Non-financial statement 2017

balance

17

development

sustainability

responsibility Non-financial Statement for 2017

Non-financial Statement for 2017

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Contents

Sadržaj 1.

A WORD FROM THE PRESIDENT & CEO

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2.

ABOUT THE NON-FINANCIAL STATEMENT

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2.1.

ENTITIES INCLUDED IN CONSOLIDATED FINANCIAL STATEMENTS

7

3.

KEY PERFORMANCE INDICATORS 8 4.

ABOUT THE ORGANISATION 11 4.1.

COMPANY NAME AND HEAD OFFICE 11 4.2.

OWNERSHIP AND LEGAL FORM 11 4.3.

MAJOR SHAREHOLDERS 11 4.4.

MANAGEMENT STRUCTURE 12 4.5.

SIGNIFICANT CHANGES DURING THE REPORTING PERIOD

12

4.6.

CROATIA AIRLINES AS A BRAND 13 4.7.

FLEET AND CAPACITIES 15 4.8.

KEY SERVICES AND ACTIVITIES 16 4.9.

COUNTRIES/MARKETS WHERE THE COMPANY OPERATES

16

4.10.

DESTINATIONS/AIRPORTS/ROUTES 16 4.11.

OTHER TRANSPORTATION SERVICES 17

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4.12.

INFORMATION ON EMPLOYEES 19 4.13.

SUPPLY CHAIN 20 4.14.

MEMBERSHIP IN PROFESSIONAL ASSOCIATIONS AND ORGANISATIONS

22

4.15.

COMPANY’S HISTORY 23 5.

SUSTAINABLE BUSINESS MODEL 24 5.1.

OPERATIONAL RISKS AND OPPORTUNITIES 24 5.2.

STAKEHOLDERS 26 5.3.

MATERIAL ASPECTS OF THE COMPANY’S BUSINESS ACTIVITIES

AND THEIR EFFECT ON ITS SUSTAINABLE DEVELOPMENT

29

5.4.

SAFETY AND ENHANCEMENTS AS BUSINESS IMPERATIVES

35

5.5.

RESPONSIBILITY TO EMPLOYEES 37 5.6.

BUSINESS ETHICS 40 5.7.

ANTI-CORRUPTION PROGRAMME 41

Š. Lugarov

5.8.

RESPONSIBILITY TO PASSENGERS 41 5.9.

SUPPORT FOR THE COMMUNITY - ENGAGEMENT AND DEVELOPMENT PROGRAMMES 45

5.10.

ENVIRONMENTAL IMPACT OF BUSINESS ACTIVITIES

47

6.

GRI INDEX 53

Dear Reader, Let me present a Non-financial Statement of the company Croatia Airlines for 2017, drawn up in accordance with the GRI (Global Reporting Initiative) Standards. I kindly invite you to read all about our activities related to corporate social responsibility on the pages to follow.

It is well known that business operations of the airline industry depend on the economic surroundings. New technologies, innovations, changes in customer behaviour and growing competition urge Croatia Airlines to introduce changes and adequate business adjustments at a faster pace.

We are aware that in today’s modern business environment one’s business success is not measured by financial results alone; activities in the segment of social responsibility and contribution to sustainable development are of equal importance. Let me point out that corporate social responsibility is one of the key principles of Croatia Airlines’ mission; accordingly, we are making our best effort to adjust our product to the market needs by constantly improving it and making sure that within our business process all of the involved stakeholders are satisfied.

Our company participates in the global aviation strategy for environmental protection and supports all measures that contribute to a reduction of aviation pollution, while at the same time supporting the industry’s growth and development. When it comes to development, Croatia Airlines is guided by the principles of sustainable development in the key areas − fleet selection and application of adequate procedures that lead to a reduction in fuel consumption, CO2 emissions and noise. In the upcoming period, Croatia Airlines plans to renew its fleet by replacing the current A319 and A320 aircraft with new, state-of-the-art aircraft Airbus 320neo, characterised by lower fuel consumption and harmful gasses emission. We are also doing our best to apply the global sus-

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tainable development guidelines in other business segments.

Here at Croatia Airlines, we are aware that corporate social responsibility brings us concrete benefits. To be precise, it is a prerequisite for earning the trust of our service users, gaining recognition on the market, and realising a comparative advantage in modern integration processes, with all of this consequently reflecting on the stability of our operations. The development and application of the company’s sustainable development practices have been additionally encouraged by Croatia Airlines’ membership in international airline associations and alliances.

As the majority owner of our company, the Government of the Republic of Croatia has entrusted us with the task of connecting our homeland by air both within the national borders and with the rest of the world. We have been successfully performing this duty for the benefit of a wider social community, thus significantly contributing to the development of Croatia’s tourism and economy.

I proudly emphasise that we have transported over 36 million passengers over the past twenty-eight years and that we stand for a safe and reliable company in the European sky. Let me also note that we have been among the top ten exporters in the Republic of Croatia for years.

In conclusion to the introductory part of our first Non-financial Statement, I am proud to note that within our summer flight schedule for 2017 we directly connected Zagreb with 24 European countries, and improved our service quality primarily by introducing direct flights from Zagreb to Helsinki, Stockholm, Oslo and Bucharest.

For the first time in our company’s history we transported more than two million passengers in a year’s period.

Our two millionth passenger was warmly welcomed in early December 2017 at Zagreb International Airport.

Š. Lugarov

Yours respectfully,

Jasmin Bajić 102-14

President & CEO

2. About the Non-financial Statement Croatia Airlines’ Non-financial Statement is compliant with and supplements the Management’s Business Report for 2017.

Croatia Airlines’ Non-financial Statement has been drawn up in line with the Sustainability Reporting Guidelines (the GRI Standards). The company has chosen the Core ‘in accordance’ option.

The Statement covers the period from 1 January to 31 December 2017 and is published once a year. Croatia Airlines has always attributed importance to all aspects of social responsibility. In its earlier years it reported on certain topics in the sphere of sustainable development within its Management’s Business Report. This is the first year to report on the company’s corporate social responsibility in this form.

No external verification of the Statement for 2017 has been carried out, but as for future periods, Croatia Airlines undertakes to continuously improve its corporate social responsibility, inform the public about it and consider the option of external verification.

The Statement has been prepared in PDF and published on the company’s publicly available webpages www.croatiaairlines.com.

For any questions or clarifications related to Croatia Airlines’ Non-financial Statement please contact us at the following e-mail address: ana-marija.jurkovic@croatiaairlines.hr

2.1 Entities included in consolidated financial statements Croatia Airlines Group comprises Croatia Airlines d.d. (joint-stock company) and the following associated companies: Obzor putovanja d.o.o. (limited liability company), 100% owned by Croatia Airlines d.d., and Amadeus Croatia d.d,, 95% owned by Croatia Airlines d.d.

The agency Obzor putovanja was founded in 1993. It provides a top-quality service that includes organis-

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ing individual or group travels in Croatia and abroad, sale of domestic and international airline tickets (IATA licence), accommodation arrangements at hotels in Croatia and abroad, cultural tourism, organisation of conferences, etc.

Amadeus Croatia, as a part of the joint reservations system of the European airlines, is a national marketing company in charge of the local market, i.e. responsible for the distribution, presentation and all other matters related to Amadeus, with the rights to operate on the market of Bosnia and Herzegovina, as well.

Total revenues and expenditures of the associated companies make up less than 1% of the consolidated revenues and expenditures, with an insignificant effect of their operations on those of Croatia Airlines.

The data set out in the Non-financial Statement refer to Croatia Airlines d.d. alone.

102-45 102-48 102-49 102-50 102-51

102-53 102-54 102-56

J. Škof

Š. Lugarov

102-52

Key indicators

3. Key performance indicators

Three core activities:

Croatia Airlines ended the year of 2017 with a net profit of HRK 24.9 million, a positive operating result of HRK 39.8 million and a net margin of 1.41%.

D. Fabijanić

Passenger transport

Operating revenues - structure

Passengers 80%

aircraft maintenance

Other

19%

%

Operating revenues (HRK 000)

1,767,478

1,561,184

13.2% 113

Operating expenses (HRK 000)

1,727,665

1,553,415

11.2% 111

EBIT (HRK thousand)

39,813

7,770

412.5% 512

Net result (HRK 000)

24,941

8,042

210.1% 310

1.41

0.52

173.9% 274

1,913

1,661

15.2% 115

TKM/employee (000)

176,820

154,824

14.2% 114

assets value (HRK 000)

855,105

862,412

-0.8% 99

Capital and reserves (HRK 000)

404,295

379,064

6.7% 107

Investments (HRK 000)

154,421

116,221

32.9% 133

Number of seats offered (million)

2,982

2,904

2.7% 103

Fleet gross carrying capacity (t)

251.2

251.2

- 100

Fleet net carrying capacity (t)

142.8

142.8

- 100

Passengers carried (thousand)

2,125

1,939

9,6% 110

Number of flights

27,491

26,848

2.4% 102

Flights in km (thousand)

18,321

17,220

6.4% 106

Operating revenue per employee (HRK 000)

Capacities

Š. Lugarov

1%

2016

Financial indicators

Net margin %

Cargo transport

Cargo

2017

Traffic indicators Operating expenses - structure 31%

Maintenance

14%

Passenger services

6%

air traffic services

23%

Promotion and sales

14%

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General and administrative expenses 5% 5%

Other expenses

2%

CTN

OU

ICaO code

IaTa code

12

75

39

aircraft 31 Dec 2017

flights per day

airports

2,273

2,591

-12.3% 88

PLF %

74.4

70.0

6.3% 106

WLF %

71.3

68.1

4.7% 105

aSK (million)

2.191

2.066

6.1% 106

RPK (million)

1.630

1.446

12.7% 113

102-7

24 38 countries

Cargo transported (t)

9

8 D. Fabijanić

Depreciation and amortisation

3

D. Fabijanić

Flight costs

destinations

27,491 2.1 924 226 flights in 2017

million passengers in 2017

employees

million (US$) sales revenues

Miles & More Frequent-flyer award programme

Global airline association

4. About the organisation 4.1 Company name and head office Croatia Airlines d.d.

The Company’s Head Office is in Zagreb, Buzin, Bani 75 b.

4.2 Ownership and legal form Croatia Airlines d.d. is a joint-stock company, majority-owned by the state; its share capital in the amount of HRK 277,879,530 is fully paid. Total number of shares: 27,787,953 of ordinary shares with the nominal value of HRK 10.00.

No changes in Croatia Airlines’ size, structure or ownership occurred in 2017.

4.3 Major shareholders Shareholder

Number of shares

RESTRUCTURING AND SALE CENTRE FOR THE REPUBLIC OF CROATIA

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10

Share %

26,886,888

96.7574

ZAGREB AIRPORT LTD.

477,121

1.7170

HPB FOR THE REPUBLIC OF CROATIA

297,701

1.0713

JANAF D.D. (JSC)

22,000

0.0792

CROATIA INSURANCE JSC

10,270

0.0370

CROATIAN LOTTERY LTD.

4,000

0.0144

ASTRA INTERNATIONAL JSC IN BANKRUPTCY

3,682

0.0133

HP D.D. (JSC)

2,750

0.0099

TURISTHOTEL D.D. (JSC)

2,090

0.0075

TANKERKOMERC D.D. (JSC)

2,090

0.0075

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102-1 102-2 102-3 102-4 102-5 102-6 102-7 102-8

102-10 102-13 102-18

S. Jungić

Š. Lugarov

102-9

4.4 Management structure

4.6 Croatia Airlines as a brand As a fully-fledged member of the International Air Transport Association (IATA) and the renowned airline organisation Star Alliance, our company has been recognised as a Croatian brand on all of the markets it flies to.

