Nonfinancial Statement 2021

Non-financial Statement for 2021

balance development sustainability responsibility

2

Successful and satisfied employees M. Šarić

make a successful company.

Contents

A 3

1.

A FOREWORD BY THE PRESIDENT AND CEO

5

2.

ABOUT THE NON-FINANCIAL STATEMENT

6

2.1.

ENTITIES INCLUDED IN CONSOLIDATED FINANCIAL STATEMENTS

6

3.

BUSINESS OPERATIONS DURING THE PANDEMIC

7

4.

KEY PERFORMANCE INDICATORS

8

5.

ABOUT THE ORGANISATION

11

5.1.

COMPANY NAME AND HEAD OFFICE

11

5.2.

OWNERSHIP AND LEGAL FORM

11

5.3.

MAJOR SHAREHOLDERS

11

5.4.

MANAGEMENT STRUCTURE

12

5.5.

SIGNIFICANT CHANGES DURING THE REPORTING PERIOD

12

5.6.

CROATIA AIRLINES AS A BRAND

12

5.7.

FLEET AND CAPACITIES

14

5.8.

KEY SERVICES AND ACTIVITIES

16

5.9.

COUNTRIES/MARKETS SERVED

16

5.10.

DESTINATIONS/AIRPORTS/ROUTES

16

5.11.

OTHER SERVICES

17

5.12.

INFORMATION ON EMPLOYEES

18

5.13.

SUPPLY CHAIN

20

5.14.

MEMBERSHIP IN PROFESSIONAL ASSOCIATIONS AND ORGANISATIONS

22

5.15.

COMPANY HISTORY

24

6.

SUSTAINABLE BUSINESS MODEL

26

6.1.

OPERATIONAL RISKS AND OPPORTUNITIES

27

6.2.

STAKEHOLDERS

30

6.3.

MATERIAL ASPECTS OF THE COMPANY’S BUSINESS ACTIVITIES AND THEIR EFFECT ON SUSTAINABLE DEVELOPMENT

36

6.4.

EU TAXONOMY

42

6.5.

SAFETY AND ADVANCEMENT AS BUSINESS IMPERATIVES

43

6.6.

RESPONSIBILITY TO EMPLOYEES

48

6.7.

BUSINESS ETHICS

52

6.8.

ANTI-CORRUPTION PROGRAMME

52

6.9.

RESPONSIBILITY TO PASSENGERS

52

6.10.

HELPING THE COMMUNITY THROUGH COOPERATION PROJECTS

55

6.11.

ENVIRONMENTAL IMPACT OF BUSINESS ACTIVITIES

57

7.

GRI INDEX

65

We are guided by the principles of responsibility, ethical conduct, transparency and best business practices.

D. Fabijanić

4

102-14

A quite challenging and unusual year of 2021, marked by the continued coronavirus pandemic, is behind us. It forced us to acquire new skills, called for quick adjustments and required us to focus, more than ever before, on developing socially responsible business and nurturing excellence in all spheres of our operations.

It encouraged us to think outside the box and adapt to the circumstances. This was reflected in changes to our flight schedule, which were sometimes made even on a daily basis.

During the summer season, Croatia Airlines’ aircraft flew to 19 airports in 18 European metropolises where, owing to the close and long-lasting cooperation with the partners from the Star Alliance association and other airlines, our passengers were offered a number of linked flights to their desired destinations all over the world.

It should also be noted that, in the light of increased de-

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A 5

mand for air travel and our passengers’ needs, during the summer season we ensured connectivity between European destinations and Croatia and strongly supported Croatia’s tourism by offering more than 80,000 seats a month and more than 200 charter flights from Austria, Italy, Ireland and Scandinavia, organised in cooperation with a number of tour operators. The fact that in 2021 we took a step forward in supporting Slavonian residents and entrepreneurs by connecting this region directly with Germany makes us especially proud. Direct flights between Osijek and Munich created conditions for boosting the potential for tourism and economic development of the Osijek-Baranja County and the City of Osijek, as well as for enhancing business activities and relevance of Osijek Airport. The new route reaffirms our commitment to connecting all Croatian regions, and our flag carrier role in the traffic infrastructure of the Republic of Croatia. In 2021 we also celebrated the 30th anniversary of Croatia Airlines’ first passenger flight, operated on May 5 1991 between Zagreb and Split.

Not only did it mark the beginning of scheduled air traffic within Croatia, but also the realisation of a dream about the Croatian flag carrier.

In order to further boost Croatia’s image of a safe European destination during the coronavirus pandemic, Croatia Airlines obtained a national designation of safety protocols in tourism and hospitality, Safe stay in Croatia, which guarantees our passengers compliance with national and global health and hygiene standards, and safe flights to their desired destinations. Being aware that the online world has been playing an increasingly important role in the lives of our passengers and the Company’s business, in 2021 we redesigned our website and further digitalised our operations to continue optimising our sales processes to the satisfaction of our passengers.

In 2021, we carried on with the implementation of environmental protection policies as well as with the revision of the existing EU directives within the Fit for 55 package and the drafting of new ones. The Company’s membership in the largest airline alliance, Star Alliance, encompasses participation in achieving common goals: waste reduction, use of sustainable fuels, and reduction of emissions and influence on supply chain. We expect that the coming years will, along with continuous progress, see further implementation of the above policies.

In cooperation with the selected consultancy firm, in 2021 we defined our Post-COVID Strategy, the implementation of which will ensure sustainable operations, increase efficiency and maintain the necessary level of competitiveness, and represent the new development cycle for Croatia Airlines, which will encompass fleet renewal and optimisation of the flights network throughout the year.

We will remain fully dedicated to our passengers and to connecting the Republic of Croatia with the rest of the world all year round, and along these lines we will actively support the improvement of the country’s tourism and economic position. We will continue to adapt to the market needs and develop new products and services, thus creating new possibilities to the satisfaction of our stakeholders.

Yours respectfully, Jasmin Bajić President and CEO

A. Grubelić

Dear readers!

2. ABOUT THE NON-FINANCIAL STATEMENT Croatia Airlines’ annual report on corporate social responsibility covers the period from 1 January to 31 December 2021. It has been drawn up in line with the Sustainability Reporting Guidelines (Global Reporting Initiative - GRI Standards) - the Core option.

As Croatia Airlines is strongly focused on sustainable business operations and corporate social responsibility, it already regularly covered these topics in its business reports.

This Statement has been prepared in PDF and posted on the Company’s publicly available website http:// www.croatiaairlines.com/hr.

For any questions, clarifications or suggestions related to Croatia Airlines’ Non-financial Statement please contact us at the following email 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 associate companies: Obzor putovanja d.o.o., 100%-owned by Croatia Airlines d.d., and Amadeus Croatia d.d., 95%-owned by Croatia Airlines d.d.

The Obzor putovanja travel agency was founded in 1993. It provides top-quality services that include organisation of individual or group travels within Croatia and abroad, sale of domestic and international airline tickets (IATA licence), arrangement of hotel accommodation in Croatia and abroad, cultural tourism, organisation of conferences, etc.

Being part of a joint booking system of European airlines, Amadeus Croatia is a national marketing company responsible for the local market, i.e. for the distribution, presentation and all other matters related to

2

Amadeus, with rights to operate in the market of Bosnia and Herzegovina as well.

Total revenues and expenses of the associate companies make up less than 1% of consolidated revenues and expenses, with an insignificant effect of their operations on those of Croatia Airlines. The data set out in the Non-financial Statement pertain to Croatia Airlines d.d. alone

6

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

J. Škof

102-52 102-53 102-54

3. BUSINESS OPERATIONS DURING THE PANDEMIC The airline industry has over the past two years been faced with the worst crisis ever, resulting from the global COVID-19 pandemic. Although the traffic scope is gradually increasing, the possibility of emergence of new virus strains raises new concerns and the traffic scope is not expected to reach the pre-crisis level before 2024. Airlines should in the upcoming period focus on the rationalisation of costs and development of post-COVID business strategies.

Throughout the COVID-19 crisis Croatia Airlines has continued to monitor the epidemiological situation and concrete demand in certain markets on an everyday basis, and to optimise its flight schedule accordingly, both in terms of frequencies and aircraft capacities. In 2021, Croatia Airlines gradually reintroduced routes and increased the number of frequencies, in line with the demand and the epidemiological measures of individual countries.

The planning of scheduled traffic depended on the following external factors beyond the Company’s control: • Instructions, restrictions, bans and other measures introduced by local civil protection headquarters and those of other countries, directly affecting the possibility for travels in domestic and international scheduled traffic, with the routes that depend on point to point demand being particularly sensitive; • Vaccination coverage and application of measures that should facilitate or simplify travels (COVID vaccine passports); • Flexible flight network planning along with demand projections related to certain types of travel; • Realisation of optimum load and an average fare in the conditions of reduced aircraft capacity due to the social distancing measures.

Just like in the previous year, in 2021 Croatia Airlines’ Crisis Management and Emergency Response Office actively followed the developments, and planned and undertook all necessary steps to protect the health and safety of its passengers, crew members and other employees to the greatest possible extent.

All premises and aircraft were disinfected and cabin filters checked on a regular basis. The Company also introduced additional protective measures. This way it protected the health of both its employees and pa-

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ssengers, making the public health interest its priority. In order to safeguard the health of our employees at workplace during the epidemic, in 2021 the Company introduced more flexible work forms, such as occasional remote work, and shift work for non-operative employees. The COVID-19 crisis brought about numerous adjustments to the execution of business processes through a variety of online platforms (Teams, Zoom, etc.).

4. KEY PERFORMANCE INDICATORS The crisis related to the coronavirus pandemic still remains the biggest immediate threat to airline ope-

Three core activities:

rations. After the devastating year of 2020, uncertainties and precautions marked 2021 as well. The tourism sector started recovering after the countries reopened borders for tourist travels in late June.

Passenger transport

However, air traffic faced a much slower pace of recovery compared to other modes of transport. It is, therefore, still among the most affected sectors. In 2021, during the most severe period of crisis caused by the coronavirus pandemic, Croatia Airlines continued connecting Croatia with the rest of the world, by gradually reintroducing routes and increasing the number of frequencies in line with the demand and the epidemiological measures of individual countries.

Cargo transport

Altogether 16,507 flights were operated in 2021, which is a 26% rise compared to the year before. When compared to 2019, the Company recorded a 42% fall in flights. We transported a total of 787,860 passengers, or 27% more than in 2020. Despite some positive shifts compared to 2020, Croatia Airlines transported 64% passengers less compared to pre-pandemic year of 2019, and this clearly points to the ongoing negative effects of the crisis on its results. It was not until the third quarter that a more significant shift was made compared to 2020, but still far from the results of the pre-pandemic 2019.

Aircraft maintenance

In such market conditions, the Company’s operating loss at the end of 2021 totalled HRK 249.7 million. Its net loss for the business year totalled HRK 288.2 million, which is HRK 70 million less compared to 2020.

The Company’s operating revenues were 12% higher compared to 2020, as a result of a 30% growth in passenger revenues. However, they fell by as much as 60% compared to 2019, which clearly attests to a slow recovery of the airline market from the crisis caused by the COVID-19 pandemic, and reflects in Croatia Airlines’ results. Besides the evident growth of the total revenues compared to 2020, the very revenue structure also noticeably changed: passenger revenues made up 71% of the operating revenues (in 2020: 61%), other revenues made up 28% (in 2020: 38%), while the share of cargo transport revenues remained on the same level.

Croatia Airlines’ operating costs were on the level of 2020. As for the structure of operating expenses, the share of variable costs rose amidst the higher level of block time, while the share of fixed costs decreased compared to 2020. More detailed information on the Company’s financial operations are available in its Annual Business Report posted on its website. https://www.croatiaairlines.com/company/corporate-governance

103-3

Operating revenues - structure

passengers 71% cargo

1%

other

28%

8

Operating expenses - structure

9%

Flight costs

24%

Promotion and sales

Maintenance

14%

General and administrative costs 8%

Passenger services Air traffic services

5% 20%

Depreciation and amortization Other expenses

19% 1%

Key indicators 2021

2020

2019

2021/2020 (%)

2020/2019 (%)

Operating revenues (HRK 000)

848,172

759,495

1,728,289

11.7%

-56.1%

Operating expenses (HRK 000)

1,097,853

1,094,869

1,783,673

0.3%

-38.6%

EBIT (HRK 000)

-249,681

-335,374

-55,384

-25.6%

505.5%

Net result (HRK 000)

-288,217

-358,225

-79,359

-19.5%

351.4%

-34,0

-47,2

-4,6

-28.0%

927.2%

900

775

1,730

16.2%

-55.2%

60,906

43,849

165,615

38.9%

-73.5%

1,409,283

1,667,528

1,407,119

-15.5%

18.5%

-71,536

215,930

224,890

-

-4.0%

17,004

69,423

64,156

-75.5%

8.2%

Number of seats offered (million)

1,6

1,3

3,1

25.2%

-58.9%

Fleet gross carrying capacity (t)

293

293

251

0.0%

16.7%

Fleet net carrying capacity (t)

159

159

143

0.0%

11.6%

788

618

2,179

27.5%

-71.6%

Number of flights

16,507

13,052

28,432

26.5%

-54.1%

Flights in km (thousand)

10,279

8,004

18,934

28.4%

-57.7%

1,320

1,442

2,135

-8.5%

-32.5%

PLF %

49,9

49,6

73,6

0.6%

-32.6%

WLF %

48,5

48,4

70,3

0.2%

-31.2%

ASK (million)

1,128

871

2,277

29.5%

-61.7%

RPK (million)

562

432

1,676

30.1%

-74.2%

FINANCIAL INDICATORS

Net margin % Operating revenue per employee (HRK 000) RTK/EMPLOYEE (000) Assets value (HRK 000) Capital and reserves (HRK 000) Investments (HRK 000) CAPACITIES

TRAFFIC INDICATORS Passengers carried (thousand)

Cargo transported (t)

4

A 9

CTN ICAO code

16,507 flights

OU IATA code

788 thousand passengers

13

aircraft on 31 Dec 2021

45 flights per day

26

14

25

airports

countries

destinations

920 112.7 employees on 31 Dec 2021

million EUR in sales revenues

Miles& More frequent-flyer award programme

global airline association

We pay special attention to environmental conservation in order to ensure a better future for everyone.

