Why the Seaplane Problems are Important for Foreign Investors in Croatia

By 21 October 2016

Following the dislosure on October 18, 2016 that four aviation experts found no justification for the grounding of the seaplanes of European Coastal Airlines, some important points to be considered by foreign investors considering investing in Croatia. 

A lot has been written about European Coastal Airlines and the grounding of its fleet for three weeks in the middle of August. Much of what has been written, in the form of Internet comments, has only muddied the waters in terms of the true picture, as well as inflaming opinion. What has been clearly lacking in the public domain is sober expert opinion and a proper investigation of the facts. 

As an inslander, the prospect of seaplanes to Hvar was particularly exciting. Check out the winter Jadrolinija options from Jelsa. A daily catamaran at 06:00 (90 mins), or the car ferry from Stari Grad (two hours) at 05:30, 11:30 and 17:30, none of which are conducive to a sensible day's business in Split. The arrival of a seaplane leaving at 08:40 arriving in downtown Split 15 minutes later was like a gift from on high. But as much as I enjoyed the seaplane service, this article is not about a defence of, or a glorification of European Coastal Airlines, for they too are not without blame, and the insistence that the 16 year-old story has been solely delayed by Croatian bureaucracy is only part of the story, albeit a very significant one. 

When Index published their initial exclusive about the dangers of the planes, which prompted the Croatian Civil Aviation Authority investigation, I was as shocked as anyone. Taking all emotion out of the topic, the article was something quite rare in modern Croatian journalism - a thoroughly well-researched investigative piece which had apparently taken six weeks and conversations with more than 20 relavent parties. After the initial shock, my second reaction was to send a message of congratulation to the portal owner on a very well researched piece. And it was, despite the conclusions potentially threatening my new-found commuting heaven. 

Events that followed vindicated Index's approach. The CCAA jumped into action, announcing an unscheduled two-day inspection (two became three), and then on August 12, grounded the entire fleet. The findings of the journalists had been officially vindicated by the professional authority responsible, and while that would mean the company losing more than 2 million euro as a result of the grounding, with more than 5,000 cancelled tickets for the last three weeks of August alone, plane safety was obviously paramount, and the grounding appeared justified with the official report highlighting nine Level 1 findings and 3 Level 2, the former a category regarding immediate plane safety threats, the latter more often related to missing documentation. Nine Level 1 findings in a fleet of four planes! My two initial questions were how was this possible with an airline in the EU, and much more importantly, how had the relavent body, the CCAA completely missed this very dangerous situation all this time, and only burst into action following the efforts of a news portal?

And soon, a third question emerged. If 9 of the 12 findings were Level 1, which would necessitate an immediate grounding (of the individual airraft, not the fleet), why were the planes not grounded until that third day? And if no Level 1 findings were noted in the first two days (how could they be if the planes were still permitted to fly), what was so serious in the non-findings thus far to merit further inspection, which then miraculously found nine imminent safety issues which had been missed in the first two days. 

Something did not add up. But I am no aviation expert, and I left it to others with more knowledge, connections and expertise. A few weeks later, ECA announced that they were ending their 2016 schedule and would reappear in 2017. I contacted CEO Klaus Dieter Martin, requesting an interview. While much had been written in the media, there had been relatively little in the public domain from the seaplane company, which had left some passengers extremely frustrated, and issues such as refunds, the plan next year and what actually happened were ones I wanted to get to the bottom of for our readers. You can read the interview here.

I was expecting a meeting of self-justification, blaming Croatian bureaucracy and wild accusation from Captain Martin, and while there was certainly some of that, I was a lot more surprised by the neatly arranged thick documents which greeted by in the cafe next to Split bus station, where I had just arrived and had an hour before my ferry home. The hour passed quickly, and any hope of a sleep to Stari Grad after a long week exploring the delights of rural tourism in continental Croatia soon disappeared, and I read through detailed reports of four aviation experts, including two court certified experts for aviation matters, who Martin had engaged to do a report on the findings. And they all came to the same conclusion...

Not one of the 12 findings was in their opinion was Level 1. Or, in other words...

The planes should not have been grounded on the basis of the results of the inspection. 

Paid reports by ECA, I hear you cry. How impartial do you expect them to be, and how did you expect any different conclusions to the ones that the client wanted? A question which leads to the first topic of interest to foreign investors - can we trust the experts in Croatia to do their job impartially?

When I bought a house in the UK, I paid for a survey, and on the basis of that expert report, I negotiated a cheaper price. The seller did not dispute the findings of the report, although he may have been unhappy with them, because they were done by an independent expert. Is that situation different in Croatia? Is it really the case that a court approved aviation expert is prepared to sell his soul (Martin claims to have another six expert reports which came to the same conclusion) for his thirty peices of silver, and if that is the case, then wouldn't that expert become ridiculed by his colleagues and never be taken seriously? If yes, how many pieces of silver would it take to come to conclusions so violently at odds to the official version? 

The same question to the other nine experts. 

I did a story on the expert opinions, which you can read here. It was one of the most widely read articles on TCN this month, and in it, I published screenshots of the final page of conclusions frm each expert. I explained that I had full copies of each opinion, and I would gladly share them with anyone who wanted to follow up the story. Some people think it strange that the airline paid for expert opinion and then used it to defend their position. I am not sure I understand the argument, unless of course those 'in the know' feel that such opinions are malleable and for sale. 

Not one person contacted me, not one news outlet. And apart from an article in Index, there was absolutely zero reaction in the Croatian media. 

A very high-profile foreign investment project stopped in its prime for reasons which ten experts say were complete b******. And no reaction. What message does that send internationally about Croatia as a safe and welcoming investment destination? Perhaps the reasons for the grounding are known, and they are not really news in the Croatian context. 

The final question is what happens now? A lawsuit has been initiated against the CCAA by ECA, those expert opinions are out there. We contacted CCAA for an interview to refute these claims, but no reaction so far. The claim by ECA that investors putting in 20 million euro (without asking for a kuna) into a tourism project which, if properly run and supported, is a magnificent addition to the country's tourism offer, can be stopped from operations with huge ensuing losses, for no reason, and nothing happens, is an alarming advertorial for foreign investors in Croatia.

ECA is not without blame in my opinion. With a different approach, I am convinced that that 14 year-wait could have been considerably shorter, that with better engagement with local authorities, the process could have been much smoother, and with better relations, who knows, they may not have upset the people behind this grounding. But does that justify what happened in August?

A new government is in power, committed to Europe, developing tourism and attracting foreign investment to Croatia. It will be interesting to see what happens next.