Shareholders

General assembly

The branding of the company started parallel with its founding, with the development of its visual identity being one of the key features of the process. In addition to the company’s business achievements, its visual identity has undoubtedly contributed to its being recognised as a Croatian brand.

Croatia Airlines’ corporate design projects its image of an airline both in Croatia and throughout the world,

Supervisory Board

attracting numerous tourists to our beautiful country. The Croatian flag is a basis of the airline’s visual identity

audit Committee

that reflects the safety, reliability and technical precision our passengers recognise, knowing that their needs will be met by the services offered.

As a member of Star Alliance, the world’s largest airline association, the company is obliged to display the logos of Croatia Airlines and Star Alliance, respectfully, in all of its promotional materials in both printed and electronic format, and in various locations. The rules prescribed for logo displays are equal for all Alliance

Management Board

members. Furthermore, Croatia Airlines organises professional lectures for its employees, drawing their attention to the importance of adhering to these rules, since displaying a trademark showing that a company is a Star Alliance member helps passengers recognise the brand’s value. Passengers are offered a service within the global flights network of an international group of airlines they can trust. To explain further, through

SHAREHOLDERS’ GENERAL ASSEMBLY − a body through which the shareholders exercise their rights. The

cooperation with partners, passengers are offered the fastest connection to their final destination, along with

scope of authority of the General Assembly is prescribed by the Companies Act and the company’s Articles of

a high fleet maintenance standard and an offer of various awards through the award programme intended

Association.

for frequent flyers.

SUPERVISORY BOARD − a body whose main task is to supervise the Management’s activities. It is composed of five members, one of whom is a representative of employees. The Supervisory Board members receive remuneration in line with the “Decision on Remuneration of Supervisory Board and Governing Council Members”.

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In 2017, the Supervisory Board held five ordinary and two extraordinary meetings.

No changes in the Supervisory Board composition took place in 2017.

The Supervisory Board appointed an Audit Committee composed of three members. In 2017, the Audit Committee held four sessions. Its conclusions are orally presented to the Supervisory Board within its regular ses-

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sions.

COMPANY MANAGEMENT − manages the company’s business activities; its scope of authority and role are defined by the Companies Act, the company’s Articles of Association and other internal regulations. In 2017, the company’s Management structure changed: Zlatko Širac was a member of the Management Board and the Chief Operating Officer until 28 February 2017. Krešimir Kučko was the President & CEO until 3 November 2017, after which the function was assumed by Mr. Jasmin Bajić, on 4 November 2017. The Supervisory Board is composed of five members, and is chaired by Zlatko Mateša, LLB. The company applies the Corporate Governance Code of Zagrebačka burza d.d. (Zagreb Stock Exchange) and meets all of the obligations arising therefrom.

4.5 Significant changes during the reporting period In late March 2017, upon opening of the new terminal at Franjo Tuđman Airport, Croatia Airlines started operating from it after undertaking extensive preparations. Krešimir Kučko was the President & CEO until 3 November 2017, and on 4 November 2017 this function was assumed by Mr Jasmin Bajić.

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4.7 Fleet and capacities In 2017, Croatia Airlines operated a fleet of 12 aircraft: six Airbus aircraft, of which an Airbus A320 was under an operating lease, and six Q400 aircraft, all under an operating lease. In early 2017, relevant preparations were carried out for the planned capacity increase by introducing two additional aircraft (wet lease) in the period from May to October 2017. Due to an increased number of flights within the summer flight schedule, Croatia Airlines leased two CRJ1000 100-seater aircraft. The aircraft of such a capacity were introduced to the fleet as an addition to the existing Airbus and Dash fleets, in accordance with the company’s development plans, as the third type of aircraft in the fleet.

S. Jungić

Our fleet comprises the following aircraft: Airbus A320-200, Airbus A319-100 and Dash8-Q400.

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Š. Lugarov

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15

Specifications

Airbus A320-200

Airbus A319-100

Dash8 - Q400

Wing span (m/ft)

34,1 / 111

34,1 / 111

28,42 / 93,24

Fuselage length (m/ft)

37,6 / 123

33,84 / 111

32,83 / 107,71

Maximum take off weight (kg)

73 500

70 000

29 257

Maximum cruising altitude (m/ft)

11 920 / 39 100

11 900 / 39 000

7620 / 25 000

122,40 / 1318

122,40 / 1318

63,08 / 679

Maximum cruising speed (km/h)

834 (450 KTS)

834 (450 KTS)

667 (360 KTS)

Aircraft power plant

engines x 2 CFM 56

engines x 2 CFM 56

engines x 2 PW 150A

Number of aircraft in fleet

2

4

6

Number of seats

174

144

76

4.8 Key services and activities

4.11 Other transportation services

As a national flag carrier, Croatia Airlines recognises its social responsibility in connecting the country via

Charter flights

air both within domestic and international traffic, thereby significantly contributing to the development of Croatia’s tourism. It has been continuously adapting to the needs of the tourism industry and development

In addition to scheduled flights, Croatia Airlines also offers charter flights, whether there is a need for

of our country by offering a network of direct flights to capital Zagreb and to the Adriatic destinations, in

organising a special flight for a certain company, school or a sports organisation or it is the matter of

cooperation with its partners and through coordination with other forms of transport whenever possible.

series of tourist charter flights. https://www.croatiaairlines.com/additional-services?langid=en Goods and mail transport

4.9 Countries/markets where the company operates

Cargo transport is also a part of Croatia Airlines’ service. Whether on its own and/or in cooperation During the summer season of 2017, Croatia Airlines flew directly to 38 destinations in 24 European coun-

with other airlines, the company transports fragile goods, large shipments, animals or easily perishable

tries within scheduled traffic. In cooperation with other airlines it offered a good connection with the U.S.,

goods, such as fresh fish, daily press, flowers, medicines, etc.

Canadian and other remote markets.

https://www.croatiaairlines.com/additional-services?langid=en

Its destinations were as follows: Amsterdam, Athens, Barcelona, Vienna, Belgrade, Berlin, Brussels, Bucharest, Copenhagen, Dusseldorf, Frankfurt, Lisbon, London, Lyon, Milan, Munich, Nice, Oslo, Paris,

Supervision services at Croatian airports

Prague, Rome, Sarajevo, Skopje, Stockholm, Helsinki, Saint Petersburg, Tel Aviv, Venice and Zurich.

Within Croatia, the company’s aircraft connected within scheduled traffic Zagreb with Dubrovnik, Split,

Croatia Airlines also offers supervision services, intended primarily for airlines that have no representa-

Zadar and Pula, and during the tourist season with Rijeka, Osijek and Bol on the island of Brač.

tives in Croatia and for the companies that are unable to cover all of their traffic demands with the existing personnel. These services are provided at Zagreb, Dubrovnik and Split airports.

4.10 Destinations/airports/routes

The services comprise the supervision of the handling agents’ work, support in the event of traffic irregularities, and representation of airlines at stations.

For additional information click on the following link: https://www.croatiaairlines.com/Additional-services/supervision/Supervision-services Helsinki Oslo

Stockholm

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St. Petersburg

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Dublin Copenhagen

Amsterdam

London

Berlin Dusseldorf

Frankfurt

Prague

Milan Venice Pula

Lisbon

companies. To date, over 300 major works have been performed on its own fleet and on those of other companies. All information on the maintenance services are available on the company’s webpage: http://www.croatiaairlines.com/Technical-Services

Our training courses are based on IATA’s standard programmes, and are held by Croatia Airlines’ highly experienced instructors. We also organise courses for the employees of other companies, as well as for

Vienna

individuals. Applications can be filed via our website, too.

Zürich

Barcelona

field of base and line maintenance, engineering services, and technical and logistics support for other

Commercial training

Munich

Lyon

For over twenty-five years, Croatia Airlines’ Technical Centre has been providing various services in the

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Brussels Paris

Aircraft maintenance services

Since 1993, Croatia Airlines’ Training Centre has offered a wide range of training courses in the sphere

Zagreb

Osijek Rijeka Belgrade Sarajevo

Zadar Split Rome Bol Mostar Dubrovnik

of reservations, tariffs and ticketing. The company’s Traffic Training Centre offers courses for the flight,

Bucharest

cabin and ground operations personnel. All courses are based on the certified programmes harmonised with the EASA regulations and approved by the Croatian Civil Aviation Agency.

Skopje

Croatia Airlines’ Technical Training Centre is a certified organisation for the training of aircraft and technical personnel, and is located at Zagreb Airport. It also offers a wide range of training courses for certain types of aircraft, and specialist training courses for aviation engineers and technicians.

Athens

https://www.croatiaairlines.com/additional-services?langid=en

Tel Aviv

S. Jungić

4.12 Information on employees

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Total number of contract employees (permanent contract, temporary contract) by gender 31 Dec 2017

Men (469) For an permanent period: (435) employees (47%) For a temporary period: (34) employees (4%) Women (455) For an permanent period: (417) employees (45%) For a temporary period: (38) employees (4%) Total (924)

Total number of contract employees (permanent contract, temporary contract) Republic of Croatia/abroad

Republic of Croatia (888) employees (96%) abroad (36) employees (4%)

Number of employees (full-time/part-time) 31 Dec 2017

Full-time (916) employees (99%) Part-time (8) employees (1%)

Number of managers by gender and age structure (up to 30 years of age, 30-50 years of age, over 50 years of age)

Men (8) employees (62%) Up to 30 years of age (0) 30-50 years of age (4) Over 50 years of age (4) Women (5) employees (38%) Up to 30 years of age (0) 30-50 years of age (5) Over 50 years of age (0)

Number of employees by gender and age structure (up to 30 years of age, 30-50 years of age, over 50 years of age)

Gender structure (total): Men (469) employees (51%) Women (455) employees (49%) Age structure (total): Up to 30 years of age (90) employees (10%) 30-50 years of age (609) employees (66%) Over 50 years of age (225) employees (24%) Gender and age structure: Men: Up to 30 years of age (7%) 30-50 years of age (31%) Over 50 years of age (13%) Women: Up to 30 years of age (2%) 30-50 years of age (12%) Over 50 years of age (35%)

External CA employees and type of work 31 Dec 2017

Seasonal cabin staff (9) Contracted short-term aircraft maintenance staff (51)

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924 employees

Men 51%

Š. Lugarov

51%

49%

Women 49% average employee age: 43 years average employment time: 15 years 92% of employees employed on an indefinite contract basis

Source: Internal data of the Human Resource Management Service

4.13 Supply chain The fuel is supplied from the storage tanks and pipelines at airports in line with the fuelling needs anticipated by each individual Croatia Airlines’ flight plan. For the supply of fuel at airports, jet fuel suppliers are licensed by the domicile civil aviation agencies as a prerequisite for their operations and so as to ensure that basic quality conditions are met.

Supplier structure

Furthermore, in order to ensure quality standards and the supply and operations safety, the aircraft supply and handling infrastructure is controlled via IFQP (IATA FUEL QUALITY POOL) audits carried out by airlines, including Croatia Airlines.

