November 12, 2018 - In August 2014, Croatia became the first country in modern European aviation history to operate a scheduled seaplanes service, as European Coastal Airlines touched down on the Adriatic before taxiing into the harbour in Jelsa on the island of Hvar, a short 15-minute flight from Resnik near Split Airport. The new service was short-lived, however, and the ECA planes were grounded two years later, and the company is now in pre-bankruptcy proceedings, as well as in a lawsuit with the Croatian Civil Aviation Authority.
In the first of a series of in-depth interviews looking at the airline industry in Croatia today, TCN talked to leading aviation industry intelligence specialists, ch-aviation from Switzerland on what went wrong with ECA and whether or not seaplanes will fly again in Croatia. We are very grateful to ch-avaition's Chief Commercial Officer and co-founder, Max Oldorf, for his thoughts on the subject, after we met in Zagreb recently.
1. The European Coastal Airlines seaplane project was a great addition to tourism in Croatia. Why did it fail?
In my opinion, there is a simple answer to this, because from my outside viewpoint it was not run like a serious airline but more like a pilot’s hobby project (the CEO has had a long career as a pilot). I could not see any economic viability behind it right from the beginning.
How someone can invest in something like this is beyond my imagination. but to be honest that happens a lot in aviation. There are plenty of airlines that exist for just one or two years and in the end, all they have achieved is to burn a lot of money with very little outcome. In fact, there is about two or three of those each year in Europe alone.
To come back to ECA, in my eyes their biggest mistake was that they wanted to be everything at once. Cheap, comfortable, to serve every little village etc. Then there was a growing unreliability with them that damaged their brand as well. In the end it was another picture perfect example of how not to run an airline.
A bad business model you can try to fix but if you start to cancel flights and leave angry stranded passengers behind that usually is a point of no return. I once had to cancel a hotel in Pula myself because ECA cancelled my flight 24 hours before departure, and when I called the reception and told them I would not be coming because ECA cancelled the flight, they were very understanding and told me it had happened a lot recently. Cancelled flights create such a widespread, bad reputation that is at some point not controllable anymore.
It also probably did not help that when the media started to cover the many cancellations ECA started to blame all other stakeholders, regulatory boards, etc. instead of acknowledging the problems and trying to fix them. If I have learned one thing in my airline career then it is that you do not publicly criticize the regulatory boards, governments etc. You can have your disputes with them but dragging them into public has never helped the situation.
In addition to this, I also think they chose the wrong aircraft type from the start. Without knowing how much demand there is they opted for the largest commercial seaplane available - the Twin Otter. Which is an expensive plane to acquire and to maintain. But due to its two engines, it is also very expensive to operate. I think if they had started with a Cessna Caravan on floats, the money would have lasted a little longer (but they would have also gone bust with the Cessna).
2. Fourteen years of bureaucracy to get it started. What are your views on that? Are things really so hard in Croatia?
I find that story hard to believe. Sure there is bureaucracy in Croatia, but certainly not to such an extent. There were other airlines before ECA like Limitless etc. that got their AOC rather quickly, so I think it is a myth that those 13 years are completely related to the bureaucracy. Maybe two or three. The others were probably wasted by finding investors, locations for the seaports, going for the AOC drive etc. Maybe it took them 13 years to realize their dream, but 13 years alone to bureaucracy I would call that an urban myth. It also shows a bit that ECA was always a Dreamers project and not really for the business itself. Because no serious investor would wait 13 years for something like this. You can invest the money somewhere else in the meantime and have a much bigger return on investment.
3. There have been various rumours of seaplane companies coming into the market, but nothing so far. What are your thoughts on the viability of a seaplane operation in Croatia, and what should be the main strategy?
I am rather skeptical that a large seaplane operation can work in Croatia. For two reasons. Reason one is the seasonality. The season is how long? May until the end of September? That’s around 5-6 months where you can earn money. But you have to cover 12 months of expenses which you can’t do in Croatia. You would need to have a counterpart on the other side of the world where you could place the aircraft in winter and make money and then bring them to Croatia in the summer.
