Adria builds Balkan gateway

 - November 26, 2007, 1:11 PM

Adria Airways, the national airline of Slovenia, has overcome the trauma of Yugoslavia’s dissolution and has adapted to the new shape of the market. The company effected radical changes to its fleet, most notably with the addition of four 50-seat Canadair Regional Jets, and appears likely to board 900,000 passengers this year in primarily regional markets. Along with its neighbor, Croatia Airlines, it stands as one of the most dynamic airlines in the Balkans. Even better, it is making a profit.
With a surface of 7,821 sq mi, just over half that of the U.S. state of Connecticut, Slovenia is one of Europe’s smallest nations. Its area and barely two million population make its domestic sphere of operations limited. But with Italy to the west, Austria to the north, Croatia to the south and east and Hungary to the northeast, Adria Airways sees itself as a Euro-Mediterranean operator and has tailored its operations to western and southeastern Europe.

Founded in 1961, Adria Airways’ operations for its first 30 years centered mainly on charter flights to other parts of the federation of Yugoslavia and especially to Adriatic coast destinations. The situation changed just 10 years ago, when on June 25, 1991, Slovenia became the first independent Yugoslav country. The conflicts in the war-torn country made Adriatic charter destinations inaccessible because they now belonged to the separate nations of Croatia and Montenegro, forcing Adria Airways to operate exclusively in its own restricted national market.

As a result, Adria lost 90 percent of its business and faced either bankruptcy or liquidation by the Slovenian government. The carrier’s new strategy led to a fast but deep-seated reorganization of its management structure, massive downsizing and a reduction of its fleet of 13 aircraft comprising three DC-9-30s, five MD-80s, one MD-81, four MD-82s, two de Havilland Dash 7s and three A320s. It kept the three A320s but placed most of the other aircraft into wet lease, resulting in a positive cash flow in the 1994-95 financial year. Adria has since acquired four CRJ-200LRs, the most recent joining the fleet in April last year.

No longer dependent on charter operations (Adria’s scheduled service now accounts for 90 percent of its total business), the airline positions itself as a link between western and southeastern Europe. To this end it has established a mini-hub at Ljubljana-Brnik, where passengers arriving from its 13 European destinations (plus Tel Aviv) connect with the Balkan destinations of Tirana, Ohrid, Sarajevo, Split, Padgtornica, Pristina and Skopje. Adria complains that Ljubljana’s airport taxes, dating from the former regime, are far too high and have resulted in a loss of transfer traffic. Another difficulty involves an airport monopoly over handling and catering. A new law regulating the airport is expected this fall.

Adria’s business depends heavily on code-share partnerships with Germany’s Lufthansa and Air France, which account for 20 percent of its global income. The Adria-Air France code share involves six weekly flights between Ljubljana and Paris and its arrangement with Lufthansa involves six weekly flights between the Slovenian capital and Frankfurt and Munich, the German airline’s two hubs. The company estimates that 70 percent of its clients are business passengers. Adria’s growth plans center on further expansion in Europe and enhanced charter operations for Slovenians. For the time being, it does not consider long-haul operations a priority.