Domestic suppliers 39%

Ground service providers

Foreign suppliers 61% 39%

Ground services include the services of aircraft handling, aircraft operations and air traffic control by way of which safe and regular provision of passenger and goods transport through airports is ensured, with the use of airport infrastructure and the services of handling agents.

These services are provided on a regular basis by 25 domestic and as many as 149 foreign suppliers.

In addition, a total of 141 suppliers have the status of an occasional supplier, for the seasonal and

61%

charter transport needs. All of the suppliers are from within the EU, while in 2017 four suppliers were hired outside the EU as well.

All of the ground service suppliers are checked and approved by the Croatian Civil Aviation Agency through the licence issuance system for the provision of services. One of the specificities of aircraft

In order to provide top-quality services in line with its Business Plan, Croatia Airlines uses a complex supply

operations in the winter period is the de-icing and anti-icing service within the DAQCP (DE/ANTI-

chain adapted to the specific requirements of air traffic. With regard to the fields of supply, the supply chain

ICING QUALITY POOL) system.

functions through larger categories comprising the supply of: goods and services, aviation fuel, ground ser-

All of the ground service suppliers, in all Croatia Airlines’ destinations, are within the quality assurance

vices, technical equipment, etc.

system of a company in charge of supplier verification.

During 2017, Croatia Airlines did business with a total of 2,035 suppliers, of which 61% were foreign ones.

Also, as the greatest turnover by far is realised on the foreign markets, of the total turnover of HRK 1.7 billion,

Aircraft catering service suppliers

more than a billion falls off on foreign suppliers.

As per regions, in 2017 the greatest turnover was realised in dealings with the suppliers from Europe and

Catering service suppliers provide the service of supplying the aircraft with food and beverages.

the USA. The largest portion of international transactions is traditionally realised through cooperation with

There are five domestic and two foreign suppliers (Sarajevo and Skopje), which, in cooperation with

suppliers from Germany, both in view of the total turnover volume and the number of suppliers. Cooperation with local suppliers makes up a third of the total turnover and a 39% share in the total number of suppliers.

Supplier countries with regard to the realised turnover

Supplier country

Turnover in HRK million

Share in total turnover

Number of suppliers

Share in total number of suppliers

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Croatia Airlines’ cabin staff, ensure high quality food for the passengers flying with the company.

In addition to food and beverage suppliers, there are also suppliers of newspapers, expendable material and dishes for aircraft, making up altogether 39 domestic suppliers and 35 foreign ones. All of

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them all obliged to act in accordance with the provisions of the Food Act of the Republic of Croatia

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Aircraft component and maintenance service suppliers

and have the HACCP standard implemented, as part of the control system within the company’s quality assurance system.

Croatia

568.5

33%

784

39%

Germany

388.2

22%

219

11%

Belgium

127.4

7%

39

2%

United Kingdom

118.0

7%

170

8%

cludes the procurement of aircraft components, material, tools and equipment, and the procure-

89.6

5%

20

1%

ment of component, tool and equipment maintenance service, with the aim of ensuring continuing

Ireland

Since Croatia Airlines maintains both the aircraft from its own fleet and those of other carriers in according to same international standards, as well as manufacturer standards, the supply chain in-

France

83.5

5%

140

7%

airworthiness of its aircraft and the material basis for the maintenance of other companies’ aircraft.

Spain

65.2

4%

31

2%

The procurement takes place on the free market, and is enabled by qualified aviation suppliers. To

USA

39.1

2%

94

5%

The Netherlands

35.6

2%

59

3%

Others

224.9

13%

479

24%

Total

1,740

100%

2,035

100%

be precise, each supplier must be licensed for a certain product and approved by the user within its quality assurance system.

Due to the specific nature of supply of aircraft components and material governed by aviation regulations, this process is exempt from the provisions of the Procurement Ordinance.

Suppliers of jet fuel (petroleum-based fuel) Cargo and customs clearance agents Jet fuel is supplied by one local supplier and 16 (up to 20) foreign suppliers, selected on the basis of the quality of fuel, service and price as the three key parameters for the safety and cost-effectiveness of each and every flight.

Freight forwarders and cargo agents provide the transportation and customs clearance facilitation services and usually include 39 domestic and 35 international agents for all of the goods and mail on Croatia Airlines’ flights.

4.14 Membership in professional associations and organisations

1989

The founding of Zagreb airlines - Zagal

1990

Zagal becomes Croatia airlines d.d.

1991

1st flight in domestic traffic (Zagreb-Split)

1992

1993

1st flight in international traffic (Zagreb-Frankfurt)/Croatia airlines joins the International air Transport association (IaTa)/acquisition of 3 Boeing 737/opening of the first foreign branch office in Frankfurt

1995

1993-1995 fleet expansion (3 aTR-42 and 2 Boeing 737)

1997

Start of the fleet modernisation

1998

Croatia airlines joins the association of European airlines (aEa)/ introduces its first airbus a319 and fleet expansion until 2000

4.15 Company’s history

Croatia Airlines is a member of professional associations, financial organisations and economic and business organisations in which it participates by paying regular membership fees. Of utmost importance for Croatia Airlines’ operations is its membership and participation in the work of the industry’s umbrella associations, among which IATA and Star Alliance are most certainly the most significant ones. IATA (International Air Transport Association) is a global association of airlines whose business standards are the basis for the operations of all scheduled carriers in international air transport of passengers and goods. Croatia Airlines’ membership in Star Alliance is exceptionally important from the commercial and strategic point of view. Owing to its membership in the world’s largest airline association, Croatia Airlines maintains a strong competitive position on the market and the position of the leading air traffic service provider not only on the Croatian market but in the entire region.

AIRLINE ASSOCIATIONS IATA (International Air Transport Association) STAR ALLIANCE ERA (European Regions Airline Association) European Aviation Maintenance PASRA (Passenger Airline Sales Representatives Association) OTHER ASSOCIATIONS

2002

Croatian Chamber of Economy Croatian Association of Corporate Treasurers

2003

Croatia airlines is awarded JaR OPS 1 aOC and ISO 9001-2000 certificates

2004

Regional membership in the global association Star alliance

Croatian Chamber of Architects Croatian Public Relations Association Croatian Information Technology Association

Croatia airlines is awarded JaR 145 certificate in line with the highest European standards

2005

2006

2008

Fully-fledged membership in Star alliance/telephone ticket sales/renewal of IOSa certificate

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Introduction of electronic tickets (e-tix)

Introduction of Web check-in/new hangar

23

22 2009

Milestones

Major awards and recognitions 1999 CRO WEB TOP 100 in the Tourism category (magazine Vidi) 2002 JAR 145 Certificate/among top 100 Croatian websites and top 10 websites in the Tourism and Travels category (magazine Vidi)/19th most successful airline in the world (magazine Airline Business) 2003 1st award for the tourism film in the category Tour Region Film (Tourfilm Festival)

2005 Rebrand 100TM Award for aircraft redesign (Rebrand 100TM, Providence, USA) Zlatna spirala (Golden Spire) - GRAND PRIX for the best company calendar (Slobodna Dalmacija daily) 2006 The highest rated regional member of Star Alliance/the best airline in South-East Europe in 2006 (Finance Central Europe) 2007 Amadeus e-Travel Airline Conference 2007 Award/Superbrands award 2008 Web 100 award in the E-innovation category (magazine Vidi)/Superbrands award

Twenty-millionth passenger carried 2010 Superbrands award/Tesla Silver Egg Award/ award in the web Top100 category for the best mobile web (magazine Vidi)/IATA certificate 2011 Best Buy Award certificate according to a GfK research/Thank-you note for contribution in organising the visits of Pope Benedict XVI to Croatia 2012 The 4th best airline in Eastern Europe (Skytrax)/Superbrands award

New applications/redesign of a319 passenger cabin

2013

1st D-check

2014

25th anniversary of Croatia airlines/ 20th anniversary of inflight magazine Croatia

2014 Among the world’s safest airlines (AirlineRatings.com)

2015

Opening of the 3rd hangar at Zagreb International airport

2015 White Flag for contribution to the protection and preservation water cleanliness and for environmental awareness (GUWAA)

2016

Four new routes

Š. Lugarov

2012

2017

Four new routes/membership in the European Regions airline association (ERa)/25th anniversary of partnership with Lufthansa Technik/1st two-millionth passenger in a year’s period

2016 The best airline in the world by the criteria of helping passengers realise their rights; overall ranking: 8th (Air Help)/The World Airline Awards, the Oscars of the aviation industry: the 4th best airline in Eastern Europe.

Key risks for Croatia Airlines’ business activities

Š. Lugarov

External risks

5. Sustainable business model

Internal risks

Economic surroundings (Croatia and destinations)

Restructuring Plan - monitoring

Transportation charges and flight permits

Human resources

Competition

Capacity management

Star alliance and partnerships

Traffic disturbances

Suppliers

Sales and revenue management

Fuel, currencies, interest rates…

Liquidity risk

In line with its mission and vision, Croatia Airlines applies the business model of a network operator within

A consistent application of an integrated approach to external and internal risk management at Croatia

the airline association Star Alliance that emphasises in all of its key business documents the necessity of

Airlines enables the company to understand the true nature of individual risks, and increases its ability to

maintaining a high level of traffic safety, reliability, quality and punctuality.

undertake relevant measures in a timely manner. By systematically managing all of the abovementioned risks, the company improves the level of its organisational efficiency, while at the same time decreasing

Croatia airlines’ business model

its costs and boosting its competitive position. Further awareness raising and the adoption of the risk

Commercial cooperation - With Star alliance and non-Star alliance members

* Public Service Obligation

Productivity growth - aircraft, labour and fuel

Social responsibility and environmental protection - attitude to passengers, employees and environment

culture at all company levels represents one of the key factors for its sustainable operations in the future.

102-2

Emphasis on scheduled traffic - Domestic traffic - by PSO* rules - International traffic - network carrier’s profitable growth strategy

Optimisation of ownership and operating lease

Optimisation of complementary development strategies - Operating, financial and human resource strategies

102-9 102-10

All major risks the company faced in its operations during 2017 are elaborated in detail in the Business

102-11

Report of the company Croatia Airlines d.d. and Croatia Airlines Group for 2017, page 27.

102-12 102-15 102-16 102-40

Safety and quality

Modernisation of IT systems - Star alliance standards

102-41 102-42 102-43 102-44

5.1 Operational risks and opportunities

102-46 102-47

24

In addition to the abovementioned operational risks, Croatia Airlines has recognised the possibility for its

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development through several key factors. The country’s tourism potential and its access to the European Single market stand out as the key factors.

It is also important to benefit from the commercial cooperation with airlines via codeshare agreements, both within and outside Star Alliance.

Ancillary revenues are another segment of operations in which airlines have in the recent years been finding room for development, as well as for differentiation (baggage fees, seat selection, priority boarding, reservation changes, food and beverages on the flight, award miles, entertainment programmes, Internet access, marketing, etc.).

Systematic and integrated management of the risks to which airlines are exposed is a key dimension of

103-1

corporate governance. All competitors on the market are faced with a series of strategic, operational and

103-2

new e-commerce technologies as sales channels used by an increasing number of potential passengers.

financial risks, whose specificities are related to the characteristics of individual markets, depending on the

103-3

The construction of a new terminal at Franjo Tuđman Airport is an additional stimulus for the company’s

economic development level, features of demand (seasonality, tourism, etc.), current and future level of com-

201-1

development in terms of an increase in its connecting capacities.

petition, and the size and financial strength of individual carriers.