10

102-1 102-2 102-3 102-4 102-5 102-6 102-8 102-9

Š. Lugarov

102-10 102-13 102-18 401-3

5. ABOUT THE ORGANISATION 5.1. Company name and head office Croatia Airlines d.d.

The Company’s head office is in Zagreb, Bani 75 b, Buzin.

5.2. Ownership and legal form Croatia Airlines d.d. is a joint-stock company majority-owned by the state. Its share capital has been fully paid up.

On 31 December 2021, the Company’s share capital amounted to HRK 627,879,530 and was divided into 62,787,953 ordinary shares with the nominal value of HRK 10.

On 15 January 2021, upon entry into the court register the Company’s capital was increased to the above sum, in cash contribution, based on a decision of the General Assembly. The capital of HRK 277,879,530 was increased by HRK 350,000,000 through the issuance of 35,000,000 new registered shares.

5.3. Major shareholders Number of shares

Portion in share capital (in %)

62,010,821

98.762

ZAGREB AIRPORT d.o.o.

477,121

0.760

HPB FOR THE REPUBLIC OF CROATIA

173,768

0.277

22,000

0.035

CROATIA INSURANCE d.d. (JSC)

7,165

0.011

CROATIAN LOTERRY d.o.o. (LTD)

4,000

0.006

ASTRA INTERNATIONAL D.D. (JSC) IN BANKRUPTCY

3,682

0.006

HP d.d. (JSC)

2,750

0.004

TURISTHOTEL d.d. (JSC)

2,090

0.003

TANKERKOMERC d.d. (JSC)

2,090

0.003

82,466

0.031

62,787,953

100

Shareholder

REPUBLIC OF CROATIA

JANAF d.d. (JSC)

5

A

OTHER Total

Š. Lugarov

11

5.4. Management structure Shareholders

Shareholders’ General Assembly

Supervisory Board

Audit Committee

Management Board

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

The scope of authority of the General Assembly is prescribed by the Companies Act and the Company’s Articles of Association.

SUPERVISORY BOARD - a body whose main task is to supervise the Management Board in running the Company’s business operations. According to the Articles of Association, the Supervisory Board is made up of five members, one of whom is the representative of employees. Members of the Supervisory Board receive remuneration in accordance with the Decision on Remuneration of Members of the Supervisory Board and the Management Board. In 2021, the Supervisory Board held nine regular meetings and three ad hoc meetings (digital decision-making, without meetings being held). The Audit Committee held six meetings in 2021. It presents its conclusions to the Supervisory Board orally, within regular meetings.

COMPANY MANAGEMENT - manages the Company’s business activities. Its competence and role are regulated by the Companies Act, the Company’s Articles of Association and other internal rules and regulations. No changes occurred within the Company’s Management Board in 2021. The Company applies the Corporate Governance Code of Zagrebačka burza d.d. (Zagreb Stock Exchange) and the Corporate Code of Governance of Companies in Which the Republic of Croatia has Shares or Interests, and fulfils all obligations arising therefrom.

5.5. Significant changes during the reporting period The crisis related to the coronavirus pandemic still remains the biggest immediate threat to Croatia Airlines’ business operations. In 2020, during the most severe period of crisis caused by the coronavirus pandemic, Croatia Airlines continued connecting Croatia with the rest of the world. It followed through with its mission in 2021, by gradually reintroducing routes and increasing the number of frequencies in line with the demand and the epidemiological measures of individual countries. The year of 2021 was also marked by uncertainties and precautions.

Within the process of recovery from the COVID-19 crisis, in both the second and third quarters Croatia Airlines continued cooperating with Boston Consulting Group (BCG), a leading global strategy consulting firm, on drafting a post-COVID strategy to define the strategic initiatives to be implemented in the following three years in order to ensure long-term sustainable operations.

5.6. Croatia Airlines as a brand Today, Croatia Airlines is a distinctive brand in both Europe and the rest of the world, and actively contributes to the development of Croatia’s tourism.

The Company branding started parallel with its founding (7 August 1989), with the development of its corporate visual identity being one of the most important components of the process. Its visual identity undeniably contributes to its being recognised as a Croatian brand.

The Company’s corporate design aims to project its image of a highly reputable airline not only in Croatia but throughout the world. Its visual identity reflects safety, reliability and technical precision. The image of

12

Croatia Airlines is not only a visual expression of the Company’s culture; it has become a part of the national identity. The ‘Croatia’ logo on its aircraft is exceptionally important, as it promotes the country throughout Europe. Croatia Airlines contributes to the development of Croatia’s tourism and economy on an ongoing basis.

It is important to note that it is precisely our own experts we should credit with creating the Croatia Airlines brand. The coronavirus crisis has temporarily suspended some of our projects, but they are expected to continue in the upcoming period, once the pandemic subsides.

Since the beginning of Zagreb Advent, Croatia Airlines has in cooperation with the Zagreb Tourist Board been offering its passengers meals inspired by Zagreb, and creating a special ambiance typical of the country’s capital (short films, leaflets, heart-shaped decorations). With the easing of the epidemiological measures, in June 2021 Croatia Airlines reintroduced inflight meals and beverages, while the inflight Sky Shop service was reintroduced in July.

The Company also contributes to the development of Croatia’s tourism with its inflight magazine Croatia, which has a great role in its visual corporate identity and greatly promotes the country.

5

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Facebook - 151,753 fans Twitter - 4,469 followers Instagram - 22,800 followers LinkedIn - 10,365 followers YouTube - 793 subscribers

5.7. Fleet and capacities In 2021, Croatia Airlines operated a fleet of 13 aircraft: seven Airbus aircraft - two A320 (one under an operating lease) and five A319 (one under an operating lease), and six Q400, all under an operating lease.

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

Airbus A320-200

Airbus A319-100

Dash8 - Q400

Wing span

35.8 / 117

35.8 / 117

28.42 / 93.24

Fuselage length

37.6 / 123

33.84 / 111

32.83 / 107.71

Maximum ground takeoff weight

77,000

64,000 / 75,500

29,257

Maximum cruising altitude

11,900 / 39,000

11,900 / 39,000

7620 / 25,000

Wing area

122,40 / 1318

122.40 / 1318

63.08 / 679

Maximum cruising speed

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 the fleet

2

5

6

Number of seats

174

144/150

76

14

Š. Lugarov

Specifications

Š. Lugarov

5

Airbus A320-200

A 15

Airbus A319-100

Dash8 - Q400

5.8. Key services and activities As the national flag carrier, Croatia Airlines recognises its social responsibility to ensure optimum connection of the Republic of Croatia with the rest of the world, with an emphasis on contributing to the development of the country’s tourism. It has been continually adapting to the needs of the tourism industry and development, and planning its network of direct flights from both capital Zagreb and destinations on the Adriatic coast accordingly. It also provides passengers with good connections to their final destinations in cooperation with its airline partners, as well as those offering other means of transport.

In thirty-three years of existence and provision of transport services, Croatia Airlines has been connecting Croatian cities with major European metropolises, and in cooperation with its airline partners - with the entire world. As a member of Star Alliance, the world’s largest airline association, it provides its passengers access to the global network of flights coupled with numerous benefits.

5.9. Countries/markets served In the extraordinary circumstances during 2021, when the business and flight dynamics was dictated by the coronavirus pandemic, Croatia Airlines kept inter-connecting Croatian destinations, as well as connecting the country with the rest of the world. In 2021, Zagreb, Split, Dubrovnik, Osijek and Rijeka airports were directly connected within the network of flights to 18 international destinations, and Croatia was connected with 14 European countries. The Company also introduced a new scheduled route Osijek - Munich.

Our destinations are: Amsterdam, Athens, Vienna, Berlin, Brussels, Copenhagen, Dublin, Düsseldorf, Frankfurt, London Heathrow and Gatwick, Lyon, Munich, Paris, Prague, Rome, Sarajevo, Skopje, and Zurich.

Within Croatia, the Company’s aircraft connected Zagreb with Dubrovnik, Split, Zadar and Pula, and during the tourist season also with Osijek and Bol on the island of Brač. In 2021, they operated 16,000 flights within scheduled traffic, with the capacity of 1,600,000 seats being offered. In cooperation with other airlines, we provide a good connection to the U.S., Canadian and other distant markets.

5.10. Destinations/airports/routes Trondheim

Bergen

Montreal Toronto Vancouver Calgary Ottawa

Helsinki

Oslo Stockholm

Stavanger Gothenburg

16

Dublin Copenhagen

Vilnius

Hamburg Amsterdam

London

Gdansk

Berlin Poznan Dusseldorf

Warsaw

Brussels Paris

Frankfurt

Prague

Munich

Vienna

Zurich Lyon

Geneva

Zagreb Pula

Zadar Split

Rome Lisbon

Osijek

Rijeka Sarajevo

Bol Dubrovnik

s Skopje

Istanbul

Athens

linije Croatia Airlinesa / Croatia Airlines' services u suradnji sa stranim zrakoplovnim kompanijama / in cooperation with partner airline

Singapore

5.11. Other services Charter flights Croatia Airlines also offers charter flights, that is, a possibility of organising individual or series of flights for any company or organisation requiring a personalised, reliable and commercially optimal air transport service. https://www.croatiaairlines.com/Additional-services/Charter-transport/Ask-for-charter-service

Goods and mail transport Croatia Airlines also offers the service of cargo transport. Whether on its own and/or in cooperation with other airlines, it transports fragile goods, large shipments, animals or easily perishable goods, such as fresh fish, daily press, flowers, medicines, etc. https://www.croatiaairlines.com/services/cargo

Supervision services at Croatian airports Croatia Airlines also offers supervision services, intended primarily for airlines that have no representatives 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 Dubrovnik, Split and Zagreb airports. The services comprise the supervision of the handling agents’ work, support in the event of traffic irregularities, and representation of airlines at destination airports.

Additional information is available at: https://www.croatiaairlines.com/Additional-services/supervision/Supervision-services

5

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Aircraft maintenance services Croatia Airlines’ Technical Centre offers various services in the field of base and line maintenance, engineering services, and technical and logistics support for other companies. To date, it has performed several hundreds of major works on its own fleet and that of other companies. All information on maintenance services are available on the Company’s webpage: https://www.croatiaairlines.com/services/Technical-Services

Commercial training Our training courses are based on IATA’s standard programmes, and are held by Croatia Airlines’ highly experienced instructors. Since 1993 the Company has been organising a wide range of training courses needed by travel and commodity agencies for the acquisition of the IATA licence, training courses for the employees of airports, freight forwarders and airlines.

The Company’s Flight Operations Training Centre offers courses for the flight, cabin and ground operations personnel. They are all based on certified programmes harmonised with EASA regulations and approved by the Croatian Civil Aviation Agency.

Croatia Airlines’ Technical Training Centre is a certified organisation for the training of aircraft and technical personnel, offering a wide range of training courses for certain types of aircraft, and specialist training courses for aviation engineers and technicians. Aircraft type training is provided in accordance with the EASA Part 66/ Part 147 standard, and is intended for the holders of Part 66 licence for the maintenance of A, B1, B2 or C category aircraft and for the engineers. https://www.croatiaairlines.com/Additional-services/Training-centers/Technical-training-center

5.12. Information on employees

920 employees

men

52%

women 48%

Average employee age: 44 years Average employment time: 17 years 96% of employees employed on an indefinite contract basis No employees outside CA performing work for CA

Structure by age and gender

Manager structure by age and gender

600

5

men

men

533 women

500

total

400

3 296

200 131

165

91

75 16

0

up to 30 years

30 - 50 years

above 50 years

2

1

0

30 - 50 years

above 50 years

18

D. Fabijanić

270 263

Manager number

Employees number

300

100

women

4

Number of employees (full-time/part-time)

Total number of contract employees (permanent contract/temporary contract) in the Republic of Croatia and abroad

full time 915; 99%

employees in the Republic of Croatia 888; 97%

part time 5; 1%

Employees abroad 32; 3 %

All of our employees have equal development and advancement opportunities, regardless of their parental status. A total of 36 employees were on parental leave in 2021. Of this number, 14 employees returned to work after a year, while the rest opted for extended leave. All employees who returned from parental leave continued working with the Company.

Based on the data shown below, the return to work rate was 38.9%.

