most important for the safety of our flights and passengers.

Q: As part of the aircraft blessing and baptizing ritual, you have named all your aircraft after geographic locations, such as Slavonija, Dalmacija and Lika. What is the significance behind naming your aircraft?

A: Many international passengers traveling with Croatia Airlines are arriving in Croatia for the first time, and our airplanes are their first introduction to our country. By naming planes after Croatian cities and the region, we are further promoting our country, even prior to the physical arrival of passengers to Croatian destinations. Our Airbus aircraft bear the names of Croatian cities, while Q400 aircraft are named for Croatian regions. In addition, our airplanes display symbols of Croatia’s national identity, which helps emphasize our role as the national airline.

To further promote specific features of Croatia’s regions, we have introduced the “Tastes of Croatia,” which presents a variety of Croatian cuisine to passengers through our meal and drink services. We are modifying this concept as necessary to meet our passengers’ needs and the company’s business objectives.

These efforts contribute to the development of our country’s tourism industry.

Q: What plans do you have for starting long-haul operations?

A: In the future, it is my desire to include intercontinental flights in our network. I would like to see the long-haul model move from the dream phase to the planning phase, and then to the implementation phase. At the moment, however, we are focused on the development of our network of European destinations.

Q: What is the future strategy of Croatia Airlines? Where do you see your airline in five years?

A: In the coming years, I envisage the company as an important factor in the development of our country’s position within the European Union, especially in the areas of tourism and economic development. We believe new business opportunities will become available to us upon Croatia’s accession to the European Union. Additionally, we will strengthen and develop our network airline business model and contribute even more to the quality of Croatian and European air transport.