302-1

Taking into consideration the industry’s specific requirements, Croatia Airlines as a rule uses the COSO ERM

302-3

(Committee of Sponsoring Organizations of the Treadway Commission - Enterprise Risk Management) Frame-

302-4

work and ISO 31000:2009 risk management standard as a basis for defining its risk management policy.

305-1

COSO ERM is a process in which risks are monitored on an ongoing basis, in line with the probability of their occurrence and their effect on the realisation of goals.

305-4 306-2

Croatia Airlines sees its development possibilities also in an ever growing application of the Internet and

When taking into consideration the possibilities for the company’s development, one should not ignore social migrations within the EU and an increased demand for goods air transport services.

By having at its disposal three work units for aircraft maintenance, i.e. three hangars, in the conditions of a rising demand for these services, the company has met the prerequisites for an even greater scope of maintenance works on the European airlines’ aircraft at Croatia Airline’s Technical Centre. To this effect,

307-1

the company also plans to expand its line maintenance services to at least two new aircraft types (e.g.

401-1

A320neo, CRJ900/1000, B737, A330, etc.), with the aim of expanding its line maintenance services to

404-2

other companies and opening new line bases.

406-1

The company has also recognised the possibility for its development in an increased demand for the

ments, and are being continuously monitored as prescribed by Croatia Airlines’ quality assurance system.

413-1

training services, and is, therefore, offering commercial training programmes intended for external users.

Within the implementation of the risk management process, major risks have been identified according to

415-1

Ahead of the company are also privatisation processes, which the vast majority of Europe’s traditional car-

their potential influence on Croatia Airlines’ business operations, and the monitoring of those risks should

416-1

riers have already undergone. This is particularly important in the context of capital increase, which would

help mitigate potential negative consequences whenever possible.

417-1

enable the company to renew its aircraft fleet and expand its destinations network.

Given its operations on the Croatian, European and global airline markets, Croatia Airlines is exposed to numerous external and internal risks. Primarily when safety and security of operations, aircraft maintenance and personnel training are concerned, the company’s standards are more stringent than the regulatory require-

5.2 Stakeholders

ing period. The goal of such communication is to achieve the desired position on the market, as well as to provide information on the company, its services and news related to its business

With regard to importance and influence on its business operations, Croatia Airlines has identified and clas-

activities to a wider public and to the current and potential users, in a systematic manner. Its

sified its stakeholders into the following three categories: key stakeholders, stakeholders with significant

utmost goal is to establish and nurture the distinctive and positive image of Croatia Airlines in a

influence, and other stakeholders. In the spirit of preserving a favourable business climate, stakeholder

wider public.

communication is carried out at a professional level and through partner relations throughout the year, both on an ongoing basis and whenever needed.

STAKEHOLDERS

COMMUNICATION CHANNEL

Croatia Airlines has been cooperating with all of its business partners (domestic and foreign) by adhering to

Passengers

Official website Call Centre Fairs and congresses Miles&More loyalty programme Social networks Marketing campaigns Promotional material Inflight magazine CROATIA Inflight entertainment Service quality questionnaires

Service users (cargo, technical, training)

Business correspondence; telephone calls Face-to-face meetings Business reports External user trainings Events

Employees

Intranet e-mail e-news Internal meetings Works Council Workers’ meetings Business reports Education and training Management Board’s memos

Shareholders and investors

Regular and ad hoc meetings Written communication (mail, e-mail) Business reports Face-to-face meetings Official website Official websites of Stock Exchange and the Croatian Financial Services Supervisory Agency (HANFA) Reports on carried out supervision (controls, audits)

Suppliers

Business correspondence (e-mail, mail, telephone) Face-to-face meetings Business reports Fairs Website

Labour unions

Direct communication - meetings Written communication (e-mail, intranet, mail)

the principles of due care and diligence, and taking into account the interests of the owners, i.e. shareholders. The company strives to maintain business cooperation with all of its partners in good faith and to mutual satisfaction. It takes particular care to adhere to the specific international aviation regulations and recommendations, and to the national legal and professional regulations in view of all of its operations.

Below listed are some of the major ways of stakeholder communication and engagement during the report-

STaKEHOLDERS WITH SIGNIFICaNT INFLUENCE

KEY STaKEHOLDERS - Passengers - Cargo, aircraft maintenance and training service buyers - Employees

- Shareholders and investors - Suppliers - Labour unions - Government bodies - academic /business / professional community - Certification bodies and companies

OTHER STaKEHOLDERS - Local community - Financial service providers - airline associations - Media/public

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National and international laws and regulations

Croatia airlines Management

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Facebook - 137,712 fans

Government bodies

Local community

Donations and sponsorships Official website Direct contact; telephone; e-mail; mail Training and internships Organised hangar and aircraft tours

Financial service providers

Business reports Media releases Official website Official websites of Stock Exchange and the Croatian Financial Services Supervisory Agency (HANFA)

Airline associations

Memberships Written communication Conferences, business meetings Business reports

Media/public

Releases Regular and ad hoc press conferences Official website Promotional campaigns; reports; interviews Social networks Incentive travels

Academic/business/professional community

Conferences Scientific and technical papers Memberships

Certification bodies and companies

Business correspondence (e-mail; mail; telephone) Face-to-face meetings Business reports Audits

Twitter - 2,745 followers Instagram - 12,900 followers Google + - 404 followers

Communication with Stakeholders

LinkedIn - 6,369 followers YouTube - 483 subscribers

Written communication (mail, e-mail) Business reports Official website Official websites of Stock Exchange and the Croatian Financial Services Supervisory Agency (HANFA) Reports on carried out supervision (controls, audits) Memberships

5.3 Material aspects of the company’s business activities and their effect on its sustainable development We are aware that in today’s modern business environment one’s business success is not measured by financial results alone; activities in the segment of social responsibility and contribution to sustainable development are of equal importance. Independently of the services we provide, we are aware that our success in connecting Croatia with the rest of the world, as well as our worthy representation of the country directly depend on the trust and satisfaction of our service users; responsibility to our passengers is, therefore, one of the crucial aspects of our service. It is our duty to understand their needs and do our best to meet their expectations.

We have been nurturing successful business cooperation with our business partners, guided by the principles of corporate excellence and business ethics. We strive to establish business cooperation with all of our partners in good faith and to mutual satisfaction. In the segment of social responsibility, Croatia Airlines has recognised safety as one of the key aspects and the basic prerequisite for its business operations. The affirmation of ethical norms, activities and behaviour are among the most important corporate goals of Croatia Airlines. The company’s Anti-corruption Programme is of particular importance for carrying out business activities in line with the ethical principles. Through numerous sponsorships and donations, Croatia Airlines invests into the community in which it does business, as well as into various segments of the society.

Great attention is paid to employee satisfaction, too, since highly motivated and satisfied employees are a key factor for the realisation of our goals. This is why the spirit of mutual respect, cooperation and teamwork is nurtured. The latest resource management trends are being evaluated and applied; we have been measuring employee performance and actively cooperating in their career guidance, training and efficiency improvement.

We have also recognised our role in connecting Croatia with the rest of the world, and in maintaining the route connectivity of its regions throughout the year, thus directly contributing to the country’s economic development.

In addition to our active engagement in strengthening the competitive position of Croatia’s tourism, we have in the past several years been among the top local exporters.

Great attention is also paid to the environmental impact of the company’s activities. Croatia Airlines strives to do business as a socially responsible company, taking into account the by-products of its operations and their impact on the environment and the community. By applying modern technologies and optimising its operations,

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we are reducing a negative impact of aviation activities on the environment, thus contributing to its preservation and the advancement of sustainable development, and fulfilling our obligation towards future generations.

We have defined the content of this Non-financial Statement in line with the requirements of the standards prescribing the preparation of a non-financial statement, and taking into account Croatia

Material aspects

Airlines’ business activity. During the reporting

Social

period, we communicated with our key stake-

Safety and security

holders on an ongoing basis, through our com-

System quality

munication channels (see Table on page 27). A

User satisfaction

task force was formed, comprising the key indi-

Product responsibility

viduals from each sector identified as relevant for the fields and topics covered by the Nonfinancial Statement. In a broader sustainability context, members of the task force reviewed

Training and education Labour relations and decent work Marketing communication

for the first time, in line with the methodology

Local community development

prescribed by the GRI Standards, significant

Freedom of association and collective bargaining

impacts of Croatia Airlines’ activities on the society, environment and economy. Based on this, topics relevant for an overview of the com-

Environmental

pany’s impacts, as well as topics that might af-

Legal frameworks for environmental protection

fect stakeholders’ assessments and decisions,

Emissions and energy

were identified. After defining relevant mate-

Waste management

rial aspects, the following was defined: aspect

Š. Lugarov

Sustainable development goals

boundaries within and outside the Group, key

Economic

stakeholders in Croatia Airlines’ business pro-

Economic impact

cess, and the effect of material aspects on their

Contribution to tourism development

decisions and attitudes.

Procurement process and practice

Direct economic value generated and distributed

Boundaries within the Group

MATERIAL ASPECTS

Boundaries outside the Group

Croatia Airlines’ economic aspects affect the economic position of its stakeholders at both the local, regional All entities within the company

All company service users

All stakeholders Employees

Suppliers

Social, local community, markets served

and national levels.

Economic category

As a for-profit organisation, Croatia Airlines recognises all economic aspects as material, particularly emphasis-

Economic impacts and procurement Contribution to tourism development Procurement process and practice

ing its contribution to the development of Croatia’s tourism and economy as a whole, as well as the well-being of an individual. It regularly calculates and pays taxes, contributions and other levies in line with the applicable

Social category

regulations, thus significantly contributing to the functioning of numerous business activities of importance for

Safety and security System quality User satisfaction Product responsibility Training and education Labour relations and decent work Marketing communication Local community development Freedom of association and collective bargaining

the daily lives of the Croatian citizens. A detailed overview of the company’s financial results is prepared in accordance with the IFRS, the Accounting Act and other applicable legal regulations, as well as the industry rules.

It is set out in the Audit Report and in The Management’s Business Report for 2017, where the key business changes in the observed period are elaborated on, too.

The company’s goal is to develop its business by making the right and timely decisions, with the ultimate goal of ensuring its sustainable development. The company has been managing its economic impact through annual

Environmental category

and medium-term planning, as well as by monitoring the realisation of the anticipated results on a monthly ba-

Emissions and energy Legal frameworks for environmental protection Waste management

sis and undertaking relevant measures in a timely manner in case of major deviations from the plan. The entire company participates in the annual planning process, as each sector/service delivers their framework plans for the year to come, which are consolidated at the Controlling and Internal Audit Sector, after which the defined plan is delivered to the Management Board and the Supervisory Board for approval.

Croatia Airlines’ environmental, social and economic impacts

Highly important for the stakeholders

Economic impact

Croatia Airlines’ economic contribution in 2017

Supply chain process and sustainability Safety and security System quality User satisfaction Local community development

Product responsibility Training and education Labour relations and decent work Legal frameworks for environmental protection

5 a

Contribution to tourism development Marketing communications

30 Important for the stakeholders

Distributed economic value

Generated economic value

31

Revenues from the sale of products and services HRK 1,497.8 million Revenues from the sale in Croatia and abroad Other revenues HRK 336 million Other operating revenues, revenues from subsidies and financial revenues

Waste management

Emissions and energy

Distributed economic value

Freedom of association and collective bargaining

Suppliers HRK 1,595.7 million Costs of raw and other material, service costs and other costs Employees HRK 117.6 million Employees’ net receipts (net salaries, incentives, bonuses)

Important for the environment

Highly important for the environment

All categories that can have a significant economic, environmental and social impact have been recognised by Croatia Airlines as the material aspects. Their recognition is aligned with the company’s mission, vision and activities. All of the above listed material aspects are an integral part of the Business Report for 2017. Croatia Airlines undertakes to implement, analyse and update the material aspects in the future reporting periods, too.