Year

5

2021

A

Š. Lugarov

19

Gender

Total number of employees on parental leave

Number of employees who returned to work after parental leave

Total number of employees retained for 12 months after returning to work following parental leave

m

9

4

4

f

27

10

10

5.13. Supply chain Supplier structure

39%

Domestic suppliers 39% Foreign suppliers 61%

61%

With a view to providing top-quality services in line with its Business Plan, Croatia Airlines uses a complex supply chain adapted to the specific requirements of air traffic. In terms of fields of supply, the supply chain is managed through larger categories comprising the supply of: goods and services, aviation fuel, ground services, technical equipment, etc.

During 2021, Croatia Airlines conducted business with a total of 1,453 suppliers, of which 884 (61%) were foreign ones. As the greatest turnover is realised in foreign markets, of the total turnover of HRK 890 million, HRK 564.5 million falls off on foreign suppliers. In terms of regions, in 2021 the highest turnover was realised in dealings with suppliers from Europe. Cooperation with domestic suppliers comprises more than a third of total turnover. The share of domestic suppliers in the total number of suppliers is approximately 39%. As for the structure of turnover, when it comes to domestic suppliers the highest turnover was generated in operations with airports and in the fuel procurement segment.

The biggest share of international transactions is traditionally realised through cooperation with suppliers from Germany, both in terms of total transaction volumes and the number of suppliers. When it comes to the type of service in international traffic, the highest turnover was generated from fleet maintenance services, aircraft block time and airport services, operating leases and fuel procurement.

Supplier countries according to turnover generated Supplier country

Turnover in HRK (million)

Share in total turnover

Number of suppliers

Share in total number of suppliers

Croatia

325.5

37%

569

39%

Germany

125.0

14%

169

12%

Ireland

90.6

10%

20

1%

Belgium

68.3

8%

36

2%

Great Britain

56.3

6%

120

8%

SAD

41.6

5%

83

6%

France

36.3

4%

8

1%

Canada

26.1

3%

28

2%

The Netherlands

15.9

2%

29

2%

6.2

1%

66

5%

Other

98.3

11%

325

22%

Total

890.0

100%

1,453

100%

Switzerland

Jet fuel (petroleum-based fuel) suppliers Jet fuel is supplied by one local supplier and some 20 foreign suppliers. In 2021, they covered some 150 main and alternate airports. All suppliers are 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. Jet fuel suppliers supply aircraft with fuel at airports in accordance with fuelling needs planned for each individual flight. Jet fuel suppliers are licensed to supply jet fuel at airports by domicile civil aviation agencies as a prerequisite for their operations and so as to ensure that basic quality conditions are met.

Furthermore, in order to ensure that the required quality standard, and the supply and operations safety standards are met, Croatia Airlines carries out inspection supervision of suppliers under its membership in IFQP (IATA FUEL QUALITY POOL), which conducts supervision at all airports where Croatia Airlines operates.

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In the complex operating conditions during the global pandemic, Croatia Airlines maintained cooperation with all foreign and local fuel suppliers in line with high quality standards in 2021 as well. It closely followed all news related to energy transformation and amendments to the EU ETS, and actively participated in the activities of expert working groups aimed at defining the Fit for 55 legislative package, in order to achieve the climate targets by 2030, while at the same time monitoring and assessing the impact of the package on its sustainable operations.

Ground service providers Ground services include aircraft handling services (passengers, luggage, goods and mail), air traffic control services, and passenger accommodation services. They ensure safe and regular provision of passenger and cargo transport through airports, using airport infrastructure, handling agent services and passenger hotel accommodation services in the event of traffic disturbances. A specificity of flight operations in the winter period is the de-icing and anti-icing service within the DAQCP (DE-ICING/ANTI-ICING QUALITY CONTROL POOL).

All handling agents of ground service providers are verified and approved by civil aviation authorities and licensing bodies competent to issue service provision licences. All ground service providers at regular Croatia Airlines destinations undergo company quality control. Those that are members of IATA, an umbrella association of airline companies, have been accredited IATA’s Safety Audit for Ground Operations (ISAGO) certification, which guarantees that safety standards are met.

In 2021, these services were provided by 40 domestic and 152 foreign suppliers at regular destination airports, and 73 suppliers with the status of an occasional provider of services related to seasonal and charter transport.

Aircraft catering service suppliers Catering service suppliers include catering companies at airports, suppliers of beverages, newspapers, expendable material and dishes for aircraft. All of them are obliged to act in accordance with the provisions of the Food Act of the Republic of Croatia and have the HACCP standard implemented, which is

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subject to control within the Company’s quality assurance system. From the outbreak of the coronavirus pandemic until 15 June 2021, the standard inflight meal/beverage/newspaper service was suspended in order to adhere to all epidemiological measures and reduce the passenger-staff interaction. It was later reintroduced in a slightly reduced scope, so the business class service now encompasses a wide selection of beverages and pre-packaged meals, while economy-class passengers are offered bottled water and a small, pre-packaged snack. Ever since the beginning of the pandemic, we have been distributing sanitising wipes to all our passengers upon entering the aircraft. In 2021, we cooperated with 31 local and 15 foreign goods and service suppliers.

Aircraft parts and maintenance service suppliers Since Croatia Airlines maintains both its own aircraft and that of other carriers, by adhering to the same international and manufacturer standards, the supply chain includes the procurement of aircraft parts, material, tools and equipment, and the procurement of part, tool and equipment maintenance services, with the aim of ensuring the continuing airworthiness of its aircraft and the material basis for the maintenance of other companies’ aircraft. Procurement takes place in the free market, and is facilitated by qualified aviation suppliers approved by the buyer through quality assurance mechanisms (at Croatia Airlines this is a list of approved suppliers that is an integral part of the CAME/MOE manuals).

Due to the specific nature of procurement of aircraft parts and material governed by international trade conventions and other regulations, including aviation regulations, this procedure is exempt from the provisions of the Procurement Ordinance.

Cargo and customs clearance agents Freight forwarders and cargo agents provide the transportation and customs clearance services and usually include 39 domestic and 35 international agents for all cargo and mail transported by Croatia Airlines.

5.14. Membership in professional associations and organisations Croatia Airlines is a member of professional associations, financial organisations, and economic and business organisations, in the activities of which it participates upon paying regular membership fees. Croatia Airlines’ membership and participation in the work of the industry’s umbrella associations, among which IATA and Star Alliance should be singled out, are of utmost importance for the Company’s operations. IATA (International Air Transport Association) is a global association of airlines whose business standards are a basis for the operations of all carriers offering scheduled flights in international air transport of passengers and cargo. 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 in the market and the position of the leading air traffic service provider not only in the Croatian market, but in the entire region.

Since 2017, Croatia Airlines has been a member of the European Regions Airline Association (ERA), a non-profit association whose main objective is to improve the conditions of business operations in the European airline sector, covering through membership the entire aviation industry with 50 airlines and 140 air service providers, including aircraft and engine manufacturers, airports, service providers and suppliers from all over Europe.

Membership in this association additionally boosts Croatia Airlines’ international image and offers it excellent opportunities to respond better to the modern business challenges. Jasmin Bajić, Croatia Airlines President and CEO, was in 2018 elected member to the governing body of this international association.

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 Croatian Chamber of Economy Croatian Employers’ Association Croatian Employers’ Association Croatian Public Relations Association Croatian IT Association

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5.15. Company history

Zagal becomes Croatia Airlines d.d.

Croatia Airlines is awarded JAR 145 certificate in line with the highest European standards

1st flight in international traffic (Zagreb-Frankfurt) - Croatia Airlines joins the International Air Transport Association (IATA)

- Among top 100 Croatian websites and top 10 websites in the Tourism and Travels category (Vidi magazine)

- Acquisition of 3 Boeing 737 - Opening of the first foreign branch office in Frankfurt

- 19th most successful airline in the world (Airline Business magazine)

1989

1990

1991

1992

1993

1995

1997

2002

2003

Croatia Airlines is awarded JAR OPS 1 AOC and ISO 9001:2000 certificates 1st award for the tourism film in the Tour Region Film category (Tourfilm Festival)

The founding of Zagreb Airlines - Zagal 1993 -1995 Fleet expansion (3 ATR-42 and 2 Boeing 737)

1st flight in domestic traffic (Zagreb-Split)

24and Fleet modernisation expansion (replacement of Boeing aircraft with Airbus aircraft)

- New hangar

Regional membership in the global association Star Alliance

- Replacement of the ATR42 fleet with Dash8-Q400 aircraft in the period from 2008 to 2010

Opening of the 3rd hangar at Zagreb International Airport White Flag for contribution to the protection and preservation of water cleanliness and for environmental awareness (GUWWA)

2006 The highest rated regional member of Star Alliance/The best airline in South-East Europe in 2006 (Finance Central Europe)

2021 Continuation of the worst crisis in the history of civil aviation, caused by the coronavirus pandemic /Post-COVID Strategy defined

2007 Amadeus e-Travel Airline Conference 2007 Award/Superbrands award 2008 Web 100 award in the E-innovation category (Vidi magazine)/Superbrands award

2004

2005

2008

2009

2020 The worst crisis in the history of civil aviation, caused by the coronavirus pandemic (significantly reduced block time)

2015

2016

2018

2019

2020

2021

- Fully-fledged membership in Star Alliance - Telephone ticket sales

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- Renewal of IOSA certificate

25 - Rebrand 100TM Award for aircraft redesign (Rebrand 100TM, Providence, USA) - Zlatna spirala (Golden Spire) GRAND PRIX for the best company calendar (Slobodna Dalmacija)

2010 - Superbrands award - Tesla Silver Egg Award - Award in the web Top100 category for the best mobile web (Vidi magazine) - 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 2014 Among the world’s safest airlines (AirlineRatings.com)

Expansion of the destinations network (12 new routes)

- 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.

- Company’s 30th anniversary - 40.2 million passengers and over 614,000 flights

6. SUSTAINABLE BUSINESS MODEL The airline industry has over the past two years been faced with the worst crisis ever, resulting from the global coronavirus pandemic. Although there had already been crises leading to a fall of air traffic, a recovery would soon follow. It is hard to say when the air traffic will return to the pre-crisis levels; airlines and related industries do not expect a recovery in years to come, and IATA does not see the air traffic reach the pre-crisis level before 2024. Having an important role in the traffic infrastructure of the Republic of Croatia, we are a leader in the domestic aviation market with a share of some 25% a year on average, while in the winter season it increases to some 50%. Croatia Airlines’ role in ensuring the country’s traffic connectivity became even more pronounced during the COVID-19 pandemic crisis in 2020 and 2021, especially in the winter season, when the majority of foreign airlines withdrew from the market or significantly reduced the number of flights.

Within the process of recovery from the coronavirus crisis, Croatia Airlines cooperated with Boston Consulting Group (BCG), a leading global strategy consulting firm, on drafting a post-COVID strategy, which was adopted by the Company’s Supervisory Board, thus paving the way for further talks with the Republic of Croatia as the Company owner, and other entities crucial to ensure a successful and sustainable future of the national flag carrier and Star Alliance member.

The strategic initiatives stipulated by the Post-COVID Strategy that will be implemented in the next three years will ensure long-term sustainable operations and a new development cycle for Croatia Airlines. Along with increasing its efficiency and competitiveness by transforming the current operating models and methods, ahead of the Company are key operational and structural challenges, including fleet renewal and optimisation of its flights network throughout the year. Taking into account the trends in the highly competitive Croatian airline market, fuel and CO2 emission prices, as well as the EU green policy objectives, there is no

102-2 102-9 102-11 102-12

alternative to the defined strategic initiatives, and their implementation will enable the Company to seize any

102-15

opportunities it will come across in the following two years, when air traffic is expected to recover.

102-16

The key strategic goals in the upcoming period include profitability, responsibility to shareholders, capital

102-40

increase, fleet renewal and optimisation, and entering into a Public Service Obligation (PSO) contract for

102-41

the upcoming period. In order to achieve the above stated strategic goals, the Company will initiate, or has

102-42

already initiated, the following measures:

102-43

- Fleet structure optimisation;

102-44

- Optimisation and expansion of the destinations network;

102-46

- Increase in passenger revenues based on the envisaged rise in the number of transported passengers, while at the same time expanding the offer of services (products) and diversifying their prices, and increasing efficiency through further digitalisation of all commercial activities for the purpose of realising fresh revenue potential; - Increase in non-flight revenues, primarily those from aircraft maintenance services provided to third parties;

102-47 103-1 103-2 103-3 201-1

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302-1

- Winning a tender for an award of a PSO contract for domestic routes for the 2022-2026 period;

303-1

- Various cost-cutting initiatives for a number of cost categories.

303-2

The implementation of the defined Post-COVID Strategy, and continuing with the privatisation process once

303-3

the prerequisites are met, should reduce risks related to the Company’s ability to continue operating under

303-4

the going concern principle in the upcoming period.

303-5

In line with its mission and vision, it applies the business model of a network operator within the Star Alliance

305-1

airline association, which emphasises in all of its key business documents the necessity of maintaining a

305-2

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

305-4

The Star Alliance membership has enabled Croatia Airlines to be available in the markets where it does no physically operate flights and to increase capacities on the existing routes. Its business model is based on the concept of a strong network carrier that provides scheduled air traffic services. The strategy of network traffic is focused on clearly defining primary, secondary and tertiary routes, that is, domestic and regional routes, while at the same time defining their specific importance and optimising flight frequency.

