Business News

Adria Restructuring Plan to Start With Cost Cutting

Ljubljana, 12 August (STA) - The daily Delo has acquired an unofficial draft of the restructuring plan for flag carrier Adria Airways, according to which the troubled company will focus on cost cutting first, followed by stabilisation and growth through facilitation of sales.

An expansion strategy advocated until the beginning of 2011 will now be replaced with a contraction strategy, and the consequences of all bad decisions from the past will be felt primarily by the staff, Delo says on Friday.

The company plans to abandon certain routes, which have still not been specified, and to cut its workforce and reduce wages. Exact figures should be known in the second half of September.

According to the plan, Adria Airways is to operate in the black in 2013, which would be followed by stabilisation (in cooperation with other regional airlines) and growth. The number of flights would be then increased and the company privatised.

The business daily Finance meanwhile warned that the ongoing political crisis could present a disaster for Adria Airways. If MPs fail to endorse the supplementary budget for 2011 in September, the company will probably be left without the planned EUR 50m state bail out.

The government confirmed the aid for the flag carrier in June, under which the government would provide EUR 49.5m, and the remaining EUR 0.5m would come from the state-owned PDP restructuring fund, the majority owner of Adria.

According to Delo, the plan also says that only four out of 31 regular routes are profitable (Brussels, Frankfurt, Zurich and Munich), and that almost all charter flights bring losses.

The future of Adria will be known at the end of September, the deadline for the government bailout plan and the conversion of the EUR 38.4m debt owed to banks into ownership stakes, the paper adds.

According to Delo, August 31 is also one of the key dates, as Adria Airways shareholders will decide on the proposal to reduce the share capital and the envisaged restructuring.

The creditors are expected to decide by then whether they agree with the conversion of almost half of their claims into ownership stakes.

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