Generated economic value

Public administration HRK 104.3 million VAT, salary contributions, fees and other levies for the public administration and institutions Banks and creditors HRK 8.5 million Interest, fees and other financing costs Community HRK 1.2 million Donations and sponsorships Investments Investments into tangible and intangible assets HRK 154.4 million

Procurement process and practice Croatia Airlines’ economic aspects affect its stakeholders’ economic situation on both the local, regional and national levels.

An ongoing task related to the procurement of goods and services is to find such suppliers that can meet the supply requirements in terms of quality, quantity, prices and deadlines. For this purpose, the company applies both the legally prescribed supplier verification methods and those it finds relevant to suit its purpose.

In line with its Procurement Ordinance, Croatia Airlines applies equal principles to all economic operators when selecting the procurement procedure, as follows: fair competition and equal treatment, non-discrimination, reciprocity, proportionality and transparency, efficiency, free movement of goods capital, and services.

The implementation of the procurement process in the company is decentralised, which means that with the approval of the Management Board, the organisational units initiate and implement the process on their own.

The very procurement process depends on the type of goods, and is carried out in a several different forms of procurement procedures.

When implementing procurement procedures and selecting suppliers, steps are undertaken in line with the company’s Procurement Ordinance, whereby the preparation of a certain procedure, supplier selection, procurement contract award and execution must meet the criteria of timeliness and compliance with the specification requirements, all with the aim of enabling efficient and effective procurement and the cost-effective spending of the funds intended for the procurement.

The Ordinance recommends the application of “green and sustainable procurement” whenever possible given the market circumstances and in line with the company’s Environmental Protection and Energy Efficiency Guidelines. When procuring machines and devices that pose increased hazards, and dangerous substances, the company rigorously applies the occupational health and safety measures.

In view of the correlation between procurement and environmental protection, each procurement of goods and services undergoes assessment from the aspect of environmental impact (if any), and the Procurement

32

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Ordinance recommends that, whenever possible, the elements of green public procurement are applied. All Croatia Airlines’ suppliers have been familiarised with the ISO14001/50001 certificates through an official letter the company sent to each of them, and from the information posted on its website. By these certificates, Croatia Airlines confirms its dedication to preserving the environment and energy, and supporting sustainable

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development. At the same time, it calls upon all of its suppliers to contribute to environmental protection and

33

The company’s Environmental Protection Policy and the official letter to suppliers are available on its web-

energy efficiency through active and preventive activities, and by encouraging their business partners to do the same.

page: https://www.croatiaairlines.com/about-us/corporate-values/sustainable-development?langid=en The prescribed procurement process and its key requirements are integrated in all other procurement sub-

Š. Lugarov

processes at Croatia Airlines.

5.4 Safety and enhancements as business imperatives Safety is of primary importance for all segments of Croatia Airlines’ corporate activities. There can be no compromise with safety. In order to achieve a high safety level, the company invests largely in training the flight, cabin, ground and technical personnel and ensures relevant level of expertise of all other employees. Moreover, it ensures a high level of aircraft maintenance that complies with the highest standards of the global airline industry, adheres to all applicable regulations and standards and continually invests technical resources to ensure that safety criteria are given priority in all business segments.

Quality management system Croatia Airlines has introduced an integrated quality management system compliant with the requirements of the following standards: Air Operation Regulation, EASA Part 145, EASA Part 147, EASA Part M, Aircrew Regulation, EU ETS, ISO 9001, ISO 50001 and ISO 14001.

The quality management system encompasses all organisational units of Croatia Airlines and their related processes.

CROATIA AIRLINES’ QUALITY MANAGEMENT SYSTEM

5

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- Finance and accounting - Legal affairs, human resource and asset management - Information Technology management - Sales and marketing - Network and revenue management - Controlling and internal audit Quality management for non-operating activities

- Flight operations - Ground operations

35

- Flight operations Training Centre

Flight operations quality management

- aircraft maintenance - Engineering and technical support - Technical Training Centre

Technical quality management

1. Air Operation Regulation CR (EU) 965/2012 CR (EU) 965/2012 is a European and Croatian standard laying down requirements to be met by air carriers in civil commercial air transport. Having fulfilled all certification criteria prescribed by the Regulation, on 29 April 2003 the company was for the first time awarded the Air Operator Certificate (AOC) by the Air

Š. Lugarov

Transport Directorate of the Ministry of the Sea, Tourism, Transport and Development (today Croatian Civil Aviation Agency).

2. Aircrew Regulation CR (EU) 1178/2011

tasks contributes to achieving quality goals. All of our employees are familiar with the laws, regulations and

CR (EU) 1178/2012 is a European and Croatian standard laying down requirements related to civil aviation

procedures of the destination countries relevant for the performance of their tasks.

aircrew. Having fulfilled all certification criteria prescribed by the Regulation, the company obtained the ATO

Data protection

certificate − HR.ATO.001 via the AOC, i.e. the approved pilot training organisation.

In line with requirements of the GDPR and risk assessment results, the company regularly implements data protection measures in infrastructural segments of its IT system with the aim of strengthening security mea-

3. Continuing Airworthiness CR (EU) 1321/2014

sures affecting the protection of personal data. It also regularly implements measures for enhancing supervi- Part M

sion mechanisms in its IT system with the aim of identifying the misuse of personal data and making sure

In late 2007, Croatia Airlines fulfilled all requirements and was issued with a 9A Part M certificate with the scope

they are not compromised.

of authorisation specified in Subpart G, allowing it to carry out independent controls of its fleet airworthiness.

For the purpose of harmonising with the GDPR, appropriate measures and system supervision were imple-

Starting from January 2009, the scope of authorisation was further extended to Subpart I, allowing the com-

mented in the company’s IT system in 2017. We continue with further harmonisation with the GDPR.

pany a fully independent review of airworthiness and verification of the aircraft airworthiness certificates. They ERCM (Emergency Response and Crisis Management)

can be obtained on the basis of the Continuing Airworthiness Management Organisation Manual and/or Aircraft Maintenance Organisation Manual, which are fully compliant with EU laws. Upon Croatia’s admission to the EU,

Despite the measures taken at Croatia Airlines to ensure protection and security, the occurrence of unex-

the Croatian approval HR.MG.001 became recognised and valid within the European Union.

pected events should also be taken into account (incidents or aircraft accidents, hijacks, etc.). Given that

- Part 145

the management of such crisis has a major impact on the business continuity and future development of the

In 2001, Croatia Airlines obtained an approval of the aircraft maintenance organisation in accordance with JAR

company, it has founded an Office for Emergency Response and Crisis Management (ERCM).

145, the regulations in force at the time of approval; in 2004 it was replaced by EASA Part 145, an approval

Emergency response and crisis management applies to all of our aircraft regardless of their location, wet-

issued in line with requirements of the European Aviation Safety Agency (EASA). On behalf of EASA, the LBA

lease aircraft, aircraft of our STAR Alliance partners (for the territory of Croatia, Bosnia and Herzegovina, and

(Luftfahrt Bundesamt) experts monitored the compliance with EASA Part 145 requirements through annual

Macedonia) and codeshare partners. The system is based on coordinated actions of ERCM teams, aimed

audits.

at providing an appropriate and efficient response, minimising a negative impact of accidents and ensuring

The company also insisted on holding the equivalent Part 145 certificate, issued by the Air Transport Director-

business continuity.

ate of the Ministry of the Sea, Tourism, Transport and Development and now renewed by the Croatian Civil

5.5 Responsibility to employees

Aviation Agency.

Upon Croatia’s admission to the EU, the EASA Part 145 approval for a non-EU member ceased to be valid and the Croatian approval HR.145.001 became recognised and valid within the European Union.

- Part 147 In 2005, Croatia Airlines obtained an approval of the aircraft maintenance training organisation in accordance with JAR 147, the regulations in force at the time of approval; in 2007 it was replaced by HR Part 147, an approval issued in line with the then valid regulations 9A-Part-147 for all aircraft types within its fleet.

As of 2012, Croatia Airlines holds an approval for basic training and several aircraft types from the aircraft Upon Croatia’s admission to the EU, the Croatian approval HR.147.001 became recognised and valid within the European Union.

4. IOSA Operator under the IATA Operational Safety Audit Programme The International Air Transport Association (IATA) has established a common global safety assessment standard applying to all of its members. An IATA Operational Safety Audit (IOSA) was carried out at Croatia Airlines in 2003, confirming a high level of flight safety. The said certificate is subject to renewal on a biannual basis.

5. ISO 9001 Our approach to quality management is defined by our core document, the Quality Policy. Croatia Airlines established and in November 2003 certified the quality management system in line with the requirements of ISO 9001, the world’s most widely recognised quality management standard.

6. ISO 14001, ISO 50001 By adopting the Environmental Protection and Energy Efficiency Policy, Croatia Airlines undertook to manage its business risks and goals by taking into account care for the environment and improvement of energy efficiency, as an obligation to future generations. In order to deliver on this commitment, in 2016 the company implemented an environmental protection management system according to ISO 14001 and an energy management system according to ISO 50001. Croatia Airlines is highly dedicated to raising employee awareness about the level of responsibility, job importance and the way in which successful performance of job-related

5

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maintenance training organisation.

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Our employees are the company’s greatest asset and the main catalyst of business activities and development. We aim to offer passengers a lot more than just a comfortable flight, by investing in aircraft and ground personnel. This is why we devote a lot of time to training, in order to continuously improve the expertise of all employees. Working at Croatia Airlines offers the opportunity for professional advancement in an international environment, which poses a challenge for all employees and contributes to their satisfaction and motivation. The company builds upon a working culture that promotes cooperation and teamwork, while readiness to learn and develop further is expected from each employee. Highly motivated and satisfied employees are the key factor for ensuring quality, so their motivation and professional interests are important factors when hiring and developing the staff.

The differences between employees with regard to education, skills, personal traits, interests and work motivation indicate quite clearly that achieving sustainable development goals is not a simple or easy task. By aligning individual interests of a large number of people and common interests of the organisation, we strive to organise the work in a way to make each individual satisfied and encourage them to make maximum contribution as a member of the organisation. Human resources management activities aim to enable employees to make use of their knowledge, skills and experience to create an additional value for the company in a way that the most competent person is assigned to the most appropriate workplace.

Employment policy New recruitments, required competencies and training for the successful performance of all work-related tasks are planned on an annual basis. The company regularly offers employees to apply for job vacancies within the company by way of internal hiring procedures and, in addition to regular education necessary for sustaining the business process, organises training courses to improve employee skills and knowledge.

Mirna Žic

During 2017, a total of 178 persons were employed, of whom 84 on a long-term employment contract and 94

Member of the Croatia Airlines’ aircraft

agency workers, primarily cabin staff and aeromechanics. At the end of 2017, there were 42 employees work-

cabin crew

ing on the basis of a long-term employment contract and 28 agency workers. Together with seasonal workers, the fluctuation of employees in 2017 totalled 10%. Sixty cabin staff members were employed in 2017 on a

Dream job

seasonal basis.