306-1 306-2 307-1 401-1 404-2 406-1

Domestic scheduled air traffic, which is of special interest to the Republic of Croatia, has been operated

413-1

under the European PSO (Public Service Obligation) model since 2007. In late 2021, the Ministry of the Sea,

415-1

Transport and Infrastructure called a new public tender for the award of scheduled air traffic services to be

416-1

provided within the Republic of Croatia in the period from 2022 to 2026, for which Croatia Airlines applied.

417-1

MISSION Our mission is to generate profit by providing air traffic services. Our priority is to provide our customers with optimum connections between the Republic of Croatia and the world via our own flights and those of our partners, and to contribute to the development of tourism in the Republic of Croatia.

VISION CROATIA AIRLINES aims to be the first choice of every passenger travelling from or to Croatia.

Croatia Airlines’ business model Network regular carrier

Commercial cooperation

- Domestic traffic - under PSO* rules - International traffic - network carrier’s profitable growth strategy

- With Star Alliance and non-Star Alliance members

*Public Service Obligation

Productivity growth - Aircraft, labour and fuel

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

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Fleet modernization

Safety and quality

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

Digitalization of business processes and commercial activities

6.1. Operational risks and opportunities Efficient risk management is of exceptional importance for the sustainability of business operations.

Risk management in Croatia Airlines’ operations is carried out in compliance with the principles of ISO 9001, and the Company uses the COSO ERM (Committee of Sponsoring Organizations of the Treadway Commission - Enterprise Risk Management) framework as a basis for defining its risk management policy.

We pay great attention to risk assessment, verification and management to ensure efficient and timely decision-making, business planning and corporate governance.

In early 2021, the Internal Audit Department drafted jointly with the Quality, Safety and Security Office the Risk Management Policy of Croatia Airlines d.d., which was later approved by the Company’s Management Board and Supervisory Board.

We also set up a register of strategic risks, listing all major strategic risks of Croatia Airlines. In addition to existing controls, initial risk assessment, and risk response and evaluation were outlined at workshops in cooperation with responsible risk managers, and the entire Register was presented at the Audit Committee’s meeting in July 2021. The plan is to update it twice a year in cooperation with the sector managers.

Most risks are managed within regular corporate governance processes defined in the Quality Manual.

Responsibility for the risk management and the supervision of the risk management system efficiency lies with the Management Board of Croatia Airlines.

The Management Board, which consists of its members and sector managers, analyses reports and key performance indicators, and takes concrete steps in accordance with the level of non-compliance with the set goals. The Company’s Commercial Committee proposes activities and adequate responses to risks

with regard to sales and marketing activities. Also, when developing business plans, additional sensitivity analyses are carried out concerning possible changes in some of the high-risk categories of the Company’s business operations so as to prepare alternative scenarios. When defining goals, it is essential that the Company’s goals are aligned with those of each sector. For all goals planned on the level of sectors, risks related to their achievement need to be defined and control activities implemented. Also, possible opportunities arising from the achievement of a particular goal need to be outlined as well. All organisational units are required to implement and harmonise the defined goals and guidelines through their risk management procedures, with monitoring being facilitated through the Company’s internal control systems, quality assurance system and internal audit. The application of an integrated approach to external and internal risk management enables the Company to understand the true nature of individual risks, and increases its capacity to take relevant measures in a timely manner. Managing all the said risks in a systematic manner increases the Company’s level of organisational efficiency, while at the same time decreasing its costs and boosting its competitiveness. Raising further awareness and the adoption of risk culture at all levels of organisation is one of the key factors for the sustainability of the Company’s business operations.

The crisis caused by the coronavirus outbreak has pointed to the unpredictability and the importance of timely risk identification and management. Faced with the extraordinary circumstances caused by the pandemic, the Company undertook a number of measures on the organisational, operational and financial levels to adapt to the situation in the best possible way and to mitigate its consequences for its operations.

At the very onset of the crisis, the Company gathered its Crisis Management Team, the main operating body in charge of managing the crisis situation in coordination with the Management Board Chairman.

All Company employees were regularly informed via internal communications channels about the developments related to the coronavirus spread and the measures that were being undertaken. The Company followed recommendations issued by relevant institutions, carried out corresponding activities, and issued instructions as to the related conduct. Assessments were made and responses to challenging situations sought on a daily basis and in all business segments, so as to reduce the negative impact of the crisis on the Company’s business operations.

Major risks in Croatia Airlines’ business operations

External risks

Economics surroundings (Croatia and destinations)

Internal risks

Company strategy

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

The most significant external risk currently affecting Croatia Airlines’ business operations is a reduced demand for air traffic services amidst the pandemic, which has resulted in various travel restrictions, high oil price and rising price of emission units. Given a great decline in revenues due to the pandemic, liquidity maintenance is the most significant internal risk affecting Croatia Airlines’ operations. All major risks the Company faced in its operations during 2021 are elaborated in detail in the Business Report of Croatia Airlines d.d. and Croatia Airlines Group for 2021, posted on the Company’s website. Every risk is also an opportunity - the Company identifies areas in which its capacities and potentials can be strengthened, and in which changes can be introduced into business operations to make room for improvements and contribute to sustainability. We have identified several segments for creating business-related opportunities.

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The country’s tourism potential and access to the European Single Market are the key factors, while migration within the EU and a growing demand for cargo transport services should not be ignored either. Exploiting the potential of commercial cooperation with airline companies through codeshare agreements, both within and outside Star Alliance, is also important.

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.).

Croatia Airlines sees its development possibilities also in an ever growing application of the Internet and new e-commerce technologies as sales channels used by an increasing number of potential passengers and undergoing upgrades on an ongoing basis. A more efficient use of the Company’s own capacities and intensified efforts to make best use of the same are seen as an additional internal factor of the Company’s potential for development.

Having at 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 Airlines’ Technical Centre. To this effect, the Company also plans to expand its line maintenance services to other aircraft types. Croatia Airlines currently has Approval for the line maintenance of Bombardier CRJ 700/900/1000, A320neo and A330 aircraft. An additional expansion of the scope of Approval for the new aircraft types will provide the Company a possibility to expand its aircraft line and base maintenance services to other companies. There is also room for opening new line bases for aircraft maintenance and extending the major works season to the entire year (or to 10 months at least).

The Company has also recognised the possibility for its development in an increased demand for the training services, and is, therefore, offering commercial training programmes intended for external users.

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6.2. Stakeholders Good cooperation with our stakeholders is a key to successful and safe business operations. This was particularly evident in the last two crisis years, when we jointly tried to find optimum solutions to ensure sustainable operations, with contributions from each stakeholder involved in the Company’s business operations. We are guided by the principles of responsibility, ethical conduct, transparency and best business practices in relations with all of our stakeholders. Given the activity it carries out, Croatia Airlines cooperates with a large number of stakeholders with whom it engages in an open dialogue and exchanges information through well-established communication channels. As a result, we have been able to identify the key topics and interests (material aspects of the Company’s business operations) that make part of the Company’s analyses and ultimately of this Non-financial Statement.

Croatia Airlines has identified and classified its stakeholders into the following three categories according to their importance and impact on its business operations: key stakeholders, stakeholders with significant influence, and other stakeholders. Croatia Airlines has been cooperating with all of its business partners (domestic and foreign) by adhering to 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.

Croatia Airlines communicates with its stakeholders with the aim to attain its desired market position, and to systematically inform the general public, and existing and potential users about the Company, its services and news on its business operations. The most important goal is to build and cultivate a distinctive and positive image of Croatia Airlines in a wider public.

Key stakeholders

Stakeholders with significant influence

Other 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

- Local community - Financial service providers - Airline associations - Media/public

30

Croatia Airlines management

National and international laws and regulations

Communication with stakeholders

Identification and prioritisation of main topics - Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - Customer satisfaction, product responsibility, marketing - Economic impact and contribution to tourism development - Labour relations, decent work, freedom of association and collective bargaining - Environmental protection, emissions and energy, waste management - Local community development

STAKEHOLDERS

COMMUNICATION CHANNEL

KEY ISSUES AND TOPICS

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

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Environmental protection, emissions and energy, waste management

Service users (cargo, technical, training)

- Business correspondence - Telephone calls - Face-to-face meetings - Business reports - External user training - Events

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Environmental protection, emissions and energy, waste management - Local community development

Employees

- Intranet - e-mail - Teams, Zoom and other similar Internet platforms - e-news - Internal meetings - Works Council - Workers’ meetings - Business reports - Education and training - Management Board’s memos

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Labour relations, decent work, freedom of association and collective bargaining - Environmental protection, emissions and energy, waste management - Local community development

Shareholders and investors

-

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

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Labour relations, decent work, freedom of association and collective bargaining - Environmental protection, emissions and energy, waste management - Local community development

Suppliers

- Business correspondence (mail, e-mail, telephone, Internet platforms such as Teams, Zoom, etc.)

- Face-to-face meetings - Business reports - Fairs - Website

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Environmental protection, emissions and energy, waste management - Local community development

- Face-to-face meetings - Written communication (e-mail, intranet, mail)

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Labour relations, decent work, freedom of association and collective bargaining - Environmental protection, emissions and energy, waste management

Government bodies

-

Written communication (mail, e-mail) Internet platforms such as Teams, Zoom, etc.

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

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Labour relations, decent work, freedom of association and collective bargaining - Environmental protection, emissions and energy, waste management - Local community development

Local community

-

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

-

Other associations/institutions (financial institutions, airline associations, media/public, academic/business/ professional community, certification bodies and companies)

-

Business reports Media releases Official website Official website of Stock Exchange and Croatian Financial Services Supervisory Agency (HANFA) Business correspondence (mail, e-mail, telephone, Internet platforms such as Teams, Zoom, etc.)

Conferences, business meetings Promotional campaigns, reports, interviews Social networks Incentive travels Scientific and technical papers Memberships Face-to-face meetings Audits

- Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic - System safety and quality - Economic impact and contribution to tourism development - Customer satisfaction, product responsibility, marketing - Labour relations, decent work, freedom of association and collective bargaining - Environmental protection, emissions and energy, waste management - Local community development

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-

System safety and quality Economic impact and contribution to tourism development Environmental protection, emissions and energy, waste management Local community development

CROATIA inflight magazine As one way of communicating with our stakeholders, we have for many years been publishing our inflight magazine CROATIA four times a year, with the aim to promote the Croatian culture, heritage and natural attractions, and to support its tourism. Being an integral part of the Company’s visual identity, CROATIA is successfully reflecting the country’s national symbols, thus contributing to the authentic image of Croatia in the world. Due to the extraordinary situation, the summer edition of the inflight magazine Croatia was for the first time issued in a digital form in 2020. The measures we implemented on-board to protect our passengers and staff were published in both the magazine and all other communication channels throughout the crisis

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year of 2021.

Croatia Airlines’ social media We regularly communicate with our service users through social media, where we publish various information (crew announcements related to flights, announcements about aircraft maintenance, releases in cooperation with the Croatian Tourist Board and Star Alliance, releases related to the Obzor putovanja travel agency, flight schedule, promotional offers, inflight magazine, information about the transport of Croatian athletes, travels during the coronavirus crisis, and much more).

On 31 December 2021, we had a total of 153,076 Facebook fans.

Shown below is the number of our followers in other social media:

Facebook - 153,076 followers Twitter - 4,894 followers Instagram - 24,200 followers LinkedIn - 16,524 followers YouTube - 1,020 subscribers

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Our employees

Our passengers have always been and will remain our priority! Our passengers always come first, especially in these challenging times, and we are doing our best to give them additional care and attention.

Jelena Pecikozić Flight attendant Our Company has been following and implementing all recommendations issued by the European Union Aviation Safety Agency (EASA), including those pertaining to the use of protective equipment by employees and passengers, aircraft disinfection and physical distance in the aircraft cabin. Also, the use of protective face masks or shields was obligatory on all our flights in 2021.

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Petra Nuelati Contact Centre employee Our phone lines are still quite busy.

Yet, we’re doing our best to indulge all our passengers, answer their questions related to flights, and give them all the information they need. We have introduced additional phone lines and included additional staff to respond to the inquiries of our dear passengers in

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this challenging period.

Tomislav Dolovski Captain Flying truly brings a sense of freedom. It opens up new perspectives and horizons. But we are now aware of it in a completely different way. We’re flying and connecting Croatia with the rest of the world with a greater than ever enthusiasm. Charity flights, in which Croatia Airlines as the national flag carrier gladly participated in 2020, were a particular challenge. We must join our forces to win the biggest battle of the 21st century!

I would like to remind you that despite the exceptionally challenging period our Company continued operating on a reduced scale to keep Croatia connected with the most important European destinations.

I hope we share the pride and joy about the fact that we have justified our role of the national flag carrier and helped mitigate the severe consequences of the Š. Lugarov

coronavirus pandemic.

Robert Kruljac Head of Ground Services and Crisis Management Team leader When it comes to the airline industry, we should always be prepared for crises. However, not in our wildest dreams could we have imagined a situation like this. The coronavirus crisis has put us all to the test, and we are doing our best to pass it with flying colours.

When making necessary decisions, we always have in mind our passengers, employees and other target groups, and rise to the occasion.

We’re looking forward to further traffic Š. Lugarov

normalisation.

https://www.youtube.com/watch?v=J2QgJJQAia8

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Vjekoslav Pinjuškić Aeromechanic Safety across all business segments comes first at Croatia Airlines, and there can be no compromises here.

