Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental protection
• Social responsibility
• Business ethics

Environmental Achievements

• Completed gasification of Croatia Airlines’ Technical Sector, converting from heating oil to gas, thus reducing environmental impact.
• Switched to electricity from renewable sources (HEP Zelen).
• Introduction of air bridges at the new Zagreb International Airport terminal reduced the use of passenger shuttles and greenhouse gas emissions.
• Introduced two CRJ1000 aircraft, contributing to reducing carbon footprint per passenger seat.

Social Achievements

• Continued cooperation with the Croatian Olympic Committee, being the official carrier of Croatia’s Olympic team.
• Supported the Croatian Paralympic Committee by providing transport for disabled athletes.
• Donated funds to the Paediatric Clinic of the Clinical Hospital Centre in Split for the purchase of medical devices.
• Organized training courses for employees in direct contact with service users, focusing on improving passenger satisfaction.
• Implemented performance assessment procedure based on goal management.

Governance Achievements

• The Committee for Monitoring the Ethics Code Implementation has been active since 2002.
• Adopted new standards: ISO14001 and ISO50001.

Climate Goals & Targets

Environmental Challenges

• Operational issues of the new terminal of Franjo Tuđman Airport, leading to increased operating costs, aircraft delays, and passenger dissatisfaction.
• High fuel costs due to rising oil prices.
• Exposure to interest rate risk from long-term loans.
• Liquidity risk, especially in the winter months.
• Exposure to negative effects of foreign currency exchange rate changes.
• Brexit negatively influenced revenue potential on the British market.
• High traffic seasonality and high competition in the summer months on the Croatian airline market.

Mitigation Strategies

• Franjo Tuđman Airport operator and handling agents are working on eliminating shortcomings (modifications on the passenger terminal premises, purchase of new equipment, hiring of additional personnel).
• Constant monitoring of fuel consumption and cost management.
• Regular monitoring of interest rate movements on the global market.
• Managing liquidity risk by planning and regularly monitoring due liabilities and maintaining adequate cash.
• Foreign currency inflows from ticket sales abroad mitigate currency risks.
• Negotiations over a new collective bargaining agreement to avoid strikes.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• extreme weather conditions

Transition Risks

• EU ETS (EU Emissions Trading Scheme)
• CORSIA regulations (Carbon Offsetting and Reduction Scheme for International Aviation)

Environmental Metrics

ESG Focus Areas

• Social Responsibility
• Environmental Protection
• Business Ethics

Environmental Achievements

• Set up a new system for measuring, verifying, and reporting greenhouse gas emissions.
• Adopted the CORSIA system to cover more flights and comply with EU ETS and Swiss ETS.
• Used electricity from renewable sources (HEP Zelen).

Social Achievements

• Introduced two new destinations (Mostar and Dublin) and two new seasonal routes.
• Became the official air carrier of the Croatian Football Federation and transported the national team after winning the silver medal at the World Cup.
• Continued cooperation with the Croatian Olympic Committee and supported the Croatian Paralympic Committee.
• Donated equipment to SOS Children’s Village Lekenik and the Special Hospital for Children with Chronic Illnesses in Gornja Bistra.
• Maintained successful cooperation with the Faculty of Mechanical Engineering and Naval Architecture and the Faculty of Transport and Traffic Sciences in Zagreb.

Governance Achievements

• Voluntarily applied the Corporate Governance Code.
• Published all necessary information for shareholders.
• Implemented a robust internal control system to ensure data accuracy and integrity.
• Signed a new collective bargaining agreement for a five-year period, ensuring long-term social peace.

Climate Goals & Targets

Environmental Challenges

• Economic slowdown in the US and EU, impacting air traffic demand.
• Increased fuel costs due to rising oil prices.
• High seasonality of air traffic in Croatia.
• Intense competition in the summer months.
• Media scrutiny and strike announcements impacting traffic and financial results.
• Chronic lack of labor force in Croatia.