“We care for the safety of our pas-

Looking after occupational health and safety of employees

sengers”.

Croatia Airlines has undertaken to protect the health and safety of employees at their workplaces and implement all prescribed occupational safety measures.

In order to protect the health and safety of its employees, in 2013 Croatia Airlines adopted the Occupational Safety Guidelines which, based on the relevant Workplace Hazards Assessment and in line with the relevant activity, technology, jobs performed in special working conditions, equipment, hazardous substances and the number of workers, set out the manner of ensuring workplace safety, related rules and rights, obligations and

Siniša Kralj

responsibilities of an authorised person of the Employer and workers where these issues are not regulated by

Croatia Airlines’ first officer

the Occupational Safety Act, its subordinate regulations and relevant employment contracts.

The company looks after its employees’ health also by organising comprehensive health assessments, flu jabs

Flying is more than just a job.

and dermatology checks.

Moreover, it ensures all workplace protection measures for the employees performing their tasks in special

“Dear passengers, fly with us! You’re

conditions in order to prevent potential harmful impacts.

in safe hands”.

Employee training and education Through regular investments in education, Croatia Airlines develops and strengthens human resources, having recognised since day one that its business activity is at the same time both capital and labour intensive. Due to an extremely sophisticated technology and demanding business processes, each year it invests considerable funds in employee training, especially in the specialist training and maintaining the level of education of the

Marina Hinić Croatia Airlines’ station manager assistant

“I live, sleep and wake up with planes on my mind”.

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Flying is my life.

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flight and cabin staff, as well as of all other employees. Additional information on employee training is available in the Business Report for 2017 of Croatia Airlines d.d. and Croatia Airlines Group, on page 11.

The training process for the employees of Croatia Airlines relies primarily on internal resources, implying the use of its own authorised instructors. In addition to financial savings realised in this way, the nourishment of its own know-how results in reduced dependence on external resources and promotes its corporate culture and business strategy.

The training of Croatia Airlines’ employees takes place on three levels: the training of operative staff, technical staff and non-operative staff.

The Croatia Airlines’ Technical Training Centre is a certified organisation providing aviation technical training under the EASA Part 147 approval. The Technical Training Centre offers a wide range of training solutions for a particular aircraft type and specialist courses for aeronautical engineers and technicians. Aircraft type training

Danijel Crnobrnja Croatia Airlines’ licensed aeromechanic Passionate about planes since childhood.

“We guarantee supreme fleet maintenance”.

is performed according to EASA Part 66 / Part 147, and is intended for Part 66, aircraft class A, B1, B2 or C aircraft maintenance licensees and engineers. All other training courses are carried out according to the Part 66 standard in order to fully meet the needs of Part 145 aircraft maintenance.

The Croatia Airlines’ Flight Operations Training Centre offers a wide range of training courses intended for flight, cabin and ground personnel. All training courses are based on certified programmes harmonised with EASA regulations and approved by the Croatian Civil Aviation Agency. Training courses are held by highly experienced Croatia Airlines’ instructors.

For certain categories of specialised employee training courses, the company uses the services of the IATA (International Air Transport Association) Training Centre and other international specialised training courses,

Ethics Committee

and, if necessary, the services of external experts who carry out in-house programmes. Company employees regularly attend various theme conferences, symposia and work groups, with the aim of getting familiar with

The Committee for Monitoring the Ethics Code Implementation has been active within Croatia Airlines since

operational and commercial innovations within the industry.

2002. Its purpose is to monitor the enforcement, implementation and breach of provisions of the Code of EthAs a national flag carrier, Croatia Airlines organises within its Training Centre a series of training courses

ics in the company’s work, proposing to the Management Board the way of settling problems related to any

needed by travel and commodity agencies for the acquisition of the IATA licence, training courses for the

reported breach of provisions as an independent body. Based on the relevant report, the Management Board

employees of airports, freight forwarders and airline companies.

decides on sanctions that may be applied in the case of non-adherence or breach of ethical principles. Its main goal is to promote moral standards, ethical behaviour and business ethics. By rectifying irregularities occurring

Works Council

as a result of non-adherence to the provisions of the Ethics Code, it aims to promote ethical behaviour to make

In accordance with the regulations related to labour relations, the Works Council comprised of nine members

work and professional activities at the company as pleasant and well-balanced as possible. For this purpose

operates within the company. It provides notifications and consultations, and participates in decision-making

a system for reporting the cases of non-adherence to the Ethics Code has been set up, allowing employees to

processes with regard to economic and social rights of workers. Up to twice a year, the Works Council or-

report any case of breach thereof.

ganises in cooperation with the employer a workers’ meeting in order to inform them about the company’s

The Committee meets when needed, i.e. when it has found out or received a notification from a company em-

current situation and development.

ployee about a possible breach of the provisions of the Ethics Code.

In accordance with the Ethics Code, all employees are required to act with due care and attention, following the

Freedom of association and collective bargaining

principle of integrity. The company pays particular attention to the choice of its business partners and refuses

The following labour unions operate within the company: Croatian Union of Air Traffic Pilots (HSPP), Air Cabin

to do business with those who have committed a serious breach of contractual obligations and the rules of

Staff Union (SKOZ), Independent Professional Union of Croatian Aeromechanics (SSSAH), Independent Croa-

business ethics.

tian Union of Airline Employees (SHSZUZ) and Union of Engineers and Technicians in Aviation (SITUZ). As

In 2017 there were no cases related to the breach of the Ethics Code.

Croatian legal framework sets out that representative unions are authorised for collective bargaining, in 2016

The Ethics Code of Croatia Airlines d.d. has also been published on the company’s website and must be ad-

a new union, Croatia Airlines’ Employees Organisation (ORCA) was founded, gathering the members of the

hered to by all employees.

above-listed pilot, cabin staff and aeromechanic unions.

Negotiations over a new collective bargaining agreement are still underway, and, despite the fact that there is

5.7 Anti-corruption programme

no valid collective bargaining agreement in place, the level of rights of all employees has remained on the level of the 2015 Collective Bargaining Agreement. The majority of employees are union members, but provisions of the collective bargaining agreement apply to all of them (100%).

In early 2010, Croatia Airlines started implementing its Anti-corruption Programme with the aim of improving

The level of rights contained in the collective bargaining agreement regulates many additional benefits of

the legal and institutional framework for efficient and systematic prevention of corruption and the promotion of

employees in order to improve their economic and social status, such as the number of days of annual leave,

zero tolerance to corruption. Any breach or non-adherence to the Anti-corruption Programme is considered a

paid leave, salary bonuses, severance payments, etc., which are above legal minimum. In case of more serious health problems, deaths, childbirths, long-term sicknesses or similar situations requiring individual approach, the company helps its employees to the fullest extent possible by paying part of the medical treatment costs and purchasing the necessary aids, thus protecting their social position.

The company has appointed a person responsible for protecting the dignity of workers and has drawn up a detailed procedure for the protection of dignity in accordance with relevant legal documents regulating the protection from discrimination and harassment. Furthermore, the company regularly adopts an action plan for promoting and ensuring gender equality. There were no discriminatory treatments of employees in 2017.

Special benefits for employees Croatia Airlines takes care of its employees and notifies them via its intranet site about its cooperation with a number of business entities (theatres, sports associations, banks, etc.) and offers them to use their services at a more favourable price (health services, catering and hospitality services, tickets for cultural events, etc.).

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Non-discrimination and employee dignity

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breach of ethical principles and standards.

Primary goals of the Croatia Airlines’ Anti-corruption Programme: - Strengthening work integrity, responsibility and transparency; - Creating conditions for the prevention of corruption on all levels; - Promoting zero tolerance to corruption.

No cases related to corruption have been reported since the foundation of the company. Its Anti-corruption Action Plan has also been published on the company’s website and must be adhered to by all employees.

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5.8 Responsibility to passengers Croatia Airlines’ management regularly monitors customer expectations with regard to the service quality. Being aware that the success of the company directly depends on the satisfaction of passengers and other customers, we make every possible effort to meet or even go beyond customer expectations. In order to achieve this, it is crucial to identify, understand and consistently apply customer demands and all applicable requirements of relevant regulations. Various methods are used to manage risks and opportunities possibly affecting the quality and compliance of our products and services, and consequently customer satisfaction.

5.6 Business ethics

In line with the above, the company creates a flight schedule, adjusts the flight network to the passenger needs, and monitors, measures and manages the processes that are directly focused on creating customer service,

Croatia Airlines and its Management Board deem that raising anti-corruption and ethical awareness of all

such as market research and analysis, measuring customer satisfaction, marketing activities and customer

employees and adopting zero tolerance to corruption is the key for an efficient prevention of corruption.

relationships. Our customers can make oral or written complaints, commendations and suggestions.

The company strives to promote ethical behaviour in all spheres of its business activities: among employees,

We have been carrying out a customer satisfaction survey since 2004. The quality of service should go beyond

toward its customers, business partners, segments of the business public, owners, shareholders, and all

our customers’ expectations and contribute to their loyalty, thus increasing the company’s profitability. The

other entities it cooperates with. Croatia Airlines guarantees equality and equal treatment to all.

survey is carried out throughout the year by way of passenger questionnaire. In 2017, the plan was to ask 6,640 passengers on 664 flights to complete the questionnaire.

Sustainability in all flight segments

CaRBON FOOTPRINT - our flights can be accessed by public transport, by which we are reducing flight carbon footprint left by passengers

CO2 CO2 MaNaGEMENT - the company compensates CO2 through the EU ETS system; data is collected for each flight, then verified and delivered to relevant bodies

kg WaTER MaNaGEMENT - the carrying of as little as 50% of lavatory water is prescribed for airbus flights, by which we are reducing emissions by 40 t of CO2/year/aircraft

WEIGHT MaNaGEMENT -by using an EFB (Electronic Flight Bag) device we have reduced the need for carrying 35 kg of paper documents per aircraft

WEIGHT MaNaGEMENT - by redesigning the cabin on the airbus fleet we have increased the number of available seats from 132 to 144, and from 162 to 174, thus reducing the aircraft weight by some 200 kg, reducing the amount of CO2 emissions per passenger and increasing comfort

FUEL MaNaGEMENT we are introducing single engine taxiing by the Dash8 Q400 fleet at airports enabling this, in 60% of cases, by which we are reducing fuel consumption and engine wear

PROCESS MaNaGEMENT - web check-in saves time and reduces the need for paper documents (printouts)

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COOPERaTION - in cooperation with the Ministry of Environment and Energy in 2017 we created a theme picture book SUPI, intended to educate our youngest passengers about the ozone layer protection

WEIGHT MaNaGEMENT - the mass of our inflight magazine Croatia has been reduced, by which we are making savings on the mass, and consequently on the consumption of fuel and CO2

FUEL MaNaGEMENT - by using advanced flight planning systems (LIDO), we are optimising our flights in view of fuel consumption

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WaSTE MaNaGEMENT - when performing aircraft maintenance activities at our technical base, responsible waste disposal approach is applied

PROMOTION Croatia’s beautiful nature, which we are doing our best to preserve, is promoted on our flights

NOISE MaNaGEMENT - all of our aircraft comply with the Chapter IV standards for aircraft noise; changes that will be made on airbus aircraft in 2018 will enable us to exceed these standards

The aim of our market research is to continuously monitor the entire service delivery process. The main survey

In order to protect the health of the company’s customers, all food and beverages served in aircraft must meet

parameters are customer satisfaction with the service, likelihood of reusing our service and the likelihood of rec-

certain health standards.

ommending Croatia Airlines as a carrier. We also monitor the experience of our customers in relation to the com-

Croatia Airlines regularly checks the preparation of passenger meals. The procurement and storage of ingredi-

petition, and the general opinion of passengers about our brand. We handle product management and reach

ents, preparation and storage of meals and their transport to aircraft are regulated by applicable Croatian laws

decisions about improving our products and services or introducing new ones on the basis of the survey results.

and related ordinances. The basic acts are: Food Act, Act on General Use Items, Veterinary Act, Act on the

We want our passengers to enjoy the benefits of good connectivity, reliability and safety by providing high-

Protection of the Population from Infectious Diseases, and the Act on the Provision of Food Information to Con-

quality service during the flight. We also want to make their travels simpler, so we carry out research on a regular

sumers. Sanitary inspectors are responsible for ensuring the implementation of relevant laws and ordinances.

basis and communicate with our passengers in order to offer them a service that meets their expectations.

