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Adria Airways Expects to Break Even in 2013

Ljubljana, 04 April (STA) - Slovenian flag carrier Adria Airways expects to break even in 2013, the STA learned from sources close to the airline. The company, which required a recapitalisation in 2011, reportedly improved its revenue per seat in the second half of 2012 and plans to increase its operating income by 2% and reduce cost by EUR 9m in 2013.

The operating income is to go up above all due to an expected 5% increase in the number of passengers this year. The airline plans to focus on passengers from Russia, Germany and the US. The majority of Adria's passengers, some 65%, are business travellers.

The EUR 9m cost reduction is expected to be reached through attrition, among other things. Several people left Adria already in 2012, this year some 30 employees and outsourced students are to follow. The company currently employs 405 people.

Adria Airways will try to make the workforce reductions as soft as possible. Some people will be retired, while the young, who might have the wish to go work abroad for a while, have been given the opportunity to suspend their employment at Adria for two years.

According to information available to the STA, Adria Airways operations were above plans in the first two months of 2013. The winter season is usually quite modest, with Adria creating most of its revenue during the summer, the source said.

The positive projection is good news for the flag carrier that has been recapitalised several times by the state, most recently in 2011, when the government injected EUR 50m in fresh capital, while creditor banks converted EUR 19.7m worth of debt into equity.

The state now directly holds 69.86% in Adria Airways and the state-owned NLB bank has a 19.62% stake in the airline. Abanka Vipa holds 4.73%, while Hypo Alpe Adria Bank has a 1.80% stake and Unicredit banka Slovenije follows with 1.76%. The state-run PD restructuring fund holds 2.07%.

After the 2011 recapitalisation, the European Commission launched in November 2012 an inquiry to determine whether Slovenia violated the EU state-aid rules by providing a total of EUR 8.5m in capital injections to Adria Airways between 2007 and 2011.

Meanwhile, the state, PDP and banks are selling a combined 74.87% stake for the flag carrier. Recently, the daily Dnevnik reported that the sellers were already negotiating binding bids.

The paper said that German Intro Aviation was the most probable buyer. The company would however only be an intermediary, with German Air Berlin as end-buyer.

However, the STA learned that the report by Dnevnik was inaccurate. The sale - if it takes place - could be completed in three months, the STA also learned.

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