Friday, 5 April 2019

Seaplane Saga Over? Investment Collapses, Dismantling to Begin

''ECA has never been supported by the Croatian administration even though we have linked the islands and the coast without the use of one kuna of state money,'' says D. Thiele, the representative of German investors who were shoved from pillar to post in an attempt to get the seaplane project off the ground again.

As Sasa Paparella/Poslovni Dnevnik writes on the 4th of April, 2019, two and a half years after inspectors of the Croatian Civil Aviation Agency (HACZ) grounded all four of ECA's airplanes for allegedly endangering flight safety back in August 2016, European Coastal Airlines (ECA) and the project of returning seaplanes to the Adriatic sea has now definitely collapsed. Soon, the dismantling of twelve airports on the water will begin, this encompasses all of the pontoons designed to receive ECA's airplanes set up at sea ports from Lošinj to Hvar, to Lastovo.

It's difficult to find someone willing to return the seaplanes to the Adriatic. German investors, who started the project all the way back in 2001, are extremely dissatisfied with the behaviour of the Croatian authorities.

"The ECA project has never been really supported by the Croatian administration. Investors from Germany and Malaysia have invested 25 million euro in the project to set up the transport infrastructure which is necessary for seaplane traffic. They did so without the use of one kuna from the state, and without an HBOR loan, even though we did apply for them. We have linked the islands and the coast and we employed 150 people,'' recalls Dietmar Thiele, executive director of OTAGO Beteiligungs GmbH, representing German investors and their Chinese partners from the Shanghai Jet star company, who were more than willing to invest in the reconstruction of seaplane traffic on the Adriatic.

Despite the total and utter lack of support from the Croatia authorities, and sometimes allegedly faced with the opposition of local and port authorities, the German investors were still able to launch the project and get all of the necessary permits to start the operations of the first hydro carrier in Europe.

"Regular lines began in 2014, and in August 2016, ECA performed 60 flights per day connecting 11 destinations, it transported up to 600 passengers per day and earned a daily income of up to 40,000 euro, as planned. However, the administrative overhaul of ECA prevented further business, resulting in enormous costs, which stalled any further funding of the project. HACZ grounded the seaplanes due to, as was noted, those established deficiencies. The unreasonableness and the illegality of this grounding has already been confirmed by four court witnesses, and this has lead us to a court dispute,'' Thiele stated.

To the contradictions that ECA was facing huge debts and would have otherwise failed because the model was not market-friendly, the response is as follows: "The business plan was based on achieving the project's profitability after five years, with seven seaplanes and 23 seaports," they added that every airline in the world plans for losses during their very first years of doing business, as they plan to cover said losses with the company's capital.

He added that the new Chinese investors were ready for the further financing of assets and new loans, the debts remained with the German investors, and the fleet would have been financed through leasing. Although the seaplanes have not flown since 2016, the project didn't fall away into the abyss immediately, but has been attempting a new beginning - some co-owners of ECA are opening a prebankruptcy process and are finding new investors from China's Jetstar.

The judge gave them two chances.

The Chinese wrote their intention to confirm that they want to invest 15 million euro in the project's renewal, to open a new company and to transfer the concession to twelve certified airports. The Chinese also sent that letter to the judge at the Commercial Court in Split, Velimir Vuković, who gave them an additional four months to complete the planned investment, but the executive powers failed to show any understanding.

In June 2018, the investors sent an official letter of intent to the Minister of Maritime Affairs, Transport and Infrastructure, Oleg Butković, from whom they received no answer. In August 2018, they asked for an answer once again. However, in communication with the then State Secretary for Maritime Affairs, the receipt of the letter was confirmed, but any official response has remained entirely absent. At the end of the prescribed four month period, Judge Vuković was forced to open bankruptcy proceedings in September 2018, resulting in the collapse of all of the existing concessions, and the investors naturally withdrew.

Much like with answering the letters from the investors, Minister Butković's office failed to answer why investors didn't get an answer when asked by Poslovni Dnevnik to comment on the matter. Instead, the portal was told: "The Ministry fully supported the project of the introduction of seaplanes and regulated the legislative framework by amending existing laws in the field of maritime and air transport, as well as the adoption of the Ordinance on water airports. Representatives of the Ministry assisted the investor in the realisation of the project,'' the letter went on to state all of the apparent ways in which the aforementioned ministry helped. This letter, which came much, much too late, didn't do much for the exhausted would-have-been investors, of course.

However, not entirely beaten, the foreign investors have initiated several litigation claims for damages and lawsuits against HACZ. They informed the German Embassy of everything, ​​as well as the Chinese diplomacy.

The collapse of the seaplane company began with a real tragedy back in June 2015 when, as the German investors themselves say, "two irresponsible Croatian ECA pilots, without having a license to fly that type of airplane, illegally took a small seaplane from the Lake company to four places, and because of their inability and their failure to comply with the flight rules, caused a plane crash resulting in two dead and one seriously injured pilot. Although two persons were killed in the accident, the State Attorney's Office in Split hasn't opened an investigation into the matter for more than 3.5 years.''