Mitigation Strategies

• Implemented projects to upgrade aircraft equipment, partly financed by EU funds (EGNOS and ADS-B OUT).
• Developed digital channels to improve user services and online booking.
• Developed business reporting through IBM Cognos Technology (BI).
• Implemented measures to manage cash flow and liquidity risks, including short-term loans.
• Regularly monitors interest rate movements and currency exchange rates.
• Negotiated a new collective bargaining agreement.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: EU IFRS, ICAO CORSIA

Certifications: ISO 14001/50001

Third-party Assurance: KPMG Croatia d.o.o. za reviziju

Environmental Metrics

ESG Focus Areas

• Social Responsibility
• Environmental Protection
• Business Ethics
• Gender Equality
• Employee Wellbeing

Environmental Achievements

• Used electricity from renewable sources - HEP Zelen, in 2020.
• Renewed the ISO14001/50001 certificate by transitioning to ISO50001:2018

Social Achievements

• Continued operations throughout the pandemic, enabling many Croatian citizens to return home and transporting humanitarian aid.
• Preserved jobs of permanent employees, despite significantly reduced business activity.
• Offered various employee benefits, including commuting expense reimbursement, severance pay, and solidarity aid after earthquakes.
• Implemented epidemiological measures to protect employees from virus spread.
• Addressed employee complaints related to dignity and personal data protection.

Governance Achievements

• Established a committee for monitoring the enforcement of the Ethics Code.
• Appointed a confidential person and a deputy confidential person for receiving complaints about breaches of the law.
• Implemented a Complaint Receipt and Settlement Procedure.

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic and travel bans drastically reduced demand for air traffic services.
• Liquidity risk due to significant revenue decline.
• High traffic seasonality and competition in the summer months.
• Uncertainty regarding the duration of the coronavirus crisis and its impact on the tourism sector.

Mitigation Strategies

• Implemented rigorous savings measures in all segments (reduced flight schedule, fleet changes, cost reductions, etc.).
• Signed agreements with labor unions and suppliers to reduce costs.
• Secured state aid for compensation of damage caused by the COVID-19 pandemic, shareholder loans, and recapitalization.
• Developed several scenarios for gradually resuming flights and crisis plan versions.
• Negotiated with lessors and banks to defer payments.
• Used grants from the Croatian Employment Service to preserve jobs.

Supply Chain Management

Responsible Procurement

• Reached agreements with a number of suppliers resulting in significant savings in 2020

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Environmental protection
• Social responsibility
• Business ethics

Environmental Achievements

• Continued using electricity from a renewable source – HEP ZelEN.
• Reached a decision to start a process of replacing its existing fleet with new A220 aircraft, significantly reducing fuel consumption and CO2 emissions (by some 25%).
• Successfully met all obligations related to EU ETS, CH ETS, UK ETS and CORSIA systems.

Social Achievements

• Continued implementing enhanced occupational safety measures.
• Organized on-site flu vaccination as well as COVID-19 vaccination for employees.
• Offered various benefits to employees, such as reimbursement for commuting expenses, severance pay upon retirement, etc.
• Resolved one complaint related to the protection of employees’ dignity.
• Actively supports sports in Croatia (Croatian Olympic Committee and Croatian Football Federation).
• Regularly makes donations and sponsors various cultural, scientific, sports and other events.

Governance Achievements

• Established an ethics committee for monitoring the enforcement of the Ethics Code.
• Appointed a confidential person and a deputy confidential person responsible for receiving complaints about breaches of the law.

Climate Goals & Targets

Environmental Challenges

• Rising fuel prices and interest rates.
• Inflation.
• Potential increase in insurance premiums.
• Reduced demand for air traffic services.
• Labour shortage in the aviation industry.
• Liquidity risk, especially in the winter months.
• Russia's invasion of Ukraine and its impact on the global market.

Mitigation Strategies

• Actively applying various internal forms of business rationalisation and supervision.
• Optimising flight schedules and adapting the fleet to the demand and booking trends.
• Making cash flow projections for the period of one year to identify on time potential operational risks and risks related to liability settlement.
• Implementing the defined Post -COVID Strategy.
• Fleet renewal process to replace its existing aircraft with a new, uniform fleet (Airbus A220).
• Negotiations with Airbus on the order of six new A220 aircraft, replacing the order of A320neo aircraft.
• Utilizing state aid measures (loan agreement worth HRK 94 million and capital injection of HRK 296 million).

Supply Chain Management

Climate-Related Risks & Opportunities

Transition Risks

• EU green policy objectives
• Phasing out of free emission allowances
• Obligation to use SAF

Opportunities

• Fleet renewal with more fuel-efficient aircraft