Disinfection, filter checks, and additional measures to protect our passengers and employees are the activities we are carrying out on a daily basis, with great responsibility. In this way we are protecting both our own health and the health of our passengers, making the public

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health interests our priority.

Safety across all business segments comes first at Croatia Airlines, and there can be no compromises here.

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6.3. Material aspects of the Company’s business activities and their effect on sustainable development We have established that material aspects of our business encompass all the segments that might have significant economic, environmental and social impacts, and are to a great extent aligned with our business direction and objectives. We strive for excellence in this particular field and keep analysing impacts on the environment in which we operate. In the process of identifying important material aspects, we followed the guidelines for drawing up non-financial statements and identified material issues, established and verified their importance, and then presented them through a materiality matrix. The working group responsible for activities related to corporate social responsibility (comprising key figures from each sector to which areas and topics addressed in non-financial statements pertain), reanalysed the aspects that reflect the Company’s significant economic, environmental and social impacts and outlined the topics potentially influencing stakeholders’ assessments and decisions.

It reaffirmed the classification of stakeholders and reconsidered the impact of selected material aspects on their attitudes and decisions. In addition to identifying and confirming key material aspects, the previously defined boundaries of each individual aspect were verified during the said process.

Material aspects Given the Company’s business environment, we approached the assessment of and reporting on material aspects in the same way as in the previous reporting period.

Croatia Airlines’ importance in connecting Croatia with other countries as well as maintaining all-year-round domestic flights is beyond question. This became even more pronounced at the onset of the crisis, when the Company continued connecting Croatian regions after all other carriers withdrew from the Croatian market.

We put all of our resources at disposal of the Government of the Republic of Croatia to organise repatriation flights, charity charter flights and flights on any needed occasion. Although the number of flights has significantly reduced for objective reasons - operating obstacles and reduced demand, we are reviewing the feasibility of flights on a daily basis, taking into account the current situation.

Our Company’s contribution to the country’s economic development is unquestionable - it is reflected in a direct contribution to the development of both economy and tourism, not to mention that the Company is a significant exporter that ranked among the top domestic exporters for several years preceding the COVID-19 crisis. We are aware that 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 business success, 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 business operations. It is our duty to understand their needs and do our best to meet their expectations. We are, therefore, continuously developing new products and services that will make it even easier for our passengers to organise their travels.

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Great attention is also devoted to employee satisfaction, since highly motivated and satisfied employees are a key factor for the realisation of our goals. This is why mutual respect, cooperation and teamwork are nurtured. The latest resource management trends are being evaluated and applied. The Company has been measuring employee performance and has been actively involved in their career guidance, training and efficiency improvement. We are doing our best to retain our employees by offering them competitive, high-quality working conditions. Today, major work-related risks occur as a result of the labour market dynamics and its open nature and also because of a lack and outflow of skilled workers. In order to address the said risks, we are constantly making efforts to create a stimulating working environment and cooperate with educational institutions in scientific, educational and technical activities. Such institutions include the Faculty of Transport and Traffic Sciences, Polytechnic of Velika Gorica and the Secondary Aviation School.

Our close cooperation with the Faculty of Transport and Traffic Sciences in Zagreb has given us the opportunity to monitor the progress of future Croatian pilots attending the Faculty.

The collective bargaining agreement in place has ensured long-term social peace as an important prerequisite for the Company’s regular and stable business operations in the next several years, and for us to face future challenges more efficiently. The COVID-19 outbreak has prompted us to make a joint effort to enable our Company to respond to the crisis that has affected our business operations in an adequate manner.

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CROATIA AIRLINE’S SIGNIFICANCE FOR THE REPUBLIC OF CROATIA Croatia Airlines contributes to the development of Croatia’s tourism and economy on an ongoing basis through sponsorships and donations, and by promoting its destinations, culture, gastronomy, science, and sports.

TRAFFIC CONNECTION COVID-19 PANDEMIC

b Before the outbreak of the Covid-19 pandemic, the Company directly connected Croatia to 24 countries and 38 destinations.

AND REPATRIATION FLIGHTS

b Croatia Airlines enables local airports to be open throughout the year and provides all passengers excellent connection via air all year round.

bCroatia Airlines continued operating

b The Company contributes to the development of tourism in general,

even in the extraordinary circumstances of

but also of MICE tourism as one of the fastest growing segments over

the COVID-19 pandemic. The national flag

the past few years (Croatia ranks 34th in the world and 19th in Europe by

carrier thus confirmed its strategic role in

congresses held, with Zagreb, Split, Opatija and Dubrovnik being its most

Croatia’s infrastructure by contributing to

important congress destinations).

the maintenance of traffic connectivity vital for both the country’s economy and citizens, which was particularly prominent in 2020.

bSince the beginning of the crisis, Croatia

Airlines has put itself at disposal of the

Government of the Republic of Croatia for the transport of humanitarian aid and the return of Croatian soldiers from Afghanistan, and operated several repatriation flights from various parts of Europe.

HELPING THE COMMUNITY

bCroatia Airlines strives to

support institutions that need humanitarian aid or organise humanitarian projects.

b

It provides help and direct

humanitarian aid by granting

transport for patients, children or people in need, and participating

A

in charity actions by donating transport services.

CONTRIBUTION TO

37

CROATIA’S ECONOMY

bBy purchasing goods and services from local suppliers, Croatia Airlines indirectly

supports about 3,000 jobs.

b

It contributes to the functioning of

numerous activities that are important for everyday life of Croatian citizens through

PROMOTING CROATIA’S GASTRONOMY,

regular settlement of taxes, contributions and

CULTURE, ATTRACTIONS AND DESTINATIONS

other levies in line with applicable regulations.

bThe Company has been presenting Croatia’ cuisine by offering its

passengers meals made from local groceries and based on local recipes.

bThe Company’s inflight magazine has a great role in its visual corporate identity and greatly promotes Croatia as a brand, placing emphasis on its stunning nature, historical values and cultural events.

bFilms promoting various Croatian destinations are shown on Airbus flights. bCroatia Airlines supports sports in Croatia and is the official carrier of the Croatian Olympic Committee, thus promoting the country and contributing to its visibility.

bCroatia Airlines has been among the top Croatian exporters for several years in a row (2019: 7th place).

We have been nurturing successful business cooperation with our business partners in good faith and to the satisfaction of all parties. Croatia Airlines is helping the community in which it does business through numerous sponsorships and donations.

In the segment of social responsibility, Croatia Airlines has recognised safety as one of the key aspects in all segments of its business operations. In order to secure a high level of safety, it has been heavily investing into the training of its staff to ensure they have top competencies. It also guarantees first-rate aircraft maintenance in line with the highest global aviation standards.

The affirmation of ethical norms, business practices and conduct are amongst the most important corporate goals of Croatia Airlines. The Company’s Anti-corruption Programme is of particular importance for carrying out its business activities in an ethical manner.

Croatia Airlines also pays close attention to the impact of its activities on the environment.

It strives to operate as a socially responsible company, taking account of the by-products of its operations and their impact on the environment and community. By applying modern technologies and optimising its operations, it has been reducing the negative impact of aircraft operations on the environment, thus contributing to its preservation and sustainable development, and fulfilling its obligations to future generations.

We strive to identify the impacts of our business in a timely manner so that we can manage them adequately and thus contribute to the development of Croatian economy and society, and the protection of natural resources. We believe that responsible corporate governance is fundamental for long-term successful business.

MATERIAL ASPECTS

Sustainable development goals

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

Environmental Legal framework for environmental protection Emissions and energy Waste management

Economic Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic Economic impact Contribution to tourism development Procurement procedure and practice

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highly important for the stakeholders

Ensuring sustainable business operations during the crisis caused by the COVID-19 outbreak Economic impact Supply chain process and sustainability Safety and security System quality Local community development

User satisfaction Product responsibility Training and education Labour relations and decent work Legal frameworks for environmental protection Contribution to tourism development

important for the stakeholders

Marketing communication

Waste management

Emissions and energy

Freedom of association and collective bargaining

important for the environment

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highly important for the environment

Boundaries within the Group

Boundaries outside the Group

MATERIAL ASPECTS All entities within the Company

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All stakeEmployees holders

Economic category Ensuring sustainable business operations during the crisis caused by the COVID-19 pandemic Economic impacts and procurement Contribution to tourism development Procurement procedure and practice Social category 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

Environmental category Emissions and energy Legal frameworks for environmental protection

Waste management

All service users

Suppliers

Government bodies, social entities, local community, markets served

Direct economic value generated and distributed The Company’s goal is to develop its business operations by making the right and timely decisions, with the ultimate goal of ensuring its sustainable development.

As a for-profit organisation, Croatia Airlines recognises all economic aspects as material, particularly emphasising its contribution to the development of Croatia’s tourism and economy as a whole, and the well-being of an individual. In the light of the market conditions in which the Company operates, we produce a significant impact that is reflected in the economic situation at the local, regional, and national levels. As we operate flights throughout the year, we contribute to the development and traffic connectivity of Croatian regions, especially the ones in the south. Croatia Airlines’ strategic role became even more pronounced during the crisis caused by the COVID-19 pandemic, as it was among the rare companies that continued with its operations in the first couple of months following the outbreak, when the vast majority of other airlines either withdrew from the market or significantly reduced the number of flights. We also put ourselves at disposal of the Government of the Republic of Croatia and thus enabled thousands of Croatian citizens to return home, ensured the transport of humanitarian aid and operated several repatriation flights.

We contribute to the functioning of a number of activities that are important for everyday life of Croatian citizens through regular calculations and payment of taxes, contributions and other levies in line with applicable regulations. Our business activities significantly contribute to Croatia’s economy, and we were among top Croatian exporters for several years preceding the pandemic. In this way we positively affect employment not only in our industry but in others as well.

A detailed overview of the Company’s financial results was 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 the Management’s Business Report for 2021, where the key business changes in the reporting period are also elaborated on.

The Company has been managing its economic impact through annual and medium-term planning, as well as by monitoring the achievement of the anticipated results on a monthly basis and undertaking relevant measures in a timely manner in case some major negative deviations from the plan should take place. The entire Company participates in the annual planning process, as each sector/service delivers their framework plans for the year to come. These are consolidated by the Controlling and Internal Audit Sector, which delivers the final plan to the Management Board and the Supervisory Board for approval.

CROATIA AIRLINES’ ECONOMIC CONTRIBUTION In HRK (million)

Direct economic value generated (sales revenues))

2021

2020

848.2

775.9

40

Distributed economic value Employees ( gross salaries, insurance, compensation to employees)

206.2

220.6

Operating costs (without employees costs and local community costs)

890.0

888.2

Capital lenders

14.6

7.1

Payments to the government

11.3

6,6

1.7

2.4

17.0

69.4

Community investments

Investments into tangible and intangible assets

Procurement procedure and practice During the COVID-19 pandemic, Croatia Airlines’ procurement procedures have been focused on preventing the spread of the disease and protecting the health of passengers and employees. We have been following the recommendations and decisions of the National Civil Protection Headquarters and other Croatian public health and regulatory authorities, and international health (WHO, ECDC) and regulatory (IATA, EASA, ICAO) authorities, and defining the procedures and procurement items accordingly, so as to ensure safe domestic and international traffic operations of Croatia Airlines’ aircraft, and safe internal processes. Due to the crisis in the aviation sector, the scope of procurement at Croatia Airlines has in line with the savings scheme been rationalised and reduced to the strictly necessary items only.

The economic aspects of Croatia Airlines affect the economic prospects of its stakeholders at local, regional and national level. An ongoing task related to the procurement of goods and services is finding suppliers who can meet supply requirements in terms of quality, quantity, prices and delivery dates. For this purpose, the Company applies appropriate supplier verification methods prescribed by the law and incorporated in the Flight and Ground Operations Procurement Procedures, the Aircraft Maintenance Procurement Procedures and the Procurement Regulations. All internal procurement procedures incorporate the public procurement principles and recommendations to the highest extent possible.

In compliance with aviation regulations and standards, procurement procedures and Procurement Regulations, Croatia Airlines applies the same principles when selecting procurement procedures with respect to all economic entities - the principle of fair competition and equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principles of proportionality and transparency, the principle of efficiency, and the principle of the free movement of goods, capital and services. The Company’s procurement procedures are decentralised, which means that its organisational units initiate and conduct them on their own, with the approval of the Management Board. They take on a number of different forms, depending on the type of procurement. Procurement procedures are conducted and suppliers selected in compliance with the Procurement Regulations and relevant Procurement Procedures, whereby the preparation of a specific procurement procedure, the selection of a supplier, the conclusion

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fication requirements, all with a view to facilitating efficient and effective procurement, and cost-effective procurement spending. The Company’s Procurement Regulations recommend 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 hazardous substances, occupational health and safety measures must be taken account of. In terms of correlation between procurement and environmental protection, each procurement of goods and services is subject to assessment of environmental impact (if any). The Company’s Procurement Regulations recommend applying elements of green public procurement whenever possible. The suppliers of Croatia Airlines have been acquainted with the ISO14001/50001 certificates via official correspondence with all suppliers individually and through the information available on the Company’s website. With these certificates, Croatia Airlines confirms its dedication to environmental protection, energy conservation and sustainable development. At the same time, it calls upon all of its suppliers to contribute to environmental protection and energy efficiency through their own active and preventive measures, and by encouraging their business partners to do the same.