Members of the cabin staff must adhere to the provisions of the Act on the Protection of the Population from Infectious Diseases. They possess sanitary certificates and attend a training course on minimum hygiene stan-

Passenger-oriented service

dards every four years.

By segmenting the market, the company tailors its service to meet the needs of individual passenger segments: we aim to provide simple and impeccable business travels; as for the tourist segment, during the summer flight

Product offer information

schedule we expand the flight network to meet the requirements of feeder markets; to the private travel seg-

Information about offers, travel planning and booking, Miles&More programme and all other travel-related infor-

ment we offer high-quality service at a favourable price for many city-break destinations in Europe, and to the

mation can be found on our website www.croatiaairlines.com.

segment of low-fare passengers we offer travelling without luggage at a lower cost.

Existing and potential customers are informed about the Croatia Airlines’ transport service also through planned

In 2017 Croatia Airlines introduced a new product − the tariff class FlyEasy. FlyEasy enables our passengers to

promotional activities, media releases, participation in domestic and international fairs, distribution of promo-

travel cheaper without luggage, i.e. only with hand luggage of up to 8 kg. With this product, Croatia Airlines has

tional material, sponsorships, and direct communication with our sales personnel.

further improved its service.

Croatia Airlines’ General Conditions of Carriage are available to customers at all sales locations, branch offices,

Furthermore, the first phase of the ancillary service sale project (AAAS - Amadeus Airline Ancillary Services) has

and representative offices of Croatia Airlines, and have also been posted on the webpage

been completed by implementing the possibility of purchasing the luggage transportation service. In addition

https://www.croatiaairlines.com/legal-information/general-conditions-of-carriage?langid=en

to the routine practice of charging excess luggage, the FlyEasy tariff enables the charging of the transport of the first handed piece of luggage. This service can be purchased online, at the Call Centre and the company’s

5.9 Support for the community

branch offices, as well as through sales agents, which was a prerequisite for introducing the FlyEasy tariff. The project will continue by working on the implementation of the sale of seats, meals, and upgrade and Time to Think options (online functionality).

We have established ongoing cooperation with the nearby ‘aviation city’ of Velika Gorica and participate in major

Upon implementing the new user interface for the online sale of airline tickets in late 2016, Croatia Airlines be-

events related to aviation. We also cooperate with the Rudolf Perešin Secondary School for Aviation, whose stu-

gan with a series of projects in 2017 within its digital channel development strategies, aimed at improving user

dents complete their internship with our Technical Sector and later get a job there.

experience and online sales. These projects will be implemented during 2018. One of them is a PNR Retrieve

Furthermore, we successfully cooperate with the Faculty of Mechanical Engineering and Naval Architecture, and

functionality that will enable passengers to manage the reservation for which the ticket has already been issued.

They will be able to change their contact data or purchase an additional service if they failed to do so when purchasing the ticket. Furthermore, the company started working on the functionality of online changes of the already issued tickets and charging the fees and potential price differences, all within the ATC Shopper project software will enable the display of offers on the company’s website in real time, with the belonging calendar, so that the users will be able to see the lowest prices by routes and days even before starting the purchase process. In this way, finding the most favourable offer for the desired flight in a certain period will be largely facilitated.

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(Automatic Ticket Shopper). Campaign Management is another digital project, and the implementation of this

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the Faculty of Transport and Traffic Sciences in Zagreb. Some of our employees are visiting lecturers for certain courses held at the Faculty of Transport and Traffic Sciences. As a potential employer, we have been participating in the Career Days for a number of years, donating airline tickets to students within the prize competition we organise on a regular basis. We actively participate in the aviation-related projects of the Faculty of Transport and Traffic Sciences and related expert meetings, and hire its graduates. Our company also participates in the Bura Project, aiming to reduce the impact of the bura wind on aircraft operations at Dubrovnik Airport.

Croatia Airlines encourages humanitarian activities and strives to support, whenever possible, institutions that need humanitarian aid or participate in humanitarian projects. It has been providing direct humanitarian aid by granting cost-free transport for severely ill patients, children or people in need, and by participating in charity ac-

Special meals for passengers

tions by providing free transport. In an effort to contribute to the quality of medical treatment of young patients,

Our most important task is to ensure customer satisfaction with the service provided. All meals and beverages

in 2017 Croatia Airlines donated funds to the Paediatric Clinic of the Clinical Hospital in Osijek, and in late 2017 it

on our flights are free of charge and the service depends on the flight duration and the time of day. Passengers

donated funds also to the Clinical Hospital in Split.

on all business flights and on certain flights in economy class can enjoy special meals that need to be ordered in advance, such as special diet meals in line with health and religious requirements, meals for children, etc.

Croatia Airlines carries out on a regular basis sponsorship and donation activities in the field of culture, science, sports, etc. It conducts its business activities in line with the principles of social responsibility and, when selecting

Health and safety of passengers

projects or events it wishes to sponsor or donate funds for, it takes into account how relevant they are to the wider

Health and safety of passengers, crews and employees is of high priority to Croatia Airlines, and is ensured

community. The company mostly sponsors cultural and sports events.

through an integrated quality management system encompassing all of its business processes and organisa-

Within its projects, the company successfully cooperates with Croatian Air Traffic Control, Geophysics Department

tional units. A more detailed description of the Croatia Airlines’ quality management system can be found on

of the Faculty of Science in Zagreb, Croatian Meteorological and Hydrological Service, Dubrovnik Airport, etc.

page 35 of this Statement. The system is continuously certified and advanced through regular internal supervi-

In line with its internal rules and regulations, Croatia Airlines does not offer sponsorships, donations or grants

sion and the supervision of relevant domestic and international organisations. The supervision encompasses

to political parties and state organisations, or organisations supporting racial, religious, minority or any other

regular audits and inspections of Croatian civil aviation authorities, i.e. Croatian Civil Aviation Agency (CCAA).

discrimination:

Croatia Airlines fully implements professional IATA standards related to air traffic safety.

5.10 Environmental impact of business activities Croatia Airlines is aware of the importance of preserving the environment and natural resources, and of the fact that by rendering its services it makes a considerable impact on the environment. It is, therefore, dedicated to managing business goals and risks all the while taking into account the environmental protection and improvement of energy efficiency.

The impact of Croatia Airlines on the environment can be seen through the activities of its various segments.

The Flight Operations Sector has a major impact in terms of greenhouse gas emissions, and the Technical Sector in terms of hazardous and non-hazardous waste, while other sectors affect the environment on a considerably lower level.

Croatia Airlines has identified greenhouse gas emissions as the most important aspect of environmental impact of its business activities and is focused the most on addressing this issue. Aircraft operate in higher layers of the Earth’s atmosphere and represent the only anthropogenic pollutant that can affect the ozone layer.

Greenhouse gases, particularly CO2, are the cause of climate changes on Earth and as such are subject to the greatest number of regulatory obligations of Croatia Airlines.

In order to mitigate the impact of greenhouse gas emissions, the company has since the very start introduced a system for measuring and monitoring the aircraft fuel consumption, and meets all related regulatory requirements (both domestic and international). Regulatory requirements are regularly evaluated on a monthly basis, thus ensuring their timely implementation in the company’s business operations.

Croatia Airlines endorses the global aviation strategy of environmental protection that is based upon four pillars: investments in technology, optimisation of air traffic and improvement of aviation infrastructure, boosting of operational performance and enhancement of applicable economic measures. Croatia Airlines supports all measures contributing to a reduced load on the environment and reduced aircraft emissions, at the same time boosting the growth and development of the airline industry.

CaRBON FOOTPRINT

FLEET

5

aircraft

average fleet age

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12

13.6 years

189

CO2

thousands t CO2e

DISTRIBUTION OF CO2 EMISSIONS ZaGREB

SPLIT

a 73-tonne a320: 33 kg of CO2 per passenger

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aircraft

99,6%

Other

0,4%

a 70-tonne a319: 38 kg of CO2 per passenger a 30-tonne Dash8: 30 kg of CO2 per passenger an average vehicle of 1.5 tonnes: 46 kg of CO2 per passenger

ELECTRICaL ENERGY NOISE

ICaO Chapter IV 100%

P. Strmečki

GaS +707% compared to 2016

HEaTING OIL

HEaTING OIL -76% compared to 2016

1,8 MWh +1.4% compared to 2016

MOTOR FUELS

48 t On the level of 2016

From a global perspective, the European Union leads the way when it comes to creating and implementing

abled the company to check and monitor relevant indicators and facilitated the identification of related goals.

environmental protection objectives, and so does the Republic of Croatia as an EU member state, and Croatia

In this way the company introduces positive business practices in its processes.

Airlines as a company operating in this area. Croatia Airlines has been participating in the EU ETS process

Croatia Airlines implements several policies within its management system. The first and most important one

since 2010. In 2018, it joined the Swiss emissions trading scheme, while in 2019 it plans to join the CORSIA

is the Safety Policy, followed by the Quality Assurance Policy, Aircraft Maintenance Quality Policy, Protection

process, thus expanding its efforts to reduce greenhouse gas emissions to a global level.

Policy and the Environmental Protection and Energy Efficiency Policy.

The activities related to the reduction of greenhouse gas emissions directly affect the company’s economic

By introducing ISO 50001 (Energy Management System) and ISO 14001 (Environmental Management System)

balance. A reduction of fuel consumption in tonnes through technical and operational activities reduces the

systems in late 2016, Croatia Airlines joined a small circle of global airline companies with an implemented

cost of fuel. Consequently, the level of emissions is lower and less money is needed to buy carbon emissions

range of ISO management systems (ISO 9001/14001/50001). Their introduction and subsequent monitoring

credits, so every initiative aimed at reducing fuel consumption results in a double impact: environmental and

have resulted in certain savings, shown by the indicators for which 2015 is taken as the base year.

economic. Moreover, various fees for waste, emissions and noise make part of the service price with regard to every flight destination of Croatia Airlines, thus directly affecting its financial operations.

