UPDATE 1 - Govt approves 33.8 mln euro capital injection for Croatia Airlines

The decision to grant the fresh capital creates the necessary conditions for launching the planned recapitalisation process at Croatia Airlines, the government said in a statement after its regular cabinet meeting.

The fresh capital will also enable the implementation of all further activities, aimed at proposing the best possible recapitalisation method by the end of the year, transport minister Oleg Butkovic said in the statement.

The recapitalisation process should be launched by June 1, 2020 at the latest, Butkovic said.

Croatia Airlines will in the meantime use the 250 million kuna to finance repair of aircraft engines, repay overdue debt to domestic suppliers, settle credit liabilities and make necessary investments in the coming 12 months, he added.

In February, the government decided to launch a procedure for selecting a strategic partner for Croatia Airlines.In April, it picked a consortium of Privredna Banka Zagreb and DVB Bank SE (part of Germany-based DZ BANK Group) to provide consultancy services for the planned recapitalisation and to help the company identify possible strategic partners.

Croatia Airlines' net loss widened to 89.4 million kuna in the first six months of 2019, from 79.6 million kuna in the like period of 2018

The airline transported 961,000 passengers in the first six months of 2019, up 1.3% on the year.

Croatia Airlines' shares closed up 58% at 33.2 kuna on the Zagreb bourse on Wednesday. There was no trading in the company's shares on Thursday.

The government controls a stake of almost 99% in the airline.

(1 euro = 7.40081 kuna)