The financial health of a flag carrier can often be an accurate barometer of its nation’s real-time fortunes. It would sadly appear that the problems bearing down upon Adria Airways are symptomatic of the wider economic malaise that’s showing no sign of being contained, let alone eradicated, throughout Slovenia’s economy.

For those ‘in the know’ it has been an open secret for some years that Adria has been on the market, desperately in need of a financial stimulus that the state can no longer provide. Continual bailouts from central government have previous kept the airline viable but no enterprise, large or small, can forever exist on handouts motivated by goodwill and sentiment. The well has been approached many times too often and finally, has been found to have run dry. As is often found in state-run institutions, the staffing-levels at Adria are rumoured to be bloated but here is the problem. Does an airline that wishes to grow retain or recruit staff as a precursor to growth or, only when certain targets have been met? A classic case of chicken and egg but as Adria has failed to grow and if anything, gone backwards, it would appear the management from the top down leaves a lot to be desired. As with many of the distressed businesses in Slovenia, for example airports, ski resorts and hotels, a distinct sense of mismanagement and weak or poorly executed business plans, many involving assets being sweated without an apposite level of inward investment, seem to be the common threads widely blamed by commentators as the main reasons for Slovenia’s financial chickens all coming home to roost at once. It seems that when one distressed business blinked first, many others followed suit. This can often be attributed to a knock on effect where one business, unable to meet its liabilities, even if only to one creditor, can have wider implications down the chain. If that one supplier goes unpaid by its main customer it will then struggle to pay its own, and so on and so forth. Companies who put their eggs in one basket can be wiped out in the blink of an eye should they lose a big contract. Ski resorts, airports and hotels are just as susceptible to such an outcome if their business-plans aren’t robust, varied and insulated to weather the storm should the tastes change of their main target demographic or, as is unarguably the case throughout Slovenia’s winter tourist season, there isn’t snow of sufficient depth to keep the tills ringing in the hotels, restaurants and cable-car stations.

It has been suggested that Adria Airways should have been marketed for sale as part of a package including Ljubljana’s airport, at Brnik. Having recently passed into the German hands of Fraport, Slovenia’s principle airport can surely look forward to a brighter future – there can hardly be more of a show of commitment to it than an investment in excess of €200 million. The question though inevitably posed is would Fraport, or any other overseas investor with the requisite means, have wanted an agreement where Adria came as a part of the deal? Investing in airlines can be greatly disproportionate to the negligible gain yielded, at least on a short to medium term basis. Consumer tastes invariably change, potentially leaving routes under capacity. Planes inevitably need to be maintained and eventually replaced, all at considerable expense. Acquiring an airport though gives the purchaser a greater scope to recoup its investment more quickly and with a greater certainty of doing so. A greater flexibility to attract additional airlines by offering advantageous landing charges, being open to more charter and freight traffic and maximising retail and dining space within the terminal building enables Fraport to diversify its methodology of making Brnik a moneymaker for its shareholders, something Adria could never do for it. An investment on the same scale it took to acquire Brnik would’ve put more planes bearing Adria’s famous livery in the air but the chances of financial returns on a par with what it can expect from it are absolutely zero, both in terms of bottom-line figures and the time taken to see a meaningful return on its investment. In short, Fraport knew exactly what they were doing when bidding for Brnik and NOT Adria.

Adria Airways continues to exist but for how long, other than on paper, is now a real cause for concern. The news that it is selling its planes on a sale and lease back agreement is shocking, even for a flag-carrier that is always going to be a correlative size to the country from where it is based. If it has a diminishing roster of assets, what does it then have to offer to prospective investors? With Slovenia being based at the crossroads between eastern and western Europe and as a unrealized hub to the emerging but potentially lucrative South Eastern European market, it has been entirely possible for Adria to be a disproportionately sized airline, should appropriate levels of business acumen and investment been forthcoming in the past from a visionary management structure. That time though, alas, has since passed. Other airlines will inevitable utilise the improving facilities at Brnik to access South Eastern Europe or eschew Slovenia completely, instead opting for the likes of Zagreb and Graz or even, Maribor. Now that Fraport are rumoured to be hiking Adria’s landing fees to unacceptable levels, the time is surely now right for Adria to acquire greater value for many of its passengers by operating some of its services out of Maribor’s airport, recently acquired by a trade-union backed Slovenian savings bank. It will take a boldness of vision and potentially a top-down overhaul of the management structure to save Adria, should it be deemed worthy of doing so. The much trumpeting of a code-share agreement with Air India will not mean very much if Adria doesn’t even own any of its own fleet.

Additional reporting on this issue can be found at: RTV Slovenia – Adria Airways