Founded in 1994, Trade Air has become a well-known player within the European charter market. Currently the Croatian airline operates two Fokker 100 aircraft and has recently begun scheduled domestic services with a wet-leased Embraer 120.
Max Oldorf talked with Managing Director, Captain Marko Cvijin and Sanja Ples, Marketing and Sales Director about the current state of the charter market, future fleet renewal plans and their new scheduled services in Croatia.
Trade Air has been in the charter market since 1994. In your opinion, what have been the most significant changes in the market between then and now? Marko Cvijin: Well, we started off in 1994 as a cargo carrier for DHL. Then, in 2005, we entered the passenger market with the arrival of our first Fokker. Since then, the passenger charter market has changed dramatically. One period in particular, the Downturn in 2008, had an enormous impact on the industry and its effects are still being felt to this day. Overall, I would say we survived the downturn because we own our planes and are debt-free.
What are passenger charter market conditions like right now? Marko Cvijin:It is very different from 2005/6 when we started. In retrospect, that was a good time to have entered the market. In terms of current market conditions, the situation is improving and I think the worst is behind us.
Croatia joined the European Union (EU) in July 2013. Has anything changed for you since then? Marko Cvijin: Yes it has. Prior to joining the EU, we had to apply for traffic rights when operating regional charter flights. Some countries, such as Spain, Sweden and France, were particularly difficult to gain entry into because they protected their domestic carriers. However, since our entry into the EU, that red-tape has now been removed and we are now seeing a rise in charter inquiries. Seeing as we operate 99% of our flights outside Croatia, we consider ourselves to be global Croatian carrier.
You are a Fokker 100 operator and you yourself are a Fokker 100 pilot. What do you like about the type? Marko Cvijin: From a pilot´s perspective, the aircraft is very easy to fly. It can use short runways and has a very good range. From an operator’s perspective, well, maintenance costs could be lower and from a commercial perspective it lacks some 100 to 200 miles of range; range that we would like to have in order to perform flights from Moscow to Western Europe. Our biggest issues are maintenance costs even though we do most of the maintenance work (up to the C checks) by ourselves. In terms of fuel burn, it is not the most economical aircraft. But that’s okay – all in all it is a good aircraft.
If you had to replace your Fokker 100s, what aircraft would you choose as a replacement? Marko Cvijin: We would go for something like a Boeing 737 or an Airbus 320. The Embraer E-Jet is still too expensive and therefore its capital expenditure would be too high for our needs. All in all, we would not continue with another 100-seater aircraft.
Any plans to expand the fleet? Marko Cvijin: We are currently looking at bigger aircraft with both greater capacity and range – possibly an Airbus A320. We are still in the early stages where we are just looking at what the market has to offer. We have not yet made a decision.
Charter operators like yours face seasonal demand, expiring contracts and various other uncertainties. What measures do you take to keep your costs down? Marko Cvijin: Well our capital investment is relatively low so therefore, we aren’t burdened with heavy debts. In this business, one has to minimize one’s staff overheads while at the same time maintaining a flexible team capable of working under those circumstances. We’ve been able to achieve this by maintaining two types of staff: full-time employees and seasonal contract workers. Even though we don’t offer pay2fly contracts, finding good staff hasn’t proven difficult. In fact, all our cockpit crews are contract pilots from Spain, Italy etc.
In 2013, you had a wet-lease agreement with Ghana’s CiTylinK which collapsed resulting in you withdrawing your aircraft (an F100). Did you take any knocks as a result? Sanja Ples: Oh no, disappointments are part of this business. The main thing is to get good securities and deposits from the client. As a rule of thumb, you always have to evaluate any risk when entering a new agreement – with start-ups in particular. So to answer your question, other than a terminated contract, we did not incur any losses due to CiTylinK’s demise. We were able to recover all the funds we were owed.
You recently won a tender from the Croatian government to operate Osijek to Zagreb flights. Were there any other bidders? Sanja Ples: It´s actually two routes: Osijek – Zagreb and during the summer season, Rijeka-Split-Dubrovnik – Rijeka. While there were other interested parties, in the end, only ourselves and Croatia Airlines met the tender’s requirements and were eligible to operate the flights. We bid for five routes in total and won two of them.
Copyright: Trade Air
Have you encountered any difficulties entering the scheduled services market given that you have been a charter operator for the last 19 years? Sanja Ples: We have been lucky in that the government has supported us by deciding to reopen this route (Osijek – Zagreb) which, until now, has been inoperative for 26 years. However, it is still a completely new project to us and of course there are going to be some difficulties. For example, one of the requirements [of the tender] was that we use an aircraft with at least 30 seats. We therefore had to wet-lease an Embraer 120 aircraft. Also the new sales and distribution system proved very challenging to us.
Which sales channels do you mainly use to sell tickets on those routes? Sanja Ples: A proportion of the tickets will be sold through Croatia Airlines’ webpage while the rest will be sold through our own internet booking portal, once it is up and running. We plan to continue cooperating with Croatia Airlines so long as it draws in customers and benefits us financially.
As you mentioned, your flights are currently sold through Croatia Airlines’ site who also bid for the routes. Did Zagreb force them to sell your tickets? Sanja Ples: No. Given their business interest in selling our tickets, we moved to conclude a marketing and code-share agreement in order to start the service as soon as possible. In all, we have a very good relationship with them and they are very important for the development of the Croatian aviation market as a whole. In fact, they are like a big mother to all of us. They have the people and the experience and are willing to develop the market. However, as already mentioned, we do plan to start our own sales in the next couple of months.
The route is a Public Service Obligation (PSO) maintained by the Croatian government. How long will the contract run for and are there any plans to extend this PSO to other routes? Sanja Ples: At the moment, there are no plans to expand PSO routes in Croatia. The current contract is set to run until the end of the summer 2016.
Copyright: Trade Air
Looking to the future, where do you see Trade Air two years from now? Marko Cvijin: I see Trade Air as a small airline, and we intend to maintain the status-quo. Over the next two years, we would like to gradually roll out our fleet renewal program though how far we get hinges on many different variables. In general, we would like to remain small – we do not have any plans to grow the fleet above five or six aircraft. We have adopted a conservative approach to these types of investments and do not want them take us into the red. The fact that we do not have any outstanding bank loans is still one of our biggest advantages. As already mentioned, it was this that saved us during the crises of recent years.