The Company’s Environmental Protection Policy and the official correspondence sent to suppliers are available on its webpage: https://www.croatiaairlines.com/about-us/corporate-values/sustainable-development?langid=en The prescribed procurement procedure and its key requirements are integrated into all other procurement sub-procedures at Croatia Airlines.

A. Grubelić

6

and execution of a procurement contract must meet the criteria of timeliness and compliance with speci-

6.4. EU Taxonomy With the adoption of the European Green Deal in 2019, the European Union (EU) set green investment targets. In order to achieve an energy-neutral economy, it is necessary to encourage private investments into sustainable, i.e. green projects. The EU Taxonomy Regulation (EU) 2020/852 was adopted in order to achieve the European climate goals and those of the European Green Deal.

This is the first year that Croatia Airlines d.d., as an entity obligated to draw up non-financial statements, published key performance indicators (turnover, capital expenditure and operating expenditure) of its Taxonomy non-eligible and Taxonomy-eligible economic activities that contribute to mitigation of and adaptation to climate change, as prescribed by the EU Taxonomy Regulation and the Delegated Regulation on disclosures (EU) 2021/2178.

For the financial year of 2021, it was necessary to disclose only the proportion of Taxonomy non-eligible and Taxonomy-eligible economic activities in the total turnover, capital expenditure (CapEx) and operational expenditure (OpEx) of the Company for the first two environmental objectives: a. climate change mitigation b. climate change adaptation.

Therefore, an analysis of technical screening criteria (TSC) and a DNSH analysis, referred to in the annexes to the above-mentioned delegated regulations, were not performed in the process of calculating the 2021 turnover, CapEx and OpEx. In order to determine eligibility of an economic activity, the Working Group on Non-Financial Reporting carried out a two-level analysis to establish: - If an economic activity is carried out at the level of Croatia Airlines d.d., and - If an economic activity is listed in the annexes to the delegated regulations of the EU Taxonomy Regulation.

The analysis showed that none of our activities were on the list of published delegated acts, meaning that the Company’s main activity could be classified as Taxonomy non-eligible.

It also showed that the proportion of Taxonomy eligible economic activities related to investments, total turnover and operating expenditure defined by the Taxonomy equals 0%.

It is expected that in the upcoming years the operations of airlines will be included in the EU Taxonomy, and that the proportion of eligible and aligned activities will increase accordingly.

Š. Lugarov

42

6.5. Safety and advancements as business imperatives Safety is of primary importance in 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 assurance system Croatia Airlines has introduced an integrated quality assurance system that meets the requirements of the following EU and international regulations and international standards: Air Operations Regulation, EASA Part 145, EASA Part 147, EASA Part M, Aircrew Regulation, Directive 2003/87/EC (EU ETS) and ICAO Annex 16 (CORSIA), ISO 9001, ISO 50001 and ISO 14001. The quality assurance system encompasses all organisational units of Croatia Airlines and their respective processes.

SUSTAV KVALITETE CROATIA AIRLINESA ISO 9001, 14001, 50001

QUALITY ASSURANCE FOR NON-OPERATING ACTIVITIES - Finance and accounting - Legal affairs, human resource and asset management - Information Technology management - Commercial Division - Network and revenue management - Controlling and internal audit

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FLIGHT OPERATIONS QUALITY ASSURANCE

TECHNICAL QUALITY MANAGEMENT

Air Operations Regulation ORA.GEN 200 Management System

Part M.A.712 & Part 145.A.65

- Flight operations - Cabin operations

- Aircraft maintenance

- Ground operations

- Technical Training Centre

- Operations Training Centre Air Crew Regulation ORA.GEN 200 Management System

- Engineering and technical support Part 147.A.130(b)

1. Air Operation Regulation CR (EU) 965/2012 Aircraft operators performing commercial air transport operations are certified and supervised in line with the provisions of Commission Regulation (EU) No 965/2012 laying down technical requirements and administrative procedures related to air operations. The Company was for the first time awarded the Air Operator Certificate (AOC) by the Air Transport Directorate of the Ministry of the Sea, Tourism, Transport and Development (today Croatian Civil Aviation Agency) on 29 April 2003. The Air Operator Certificate (AOC) certifies that the operator has the professional ability and organisation to ensure the safety of operations.

2. Aircrew Regulation CR (EU) 1178/2011 Commission Regulation (EU) No 1178/2011 lays down technical requirements and administrative procedures related to civil aviation aircrew. The Company obtained the approved training organisation certificate HR.ATO.001 for: • A320/DHC8 licence course • A320/DHC8 licence renewal course • TRI (A) - A320/DHC8 Type Rating instructor course • TRI (A) - A320/DHC8 Type rating renewal instructor course • A320/DHC8 simulator Type Rating course • A320/DHC8 simulator Type Rating renewal flight instructor course • A320/DHC8 flight training - landing.

3. Continuing Airworthiness CR (EU) 1321/2014 - Part M In late 2007, Croatia Airlines fulfilled all requirements and was issued with a 9A Part M certificate with the scope of authorisation specified in Subpart G, allowing it to carry out independent controls of its fleet airworthiness. Starting from January 2009, the scope of authorisation was further extended to Subpart I, allowing the Company a fully independent review of airworthiness and verification of the aircraft airworthiness certificates. They 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, the Croatian approval HR.MG.001 became recognised and valid within the European Union.

- Part 145 In 2001, Croatia Airlines obtained an approval of the aircraft maintenance organisation in accordance with JAR 145, the regulations in force at the time of approval; in 2004 it was replaced by EASA Part 145, an approval issued in line with requirements of the European Aviation Safety Agency (EASA). On behalf of EASA, the LBA (Luftfahrt Bundesamt) experts monitored the compliance with EASA Part 145 requirements through annual audits.

At the same time, Croatia Airlines insisted on holding the equivalent Part 145 certificate, which was issued by the Air Transport Directorate of the Ministry of the Sea, Tourism, Transport and Development. This certificate is today renewed by the Croatian Civil Aviation Agency (CCAA). Upon Croatia’s accession to the EU, the EASA Part 145 approval for non-EU members ceased to be valid and the Croatian approval HR.145.001 became recognised and valid within the European Union.

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44

- 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 maintenance training organisation. Upon Croatia’s admission to the EU, the Croatian approval HR.147.001 became recognised and valid within the European Union.

4. IOSA Operator The International Air Transport Association (IATA) set up a standardised, globally-recognised programme for assessing the safety of flight operations of all members of the Association. In December 2003, the first IATA Operational Safety Audit (IOSA) was conducted at Croatia Airlines, which confirmed a high level of flight safety. This certificate is subject to biannual renewal.

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 its 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 has opted to manage the objectives and risks of its business operations by taking account of environmental protection and improving energy efficiency, thus fulfilling its obligations to future generations. To this end, in 2016 an environmental management system according to ISO 14001 and an energy management system according to ISO 50001 were implemented.

Croatia Airlines is highly dedicated to raising employee awareness about the level of responsibility, job importance and the way in which the successful performance of job-related tasks contributes to achieving quality-related goals.

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Fatigue risk management As the risk of fatigue is analysed and identified as a potential hazard for the safety of air operations, appropriate risk mitigation measures are adopted and implemented.

Specific working conditions of aircraft crew members include shift work, night work, unpredictable and constantly changing work schedule, and a particular work environment (cockpit and aircraft cabin). This may disrupt sleep and the circadian rhythm, which in turn results in fatigue, accumulated sleep loss and reduced attention. A group named the Fatigue Safety Action Group (FSAG) has been formed to help manage all fatigue-related risks. The FSAG members gather and analyse data and draw up risk assessment reports related to the level of fatigue of flight crew members, outline recommendations and measures for reducing the fatigue risk, cooperate with the Safety Department on devising safety assurance processes, provide training guidelines and material to crew members.

A total of 39 reports were processed and analysed in 2021, which points to an increase compared to 2020, when there were 18 reports. However, it should be taken into account that in 2021, there were 26% more flights than in 2020 due to the COVID-19 pandemic. On average, there were 3.2 reports per 1,000 flights.

In 2020, an electronic fatigue report form was introduced to the Q-Pulse quality management system. As it can be filled out through a mobile application, intranet (Crew portal) or the Internet (web browser), paper-based fatigue reports are no longer used.

C4C project The Company intensified its activities on the C4C project of developing a CRM (Customer Relationship Management) system, enabling its sales and support teams a more efficient way of managing relations with private and corporate clients (B2C and B2B). The project implementation will also enable a more efficient use of human resources and ensure the mobility of sales representatives, who will be able to respond to customer needs in real time, since the system functionalities will be available on a mobile application. The project should be fully completed by the end of the first half of 2022.

Joint travel centre at Pula Airport In December 2021, Croatia Airlines, Pula Airport and the Obzor putovanja travel agency set up a joint travel centre at Pula Airport. Owing to the synergy of all participants and complementary activities, this is now a place where passengers can easily book and buy Croatia Airlines’ tickets for both domestic and international scheduled flights. Pula Airport participated in this joint project by providing space and staff, while Croatia Airlines and its subsidiary Obzor putovanja provided a marketing platform and employee training.

Prolonging the works season to summer months In 2021, the Technical Sector extended the works season to summer months, and carried out five A checks, nine C checks and two main landing gear and nose gear replacements on third party aircraft.

Maintenance works are carried out in three hangars, and as of this season on the platform as well, so that the works stipulated by the Parked Aircraft Maintenance Programme could be performed. Amidst increased aircraft parking needs, the Company implemented the Parking Expansion Project on Croatia Airlines’ premises. The parking services charged for third party aircraft covered both the project costs and brought ancillary revenues.

Project of forming a technical profit centre The goal of the project is to introduce an internal invoicing system between the operator (CTN) and the MRO sector in order to set up better internal control and profitability reporting systems within the technical profit centre (MRO). In the project’s first stage, the Company defined the types of services to be invoiced internally and their prices, while the second stage involves preparation and implementation of internal invoicing within the SAP system, and related adjustments of the existing processes within it. The final portion of the second stage of the project will be implemented in the first half of 2022 and will include preparation of reports for a monthly tracking of results of the technical profit centre, and potential updates and additional adjustments of the processes.

Data protection The IT sector has continued implementing the previously applied data protection measures within the infrastructural segments of the IT system of our Company, with the aim of strengthening the security measures affecting personal data protection.

• Measures for advancing data security are being implemented in view of the events shown in the risk register tables, identifying the risks of 3rd and 4th categories, in line with the provisions of Directive (EU) 2016/1148 (NIS Directive), Act on Cybersecurity of Operators of Essential Services and Digital Service Providers, and Regulation on Cybersecurity of Operators of Essential Services and Digital Service Provider, so as to advance the information security level.

• Supervision of information security risks previously identified in the IT system risk register was carried out.

• A regular annual information security risk assessment was carried out, and a relevant decision on addressing such risks in 2021 made.

• A regular scanning of the Company website was conducted.

It included a security testing of the intranet: - a review of vulnerabilities of the IT infrastructure - a review of key system access control measures.

Compliance with the PCI-DSS was also maintained.

• Regular quarterly perimeter security checks were carried out.

• A privileged access management system was introduced.

• A cloud infrastructure access protection and control system was introduced.

• The EOL and EOS status is being regularly checked for all software components.

• Numerous meetings and workshops (live and online) were held to implement compliance measures.

• All CSIRT notifications about system vulnerabilities were regularly followed, as well as the information from STAR Alliance, which was disseminated to all employees.

• The training programme aimed at familiarising the employees with the threats of social engineering was intensified.

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ERCM - Emergency Response and Crisis Management Regardless of the fact that safety is one of the Company’s most important tasks and that it has in place all the required safety and protection measures, the possibility of adverse events should also be taken into account. In order to ensure a continuous level of preparedness, Croatia Airlines has for many years been managing an emergency response and crisis management system.

The Office for Emergency Response and Crisis Management (ERCM) is responsible for planning, devising and testing plans and procedures, and training a variety of teams that are crucial for crisis response. Its primary task is to take care of passengers, their families, crew members and other employees in case of an aircraft accident, incident or any other crisis situation.

Its 2021 activities continued to be marked by the COVID-19 pandemic, which significantly affected not only our Company but also the entire aviation industry. Managing such crisis situations is crucial for the Company’s business continuity and its future development. Three exercises (ASAR 2021-1, 2, 3) were organised in cooperation with the Civil Protection Directorate of the Republic of Croatia, two of which took place in Zagreb, and the third one in Split.

We apply all protection measures in line with the guidelines of domestic and international public health authorities and continuously monitor and exchange experiences with other airlines. In these extraordinary circumstances, safety of flights and the health of our passengers and employees remain our number one business priority.

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Š. Lugarov

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6.6. Responsibility to employees 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 and safe 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 opportunities 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 key for ensuring quality, so 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 that achieving sustainable development goals is an exceptionally complex and challenging human resource management process. The Company carries out annual work performance assessments.

By aligning individual interests of a large number of people with common interests of the Company, we strive to organise the work in a way that each individual is satisfied and contributes his/her best as a member of the organisation. The goal of human resource management activities is to ensure that all employees make use of their knowledge, skills and experience to create added value for the Company, by being assigned an optimal workplace according to their competencies.