Reason 2, let's face it. Seaplanes are really expensive. They operate in a salt water environment so corrosion is your constant worry, and maintenance costs on these birds are really high. So what ECA did could not work in the first place because your airfares have to be really high (which they weren’t) and that will prevent most of the locals from booking the seaplane (because it is too expensive for them).
So the only guys who can afford your tickets will be the tourists and yes, you will get a few of them I have no doubt, but as mentioned in reason 1 they are not in Croatia all year round, and in low season the normal people will not fly with you. Unless the government will subsidize those tickets which they won’t. So to sum it up, seaplanes in Croatia might work if you find a good strategy on how to cope with the seasonality and if you find enough people with the buying force to actually get on those flights.
Seaplanes are nothing for a Low Cost / Low Fare operation and are therefore totally unviable for local commuters. To give you an example of what I mean. A ticket for a viable seaplane flight should probably not start below EUR 150.00 oneway and should probably cost an average of EUR 250.00 per flight.
4. The original concept was to connect all the inhabited islands, which was certainly ambitious. Which, in your opinion, should be the main seaplane hubs in Croatia for a successful business?
I already ruled out the idea of connecting all inhabited islands. That will never work. What might work is if you are able to place your seaplane in an area with a lot of tourists that have the buying force for an adventure like this. To be mentioned here are the Maldives where you have tourists all year round, Dubai. But even in Dubai the Seaplane operation there is rather small. So the preferable hub in Croatia (I would rather start with a base first instead of building a hub immediately) would be the city with the most tourists with a buying power over a certain threshold.
For example, in Dubrovnik, a seaplane could serve all those rich tourists that find the city too crowded and are willing to spend more to have a relaxed adventure to see the city from the Air. With all the cruise ships coming to Dubrovnik you could sell the seaplane adventure also together with the cruise ship companies so tourists could buy the seaplane adventure on board of the ship. Those packages you can sell for a much higher amount than just a regular ticket. But that does not solve your seasonality issue. So unless you find another region in the world where you can place the aircraft in the winter, you will have a problem.
5. Will we see seaplanes again in Croatia in your opinion?
Probably at some point yes, but the seaplane will mainly fly tourists. It will certainly not serve the local people that want to commute quickly between the islands.
6. ECA was grounded in August 2016 after an investigation by leading news portal Index.hr. ECA maintains planes were safe and has various expert reports which concur. What is your opinion on the safety issue with ECA's grounded seaplanes?
I can not really say much about it because both sides are blaming each other and so far we have not seen any public documents as it is all part of the ongoing lawsuit if I am not mistaken. What I can say is that as an airline manager, all I care about is that the aircraft is maintained to a level that allows a safe and more important, reliable operation. Unreliable aircraft lead to cancellations and therefore huge costs. That’s all you care about. So to be honest when airline managers say they care for the safety they more mean for their money.
Because unsafe airplanes are grounded more often and therefore cost more money. So every good airline manager tries to mitigate that risk exactly for those reasons, to avoid downtimes that in a worst-case scenario can lead to a grounding like this one. If there was really a maintenance issue or if someone screwed up along the way, that is something someone else has to decide. All I know is that good management avoids getting into such situations at all costs.
Max Oldorf is the Chief Commercial Officer and Co-Founder of ch-aviation. Before he joined ch-aviation he was named the world’s youngest airline CFO in 2011 while working for an Airline in Austria.
Founded in 1998 as an airline information service provider in Switzerland, today ch-aviation operates one of the largest and most comprehensive B2B databases in the area of commercial aviation. More than 500 customers, including heavyweights such as the largest aircraft lessor in the world, AerCap, aircraft manufacturers like Airbus and Embraer as well as local Croatian companies such as Trade Air, rely on the expertise of the Swiss SME. In addition to providing fleet data, ch-aviation also provides addresses of airlines and worldwide flight schedule data (in cooperation with OAG). ch-aviation also has a subsidiary in Zagreb, Croatia.
To learn more about ch-aviation, click here.