The company adheres to all applicable legal regulations on environmental protection and energy preservation

Besides limiting greenhouse gas emissions through the EU ETS system, it is also important to consider the

on the national and international level, including the waste management.

relationship between the passenger growth and emissions. The passenger growth with every flight positively affects the emission indicators per passenger seat at a certain distance, as the volume of emissions does not

The company also strives to implement new technologies and measures for improving energy performance

rise proportionally with the number of passengers. For example, by comparing the average aircraft and car

on a permanent basis, monitor and reduce greenhouse gas emissions and raise awareness about efficient

occupancy rate we can conclude that, in terms of emissions, air travel is often more environmentally friendly.

environmental protection and the strengthening of energy efficiency standards through employee education.

Physical properties of aircraft/vehicles and the fact that usually only one traveller, the driver, travels by car

Material aspects have been harmonised also with the business partners using the same infrastructure (for ex-

should also be taken into account. As we witness a growing number of technical and technological initiatives

ample, with Zagreb International Airport, with which Croatia Airlines shares the water drainage infrastructure).

in the automotive industry, the airline industry tries to keep pace and be competitive in environmental terms as well.

The application of all principles of sustainable development is limited by certain restrictions arising from the

Croatia Airlines is engaged in fulfilling all regulatory requirements and improving its business processes in line

particular nature of air transport. This primarily applies to the Safety Policy, regarded the most important policy

with available capacities in order to reduce, to the extent possible, their impact on the environment. Further-

on whose principles the quality assurance policy and the environmental protection and energy efficiency

more, it strives to improve its attitude toward the environment by adopting proposals of other stakeholders.

policy are based.

Two new aircraft of a partner company were leased in 2017 in order to expand the destinations network, which

In 2017, Croatia Airlines recorded no cases of non-compliance with the laws regulating environmental protec-

also contributed to lower emission rates per passenger.

tion and energy consumption.

Environmental impacts are monitored through the company’s environmental and energy management system certified in accordance with international ISO14001 and ISO50001 standards. It encompasses all activities

Due to the particular nature of its business operations, consumption of energy and resources within Croatia

that are carried out in a number of the company’s business sectors with regard to the environmental protection

Airlines is analysed in three separate segments: flight operations, Technical Sector, and administrative seg-

and preservation of energy. The growth of Croatia Airlines is based on the principles of sustainable development in the following key areas: fleet selection and application of relevant procedures aimed at reducing fuel consumption, CO2 emissions and noise.

As the aircraft fuel consumption represents the most prominent aspect of environmental impact and energy provement of our technical resources (primarily in relation to aircraft), the company strives to enhance energy efficiency.

It is expected that during 2022 new A320neo aircraft will be delivered to replace the existing fleet. Estimates show that fuel consumption per passenger seat will thus be reduced by some 20%.

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consumption of Croatia Airlines, the biggest improvements are expected in this very segment. With each im-

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ment of the company.

Flight operations consume most energy at Croatia Airlines, with regulations and procedures related to safe air traffic having absolute priority. Due to congested airspace, the EU carriers are constrained to act in accordance with many factors of air traffic, which sometimes hinders the implementation of ecological approach to business.

For example, in 2017 Croatia Airlines introduced four new routes and leased two new CRJ1000 aircraft, which resulted in an increased energy efficiency per passenger seat, i.e. reduced emission rates per passenger, but also brought an increase in the absolute amount of CO2 emissions. A standard EU ETS MRV method was used

In the upcoming period, the company plans to modify the existing Airbus fleet by installing wake vortex gen-

to collect CO2 emissions data through the use of 3.15 emission factor, meaning that one tonne of aviation fuel

erators on aircraft wings, reducing the noise from take-off and landing operations by some 9dB in accordance

produces 3.15 tonnes of CO2. The consumption of aircraft fuel in tonnes is considered a business secret and

with the stakeholder requirements.

as such is not stated herein.

The introduction of the environmental protection and energy management system in 2016 was followed by the introduction of the related process measurements and supervision. Many segments show improving trends.

Energy and water consumption

In 2017, a project of gasification of the Technical Sector was completed, converting from heating oil to a more environmentally friendly energy-generating product.

In 2017, the company’s administrative segment consumed 1% less electricity compared to 2016, or 389,482

Alternative fuels represent a practical challenge, especially in view of their price and the fact that on the

kWh. We should mention here that the electricity used by Croatia Airlines holds an HEP ZelEn certificate,

market they cannot be bought in larger quantities, while in Croatia they are not available at all. The company

meaning that it is produced from renewable sources.

participates in the work of professional alliances to get information on the availability and possibilities of using

The Technical Sector consumed 1.413,338 kWh during various aircraft maintenance activities, or 2% more

alternative fuels.

compared to the previous year. Such an increase in the consumption of electricity occurred due to the complexity of certain aircraft maintenance activities. It should be noted here that aircraft maintenance activities are

Environmental protection management systems have been set up to ensure more efficient monitoring of en-

focused first on the quality of work and safety, and only then on energy efficiency.

vironmental protection and better coordination at the company level. The introduction of the system has en-

Along with maintaining Croatia Airlines’ fleet, the Technical Sector also performs maintenance works for other

In 2017, aircraft of other companies were used on a short-term basis due to disruptions in operations (a 0.26% share in total BH) and their impact on emissions was not included in the overall emissions of Croatia Airlines. An analysis of CO2 emissions per revenue passenger kilometre (RPK) as an indicator of energy consumption and volume of emissions shows an improvement due to increased cabin occupancy and successfully implemented saving measures with regard to aircraft.

The CRJ 1000 aircraft leased for the first time in 2017 also show a very good result.

In line with the adopted performance indicator on the volume of CO2 emissions per passenger kilometre, in 2017 the Flight Operations Sector recorded a significant improvement, resulting from the implementation of fuel saving measures and an increase in the number of passengers and distances flown.

As during the 2017 summer season the company operated flights also on new CRJ1000 aircraft of its partner company, their traffic performance was also monitored. The results were positive, and the performance moni-

companies. Considering that the demand for such works is growing, we can expect an increase in the use of resources and the amount of hazardous and non-hazardous waste. The segment of basic aircraft maintenance (major check-ups) shows the biggest growth.

The company’s administrative segment recorded a decrease in the consumption of electricity, while the consumption of gas (used for heating) increased despite higher average temperatures during the year, indicating that an analysis should be carried out in view of potential savings. According to the data of the Croatian Meteorological and Hydrological Service, in 2016 the average annual temperature was 13.1 °C, while in 2017 it was 13.6 °C. ing oil with gas, a more environmentally friendly energy-generating product. In 2017, Croatia Airlines almost totally abandoned the use of heating oil and thus considerably reduced the environmental impact, as can be seen from the data about the emission rates contained herein.

As for water consumption, in June 2017 a separate water meter was installed for the administrative building,

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Such a huge increase in gas consumption within the Technical Sector occurred as a result of replacing heat-

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toring will continue in 2018. The applied calculation methodology was developed on the basis of official traffic performance statistics of Croatia Airlines, verified data for Croatia Airlines from the EU ETS database and the selected CO2/RPK indicator, most commonly used in the airline industry for presenting the above data.

The factor used to calculate the total direct emissions of other energy-generating products in use was the GHG Protocol Corporate Standard, developed by the World Resources Institute (WRI) and the World Business Council on Sustainable Development (WBCSD) in accordance with IPCC 2006 Guidelines for National Greenhouse Gas Inventories.

The total direct emissions of the company in 2017 with regard to consumed energy-generating products

so new and accurate data about the base value of consumption will be available as early as 2018.

amounted to 715,735 CO2. In 2016, the volume of direct emissions was 848,426 kg CO2.

At the end of 2017, the average age of the vehicle fleet was 11.3 years, which contributed to the expected in-

Such a significant improvement occurred as a result of introducing gas as an energy-generating product to

crease of consumption indicators. In 2016, the introduction of a GPS vehicle tracking system enabled a more

the Technical Sector during 2016 and 2017. In 2015, the base year, they amounted to 833,272 kg CO2. Since

precise calculation of fuel consumption, which continued also in 2017. The company plans to eliminate diesel vehicles as they release a higher amount of nitrogen oxides affecting the air quality at a local level.

the company uses the HEP ZelEn certified electricity, there are no greenhouse gas emissions for this segment, which is a huge business achievement.

The fact that vehicles of the Technical Sector are used for a specific purpose requires the adherence to ad-

Through its product ZelEn, HEP Supply sells the electricity generated in HEP’s hydro power plants registered

ditional safety rules related to vehicle movements on airport surfaces; nevertheless, the consumption index

in the relevant database of guarantees of origin, and delivers such proof of origin to its customers based

shows a considerable decrease due to the optimisation of Croatia Airlines’ operations on the new terminal of

on the Methodology for Establishing the Origin of Electricity (OG 133/14). Croatian Energy Market Operator

Zagreb International Airport.

(HROTE) is responsible for issuing guarantees of origin and for setting up and managing a database of guarantees of origin.

CO2 emissions

In 2017, Croatia Airlines’ cumulative CO2 emission impact amounted to 189.103,422 kg CO2.

The company’s CO2 emissions in 2017 include those from aircraft and those occurring due to consumption

aircraft units in 2017, resulting from the expansion of the destinations network. However, the bigger picture

of various energy-generating products. As expected, aircraft traffic accounts for the largest share in CO2 emissions.

Compared to 2016, the total volume of CO2 rose by 6.4% due to an increase in the number of operating shows evident improvements, i.e. sustainable growth, given that CO2 emission indicators per RPK for each individual type of aircraft recorded a decline ranging from 2.7% to 8.1%.

Waste

6. GRI index

Waste is delivered to an authorised waste collector and data are entered into the Hazardous Waste Register with regard to the following: the quantity, the manner in which it has been produced and the methods of waste management, in accordance with relevant laws on waste management.

At the general organisational level, the company successfully engaged in rationalising the consumption of stationery and office supplies. Where applicable, the print default on single-model printers was set on both pages, which resulted in a 2.6% decrease in consumption, with an average monthly consumption of 68,524 sheets of paper in the period since the beginning of measurements, i.e. from May until December 2016/2017.

In addition to the above, the employees were familiarised with the need for conscious printing, by which the company makes savings on both the input (paper, toner, electricity) and output (waste management, archiving as by-products) resources.

Croatia Airlines has in place a waste disposal system and pays equal attention to the managing of both hazardous and

non-hazardous

waste.

Along with communal waste, separate waste collection can be carried out within the Technical Sector, the biggest waste producer, and the appropriate management thereof eliminates the impact on the environment and ensures a sustainable development of the company’s technical activities. In 2017 the waste management capacity was further increased and more precise waste separation enabled. According to the waste documentation, in 2017 the Technical Sector located in Zagreb produced 41,352 kg of hazardous waste (as a result of more complex works on the company’s fleet and those performed on third parties’ aircraft) and 23,692 kg of non-hazardous waste; it should be noted that such a considerable increase in this category means that a larger quantity of waste was separated for reuse, while the percentage of the properly handled waste remained at 100%.

The collection of communal waste in administrative segments is performed in accordance with applicable regulations on the state and local level, with separate waste collection depending on the capacity of a local community. In this segment, paper represents the most significant type of waste: 11,620 kg of paper were collected in 2017, or 10,355 kg more compared to the previous year, which required the purchase of a larger waste paper container. The company looks forward to a thorough implementation of waste management plans reduce the impact on the environment.

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64% incineration (hazardous waste and contaminated plastics)

23% recycling (paper and clean plastics)

6

a

in the City of Zagreb and the Zagreb County as this will increase the percentage of waste separation and thus

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13% other 102-55