We keep up with the industry’s requirements and current trends, and also pay due attention to the health of our employees by organising periodic health examinations. As the Company nurtures a great tradition of celebrating our employees’ year-long loyalty, it presented jubilee rewards for 2021 to the employees who marked 25 years of uninterrupted service with Croatia Airlines. The Company has also organised flu and coronavirus vaccination to protect the health of its employees.

Employment policy and employee care 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 its employees an opportunity to apply for job vacancies within the Company by way of internal hiring procedures and, in addition to regular education programmes necessary for an uninterrupted flow of the business process, it organises training courses to improve employee skills and knowledge. Amidst the COVID-19 crisis, in 2021 the Company adjusted its operations to the new circumstances through in-house task reassignments, and hired no seasonal workers amidst reduced business activity. New employees were recruited only for the highly specialised positions that could not be filled through internal reassignments. The total employee turnover in 2021 was 7% (turnover rate = employees who left the Company/average number of employees).

Due to the COVID-19 crisis, employer branding activities were focused on promoting Croatia Airlines as a COVID-safe company with a high level of infection prevention. In 2021, a pilot project initiated for the purpose of implementing more flexible work forms such as occasional remote work for non-operational staff as well as part-time work, at employee request, to successfully balance private and business life, was upgraded by organising shift work for non-operative staff in order to additionally safeguard the health of our employees during the epidemic. Having been implemented much earlier, flexible working hours facilitate the business process to a significant extent.

The COVID-19 crisis has brought about numerous adjustments to the execution of business process through a variety of online platforms (Teams, Zoom, etc.) in all areas and types of activities such as meetings, recruitment and training. We put efforts into optimising, redesigning and adjusting the functionalities of the official HRIS HR net software, the full implementation of which is planned for 2022, and on organising outside-the-office work in shift teams. Parents of the minors in self-isolation were allowed to work from a separate place so as not to affect the work-life balance and to support long-term sustainability of both spheres.

In 2021, our employees were given a day off on their children’s first day of school - the First-graders’ Day. Occupational health and safety of employees Croatia Airlines has undertaken to protect the health and safety of its employees at their workplaces and implement all prescribed occupational safety measures.

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In order to protect the health and safety of its employees, Croatia Airlines adopted the Occupational Safety Guidelines as early as 1991 (they have been amended multiple times since, in line with legal regulations). Based on the Workplace Risk Assessment and in line with the relevant activity, technology, jobs performed in special working conditions, equipment, hazardous substances, and the number of workers, they set out the manner of ensuring workplace safety, related rules and rights, obligations and responsibilities of an authorised person of the Employer and workers where these issues are not regulated by the Occupational Safety Act, its subordinate regulations, and relevant employment contracts. Most jobs in the Technical Sector are high-risk jobs (such as working at heights, with hazardous chemicals, different machines and dangerous devices). Employee training related to working in a safe manner and basic training in fire protection are regularly organised and implemented for all new employees and those that could benefit from a refreshment course. Specialist training for the safe handling of machines and devices posing a greater hazard (hydraulic platform lifts, metal and non-metal processing machines, fork-lifts, etc.), and courses on the protection against hazardous chemicals are organised in line with the needs of the Technical Sector. Due to the COVID-19 epidemic, no such courses were organised in 2021. All employees at workplaces with special conditions regularly undergo medical examinations.

All work equipment (machines, devices, tools, plants and installations) within the operating process, as well as those serving for the fire signalling and extinction, undergo regular check-ups and periodic testing.

All hazardous waste resulting from the work process is regularly and duly disposed of, with prescribed records (registers) being kept on it, and reports submitted for the Environmental Pollution Register with the Ministry of Environmental Protection.

A total of six injuries at work were reported in 2021, of which three were sustained at the place of work, and three occurred during the commute. There were neither deaths related to injuries at work, nor professional illnesses.

Employee training and educationa Through continuous investment in education, Croatia Airlines develops and strengthens human resources, having recognised since day one that its business activity is both capital and labour intensive. Due to

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exceptionally 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 flight and cabin staff, as well as of all other employees whose contribution to the Company’s basic business processes is invaluable. 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 the Company’s cultural and business strategies.

The training of Croatia Airlines’ employees is simultaneously provided on three levels: training of operative sector employees, technical sector employees and non-operative sector employees. In 2021, a total of 4,673 hours of in-house training was provided for all of its employees.

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 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. In 2021, the Technical Training Centre continued its active cooperation with the Croatian Civil Aviation Agency concerning the issuance and extension of PART 66 licences.

Despite the COVID-19 pandemic, the Company held more training courses prescribed by the PART 145 regulations than in 2020, as well as all of the planned courses for extending internal authorisations of Croatia Airlines’ PART 145 engineers and mechanics. Given the pandemic and the introduction of special measures to protect the population, which specifically limited the work of training centres (limitation of the number of attendees, no classroom sessions), the Technical Training Centre obtained approval from the Croatian Aviation Agency for synchronous distance learning (SDL). No issues were reported by the representatives of the Croatian Civil Aviation Agency regarding the supervision.

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. In order to ensure the completion of any necessary training courses and a smooth flow of traffic, Croatia Airlines asked the Croatian Civil Aviation Agency to allow distance knowledge refreshment courses based on EASA’s instructions, which were successfully run for the flight and cabin staff. The training and refreshers took place in line with the prescribed epidemiological measures, and schedule changes were made accordingly.

During 2021, the Croatian Civil Aviation Agency carried out a number of audits and inspections for the purpose of implementing ongoing supervision of activities performed by the Flight Operations Training Centre staff at Croatia Airlines’ premises, on simulators and on the Croatia Airlines aircraft flights. The results showed an enviable level of compliance with the prescribed standards. A number of inspections of simulators and TRI/TRE work on them were carried out in accordance with the provisions OM-D[5] & Quality Inspection Orders, for the purpose of monitoring and raising the quality of the work of TRI/TRE. For most categories of specialist employee training courses, the Company uses the services of IATA (International Air Transport Association) Training Centre and other international specialised training centres, and, if necessary, the services of external experts who run in-house courses. Since the year of 2021 was also marked by the pandemic, the Company employees mostly participated in various online themed conferences, symposia and work groups organised by external professional institutions, with the aim of becoming more familiar with the industry’s operational and commercial innovations, and new procedures and regulations introduced to overcome the industry crisis.

Most of the internal training courses for non-operative staff were also held online; however, the part referring to crisis response, auditor refreshers, dangerous goods handling procedures, passenger reservations, tariffs and ticketing took place in a classroom. The Company also held a series of internal courses with the aim of offering all of its employees the knowledge and skills needed to cope with extraordinary situations and boost resilience in the demanding and stressful business and private environment they have been working and living in for quite some time now.

As the national flag carrier, Croatia Airlines organises within its Training Centre a series of training courses needed by travel and commodity agencies for the acquisition of the IATA licence, training courses for the employees of airports, freight forwarders, and airline companies. Despite the unfavourable circumstances, in 2021 the Company held courses for external associates related to reservations, tariffs and ticketing, dangerous goods transport procedures, as well as online beginner courses in the sphere of air cargo transport intended for external associates and business partners. The attendees were representatives of both freight and travel agencies, given the poor results in the passenger segment and a strong trend of turning to the transport of goods during the period of crisis.

Š. Lugarov

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Works Council In accordance with the regulations related to employment, the Works Council comprised of nine members operates within the Company. It informs, consults, and participates in decision-making processes with regard to economic and social rights of workers. Up to twice a year, the Works Council organises, in cooperation with the employer, a workers’ meeting in order to inform them about the Company’s current situation and development. The Works Council also appoints to and withdraws worker representatives from the Supervisory Board and draws up quarterly reports on employment situation and structure.

Freedom of association and collective bargaining The following labour unions operate within the Company: Croatian Union of Air Traffic Pilots (HSPP), Air Cabin Staff Union (SKOZ), Independent Professional Union of Croatian Aeromechanics (SSSAH), Independent Croatian Union of Airline Employees (SHSZUZ) and Union of Engineers and Technicians in Aviation (SITUZ). As the Croatian legal framework sets out that representative unions are authorised for collective bargaining, in 2016 a new union, Croatia Airlines’ Employees Organisation (ORCA), was founded, gathering the members of the above-listed pilot, cabin staff and aeromechanic unions.

The majority of employees are union members, but provisions of the collective bargaining agreement apply to all of them (100%). The level of rights contained in the collective bargaining agreement regulates many additional benefits of employees in order to improve their economic and social status, such as the number of days of annual leave, paid leave, salary bonuses, severance payments, etc., which are above the legal minimum. In case of more serious health problems, deaths, childbirths, long-term illnesses or similar situations requiring an individual approach, the Company helps its employees to the fullest extent possible by participating in the medical treatment costs and purchasing the necessary aids, thus protecting their social position.

Due to the coronavirus crisis, an annex to the Collective Bargaining Agreement from 2019 was signed on 19 February 2021 in agreement with the unions, temporarily reducing the gross income of employees by 15% as one of the measures the Company implemented to mitigate the impact of coronavirus crisis on its business operations.

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Non-discrimination and employee dignity 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. No reports related to dignity protection were received in 2021. There were no discriminatory treatments of employees. We also promote gender equality: there are 52% male and 48% female employees. There is also equal gender representation among managers, with 53% female and 47% male executives, who are paid equally for their work.

Non-discrimination and the promotion of diversity are also reflected in a growing number of employees of different nationalities.

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 enables them to use their services at a more favourable price (health services, catering and hospitality services, tickets for cultural events, etc.).

They are also offered the possibility of using air transport services for private travels on more favourable conditions.

6.7. Business ethics Croatia Airlines and its Management Board deem that raising anti-corruption and ethical awareness of all employees and adopting zero tolerance to corruption are crucial for an efficient prevention of corruption.

The Company strives to promote ethical behaviour in all spheres of its business activities: among em-

ployees, toward its customers, business partners, segments of the industry, owners, shareholders, and all other entities it cooperates with. Croatia Airlines guarantees equality and equal treatment to all.

Ethics Committee The Committee for Monitoring the Ethics Code Implementation has been active within Croatia Airlines since 2002. Its purpose is to monitor the enforcement, implementation, and breach of provisions of the Code of Ethics in the Company’s work, proposing to the Management Board methods of settling problems related to any reported breach of provisions as an independent body. Based on the relevant report, the Management Board decides on sanctions that may be applied in the case of non-adherence or breach of ethical principles. Its main goal is to advocate moral standards, ethical behaviour and business ethics.

By rectifying irregularities occurring as a result of non-adherence to the provisions of the Ethics Code, it aims to promote ethical behaviour to make work and professional activities at the Company as pleasant and well-balanced as possible. For this purpose, a system for reporting the cases of non-adherence to the Ethics Code has been set up, allowing employees to report any case of breach thereof.

The Committee meets when necessary, i.e. when it has found out or has been informed by a Company employee of a possible breach of provisions of the Ethics Code. In accordance with the Ethics Code, all employees are required to act with due care and attention, following the principle of integrity. The Company pays particular attention to the choice of its business partners and refuses to do business with those who have committed a serious breach of contractual obligations and the rules of business ethics.

No breaches of the Ethics Code were reported in 2021. The Ethics Code of Croatia Airlines d.d. has also been published on the Company’s website and must be adhered to by all employees.

6.8. Anti-corruption Programme In early 2010, Croatia Airlines started implementing its Anti-corruption Programme with the aim of improving the legal and institutional framework for efficient and systematic prevention of corruption and the promotion of zero tolerance to corruption. The Programme undergoes revisions, if needed, which was last done in 2019, in line with the Decision of the Government of the Republic of Croatia on Adopting an Anti-corruption Programme for the Companies majority-owned by the State for the period 2019 - 2020.

Any breach or non-adherence to the Anti-corruption Programme is considered a breach of ethical principles and standards.

The primary goals of Croatia Airlines’ Anti-corruption Programme are: - Goal 1 Strengthening work integrity, responsibility and transparency - Goal 2 Strengthening anti-corruption mechanisms.

The Anti-corruption Action Plan is also published on the Company’s website and must be adhered to by all employees. Its Ethics Code is published on its intranet site, which all employees can access. It provides them with an insight into the Company’s dedication to affirming zero tolerance to corruption. In 2021, no cases related to any form of corruption were reported.

6.9. Responsibility to passengers Our goal is to ensure good connectivity, reliability and safety by providing our passengers high-quality service during the flight. We want their journey to be stress-free and in line with their expectations. Therefore, we take surveys on a regular basis and communicate with our passengers to offer them a service that meets their expectations. We have been carrying out a customer satisfaction survey throughout the year, on a daily basis, so as to get feedback from the passengers on their satisfaction with our service quality. Our goal is to continuously monitor the entire service delivery process. The main survey parameters are customer satisfaction with the service, NPS and the likelihood of reusing our service.

As we tend to adapt the survey to the current developments, in 2021 we reviewed our passengers’ satisfaction with the inflight health and hygiene measures applied by Croatia Airlines. Passengers are surveyed

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online, via the QR code available on our aircraft during the flight.

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

As a Star Alliance member, the Company’s Customer Service monitors, adopts and applies any Star Alliance rules regarding the communication with passengers and that among its members. Any passenger concerns will be addressed within the legally prescribed deadline of 30 days.

Passengers can contact our Customer Service in writing: • using the web form on our www.croatiaairlines.com website • using the form available on our aircraft • by post (at Bani 75 b, Buzin, 10 010 Zagreb) • by fax (+385 1 6160 152).