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Click here for the original article by Sasa Paparella for Poslovni Dnevnik

 

Tuesday, 13 November 2018

Resnik Plane Crash 2015: Official 47-Page Report Released

November 12, 2018 - The final report of the fatal air crash at Resnik near Split Airport in June 2015, killing two people on board and permanently injuring a third passenger, has been released by Croatia's Air, Maritime and Railway Traffic Investigation Agency. 

More than three years after a tragic accident which killed two pilots of seaplane company European Coastal Airlines, and severely injured a third, the final official report into the causes and events leading up to the tragedy on June 25, 2015, was published on November 8, and an English-language version copy passed on to TCN today. 

The Lake-LA-4-200 aircraft, which was NOT part of the commercial seaplane fleet, crashed into the shallow waters of the sea at Resnik, shortly after take-off from Split Airport, with three people on board, having clipped a nearby building after the engine seemingly stalled. 

It is a story I have been following closely for some time now, and the final report is an official, very detailed report on the crash, which has primary conclusions for the crash, as well as secondary contributing factors, as well as a list of recommendations for the airline, the airport and the Croatian Civil Aviation Authority. 

"The investigation established the immediate causes of this accident – engine failure and inadequate pilot reaction in this situation. Detected contributory factors were omissions in the maintenance of the aircraft, the incompetence of the pilot to land on the water surface, insufficient knowledge of the aircraft type and company culture."

The unauthorised and unlogged flight in the company's documentation appears to have been a spontaneous act. Split Airport had requested that the plane be moved from its current position at the airport. no flight was necessary. According to the final report, three ECA pilots decided to take the plane for a quick flight instead, having to jump-start the engine with cables to get it started. 

Shortly after takeoff, the engine stalled, which the report attributes largely to the fact that there was a large amount of dirt in the fuel tank. The fuel quality indicator in the main tank had also completely eroded. According to available documentation, the main tank was last inspected for dirt and leaks on July 10, 2014, almost a year before the fatal flight. The plane flew for just 8 hours over the intervening 11 months, according to the official report. 

The report also concluded that human factors played a significant factor in the crash. Although all three were pilots, the pilot for the flight did not have experience of landing on water, nor authority to do so, hence probably the decision to try and return to Split Airport, which was too far away. As there was no flight recorder on board and the only survivor has no recollection of what happened (according to the report), it is impossible to know the final moments on board, but the report states that perhaps a decision to avoid procedures after an emergency landing might have played a part in the decision to try and return to the airport. The report also concludes that the pilot's lack of familiarity with this type of aircraft could have been a factor. 

The report also cites the ECA 'company culture' in the secondary factors. ECA's head office was at Resnik, very close both to the airport and scene of the crash. It would be inconceivable that nobody from the head office would not have noticed the flight, and so the report concludes that even though the flight was unauthorised. the pilots seemed not to be worried about censure from their superiors. 

In the report's conclusions, it states that the flight was approved by control, but that ECA was not informed of the flight. Weather conditions were favourable. 

If any media is interested in reading the report, please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. Subject line Resnik.

 

 

 

Tuesday, 13 November 2018

Why Did Seaplanes Fail in Croatia and Will They Fly Again? Industry Expert Interview

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. 

 seaplanes-max-oldorf.jpg

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

Friday, 14 September 2018

Seaplanes Heading South: Corfu to Be Greek Base, Lake Gerosa Italian Waterway

September 14, 2018 - Seaplanes and the Mediterranean - after another summer of no flights, are things finally about to start happening?

Saturday, 2 September 2017

European Coastal Airlines Leaving Croatia and Filing Lawsuit for 22.5 Million Euros

The airline was forced to cease operations last summer.

Friday, 5 May 2017

Seaplanes in Croatia: ECA Files for Pre-Bankruptcy. But...

Will they? Won't they? The chances of the first scheduled seaplane operator in Croatia taking to the skies this summer looks a little more remote on May 5, 2017, as European Coastal Airlines initiates the pre-bankruptcy process. However... 

Thursday, 22 December 2016

Civil Aviation Agency Under Scrutiny Due to New Leadership

New president of the Civil Aviation Agency Council is in focus for possible conflict of interest.

Friday, 21 October 2016

Why the Seaplane Problems are Important for Foreign Investors in Croatia

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. 

Wednesday, 19 October 2016

ECA Owner Pays Court Experts to Refute Inspection Results: Planes Were Grounded by European Aviation Safety Agency?

More on the latest on the Croatian seaplane story from the national media on October 19, 2016. 

Tuesday, 18 October 2016

Croatian Seaplane CEO on Grounding, Lawsuits, Refunds and 2017

After a troubled summer, Europe's first scheduled seaplane operator European Coastal Airlines has postponed its operations in Croatia until 2017. TCN caught up with CEO Captain Klaus Dieter Martin on October 17, 2016, to talk lawsuits, customer refunds, maintenance, bureaucracy and plans for 2017. 

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