Complaint management is handled in line with the Regulation (EC) No 261/2004, provisions of the Act on Civil and Proprietary Relations in Air Traffic (OG 132/98 and 63/08) in the Event of Denied Boarding, Flight Cancellations or Long Flight Delays, and the Montreal Convention of 28 May 1999, which in the Republic of Croatia is implemented on the basis of the Act Ratifying the Convention for the Unification of Certain Rules for International Carriage by Air and provisions of the Act on Civil and Proprietary Relations in Air Traffic (OG 132/98 and 63/08).

In 2021, we promoted our passenger and staff protection measures through all our communication channels. We used visuals for our social media profile pages, and new #CTNwecare pictograms, and published in all internal media the safety measures our passengers should follow before, during and after the flight.

Tailored service Due to the global crisis caused by the coronavirus pandemic, the year of 2021 was challenging and demanding in this segment as well. We adjusted our services in line with the prescribed epidemiological measures on multiple occasions, and focused on meeting the demand for air transport services. For the

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period up to 31 October 2021, the Company offered its passengers more flexible ticket purchase terms and conditions with an unlimited number of travel date changes free of charge, provided that they fly within the ticket validity period. It was also possible to get a refund in the form of a voucher, which could be exchanged for a new ticket.

Since the beginning of the coronavirus crisis, the Company has been operating flights without interruption, keeping the country connected. With international and domestic flights operated during the tourist season we strongly supported the efforts of the hospitality industry aimed at achieving the best possible results. We have continued to monitor the quality of our services regardless of the crisis.

We use an online survey adapted to the current situation to monitor the level of customer satisfaction and offer our services in line with their assessments and suggestions.

Despite the crisis, during 2021 we continued developing and improving the following services:

Website and billing system In 2021, we introduced our new website and a new billing system. The website has been technologically upgraded, it meets all modern technology requirements and boasts better technical performance. It is now responsive, i.e. enables a unique user experience and provides the same information on all devices (mobile

phone, tablet, desktop). The new billing system enables faster and easier payment for online purchases.

There is also a new billing system for the purchase of tickets through the Contact Centre and Croatia Airlines branch offices. Another novelty is the possibility of making payments with Discover credit card, and holders of Visa Premium, Visa Inspire and Maestro cards issued by PBZ Card can opt to pay in up to 3 instalments in the Republic of Croatia. We are preparing some more novelties for our users: additional changes to the website are planned, to offer an even better functionality to private and business users through the creation of a new sales channel, all with maximum protection of personal data and security of online payments.

Promo code In January 2021 we upgraded the Amadeus Promo Code functionalities to offer passengers more affordable travels in line with their specific needs.

Amadeus Reservation Essential In early January 2021, the existing Amadeus Reservation Desktop booking system was migrated to a new platform. Even though the application is intended for Croatia Airlines’ sales staff rather than for our passengers, the new platform will enable us to provide an upgraded and faster service to passengers who do not use digital channels. The advantage of this web-based platform is that it enables our employees to work from any place, not necessarily their office, owing to a URL access to the system, which is of great use in these pandemic conditions. The system boasts additional useful functionalities, such as storing documents in PDF, etc.

New tariff class - FlyBWise FlyBWise, a new tariff class that is being implemented, will enable our passengers to fly business class at more affordable prices. FlyBWise includes a priority service, entry into airport lounges, inflight meals and beverages, and allows for more baggage. Our passengers will have as many as five tariff classes to choose from - FlyEasy, FlyOpti, FlyFlexi, FlyBWise and FlyBizz.

Meals for passengers Our most important task is to ensure customer satisfaction with the service provided. As the national flag carrier and a company that continuously works on improving its services, our goal is to make flights even more pleasant and introduce the riches of Croatian cuisine to passengers. All meals and beverages on our flights are free of charge and the service depends on the flight duration and the time of day. Business class passengers can enjoy special meals, in line with their health and religious requirements, and there are also special meals for children, etc.

With the easing of the epidemiological measures, in June 2021 Croatia Airlines reintroduced inflight meals and beverages, while the inflight Sky Shop service was reintroduced in July.

Health and safety of passengers Health and safety of passengers, crews and employees are of high priority to Croatia Airlines, and are ensured through an integrated quality assurance system encompassing all of its business processes and organisational units.

A more detailed description of Croatia Airlines’ quality management system can be found on page 43 of this Statement. The system is continuously certified and advanced through regular internal supervision and the supervision by relevant domestic and international organisations. The supervision encompasses regular audits and inspections carried out by the Croatian civil aviation authorities, i.e. Croatian Civil Aviation Agency (CCAA). Croatia Airlines fully implements professional IATA standards related to air traffic safety.

In order to protect the health of the Company’s service users, all food and beverages served on the flight must meet certain health standards.

Croatia Airlines regularly checks and supervises the work of all entities participating in the processes of procurement, storing, preparation and delivery of inflight meals, as regulated by the Croatian laws and related ordinances. The basic acts are: Food Act, Act on General Use Items, Veterinary Act, Act on the Protection of the Population from Infectious Diseases, and Act on the Provision of Food Information to Consumers. Sanitary inspectors are responsible for ensuring the implementation of relevant laws and ordinances.

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The cabin crew must adhere to the provisions of the Act on the Protection of the Population from Infectious Diseases. They are obligated to obtain sanitary certificates, which have to be renewed every year, and attend training courses on minimum hygiene standards every five years. Cabin crew members who come into direct contact with passengers and ground personnel wear appropriate protective equipment, aircraft are disinfected daily, advanced hygiene measures are taken during the regular cleaning of the passenger cabin, and various disinfectants are made available to staff.

Product information Croatia Airlines has in place a Miles&More frequent flyer programme, the most extensive one in Europe.

Information about offers, travel planning and booking, the Miles&More programme and all other travel-related information can be found on our website www.croatiaairlines.com.

Customers are informed about Croatia Airlines’ transport services also through promotional activities, media releases, participation in domestic and international fairs, distribution of promotional material, sponsorships, and direct communication with our sales personnel.

Croatia Airlines’ General Conditions of Carriage are available to customers at all sales locations, branch offices, and representative offices of Croatia Airlines, and have also been posted on the following webpage: https://www.croatiaairlines.com/legal-information/general-conditions-of-carriage

6.10. Helping the community through cooperation projects Croatia Airlines strives to support institutions that need humanitarian aid or organise humanitarian projects. It provides help and direct humanitarian aid by granting cost-free transport for severely ill patients or people in need, and participating in charity actions by donating free transport. Despite the crisis, our Company demonstrated its social responsibility in 2021 as well, by realising the below described joint initiatives and projects.

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Croatia Airlines actively supports sports in Croatia. In 2021, it was the official airline of the Croatian Olympic Committee and the Croatian Football Federation, thus contributing to the country’s promotion and visibility throughout the world. In the summer of 2021, it provided transport services to Croatia’s top athletes who participated in the Olympic Games and the Paralympic Games in Tokyo.

In cooperation with the Ozana association, on 30 May - World Multiple Sclerosis Day, we distributed 4,500 hand-made butterflies and leaflets on our flights, with the aim of raising awareness about this illness.

On 25 June we are becoming a partner to the children’s Mudrica card and will be offering all card holders a discount on Croatia Airlines’ tickets.

Also, as of 1 December 2021 German students of medicine in Osijek are granted a 30% discount on the tickets for the Osijek - Munich route.

We cooperate with the Croatian Tourist Board and its branch offices on strategic projects on an ongoing basis.

In line with its internal rules and regulations, Croatia Airlines does not offer sponsorships, donations or grants to political parties and state organisations, or organisations supporting racial, religious, minority or any other form of discrimination. http://www.croatiaairlines.com/hr/O-nama/Korporativne-vrijednosti/Sponzorstva-i-donacije

A. Gospić / HTZ arhiva

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6.11. Environmental impact of business activities The environmental protection aspect was given a lot of attention within our operations in 2021. In addition to regular activities, the year was marked by intensified regulatory changes.

From the energy efficiency perspective, 2021 was a very challenging year. In absolute figures, all resources recorded significantly lower levels, with key indicators clearly showing detrimental effects of the pandemic on the business operations. The results of all analyses point to a notable effect coming from a reduced number of passengers, and show that work from home affected the ‘relocation’ of resource consumption from workplace to home environment.

The Company focused on mitigating the negative indicators (particularly CO2 emissions per passenger kilometre) by optimising traffic through the use of lower capacity (and thus lower consumption) aircraft whenever possible.

Croatia Airlines is dedicated to managing its business goals and risks, with a strong focus on environmental protection and energy consumption. The impact of Croatia Airlines on the environment can be seen in the activities of its various segments. The Flight Operations Sector is the most intensive one in terms of greenhouse gas emissions, the Technical Sector in terms of hazardous and non-hazardous waste, whereas the other sectors affect the environment at a considerably lower level. Croatia Airlines has identified greenhouse gas emissions as the most important aspect of the 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 are the only anthropogenic pollutant that can affect the ozone layer. Greenhouse gases, particularly CO2, are the cause of climate change 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 beginning introduced a system for measuring and monitoring aircraft fuel consumption, and it meets all related regulatory requirements (both domestic and international). Regulatory requirements are continuously 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 by investing in technol-

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ogy, optimising air traffic and improving aviation structure, and boosting operational performance. We are sure that sustainable development will be among top business trends in the years to follow.

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FLEET

99

CARBON FOOTPRINT

thousand t CO 2e

aircraft Average fleet age: 17.02 years

CO2

57

ZAGREB

52% less than in 2019 27% more than in 2021 (partial recovery of traffic)

SPLIT

A 73-tonne A320: 33 kg of CO2 per passenger*

DISTRIBUTION CO 2e

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 t: 46 kg of CO2 per passenger*

* pre-pandemic data

NOISE

Aircraft

98.84%

Other

1.16%

ICAO Chapter IV

ELECTRICITY

100%

1.7 MWh 6% more compared to 2020

GAS

MOTOR FUELS 31t

22% more compared

41% more compared

to 2020

to 2020

From a global perspective, the European Union leads the way when it comes to creating and implementing environmental protection objectives, and so does the Republic of Croatia as an EU member state and Croatia Airlines as a company operating in this area. As a member of the largest airline association, Star Alliance, Croatia Airlines also engages in achieving common goals in terms of waste, use of sustainable fuels, emission reductions and impact on the supply chain. In the coming years, we plan to establish benchmark values and make steady progress in these fields. Our experts participated in the reviewing of existing and the drawing up of new EU directives through the Fit for 55 package throughout the year.

Croatia Airlines has also been participating in the EU ETS process since 2010. In 2018, it joined the Swiss emissions trading scheme, and as of 1 January 2019, it joined the CORSIA process after developing new procedures and monitoring plans in 2019. The adoption of the CORSIA system required Croatia Airlines to make adjustments of the existing EU ETS (Emissions Trading System) in order to cover a greater number of flights.

Through the application of this regulation, all Croatia Airlines flights have joined one of the CO2 measurement and emissions trading systems (EU ETS, CORSIA, Swiss ETS), allowing the Company to join the growing number of companies and countries that invest significant efforts and initiatives into a global reduction of greenhouse gases emissions. Following Brexit and the United Kingdom leaving the EU, as of 1 January 2021 the Company was required to monitor emissions in the UK territory. Our experts complied with this by drawing up an additional emissions monitoring plan, which was approved in 2021 by competent UK authorities.

As of 2019, the Company’s new emissions monitoring, reporting and trading system was named EOS (Emissions Offsetting System). It was upgraded in 2020 through a new and more efficient way of recording, and successfully implemented in 2021. Its successful application is expected to continue in the years to come. Activities related to the reduction of greenhouse gas emissions directly affect the Company’s economic balance.

A reduction of fuel consumption in tonnes through technical and operational activities reduces the cost of fuel. Consequently, the level of emissions has been dropping, which implies lower costs related to emissions credits, so every initiative aimed at reducing fuel consumption results in both an environmental and economic impact. Moreover, various fees for waste, emissions and noise are part of the service price related to every flight destination of Croatia Airlines, thus directly affecting its financial operations.

Besides limiting greenhouse gas emissions through the EOS system, it is also important to consider the relationship between passenger growth and emissions. An increase in the number of passengers at every flight positively affects emission indicators per passenger seat at a certain distance since the volume of emissions does not increase proportionally to the number of passengers. For example, by comparing the average aircraft and car load, in terms of emissions air travel is often more environmentally friendly. The physical properties of aircraft/vehicles and the fact that usually only one passenger travels by car (the driver) should also be taken into account. As we witness a growing number of technical and technological initiatives in the automotive industry, the airline industry is trying to keep pace and be competitive in environmental terms as well. Through the airline associations Star Alliance and IATA, Croatia Airlines has also committed to net-zero carbon emissions by 2050.

Croatia Airlines is actively meeting all regulatory requirements and improving its business processes in line with available capacities in order to reduce, to the extent possible, their impact on the environment. Furthermore, it strives to improve its attitude to the environment by adopting proposals of other stakeholders. The Company’s growth is guided by 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.

Environmental impacts are monitored through the environmental protection and energy management system certified under ISO 14001 and ISO 50001 international standards, which were renewed in late 2019 through a recertification audit. The system encompasses all activities that are carried out in a number of the Company’s business sectors with regard to the environmental protection and conservation of energy.

Since the above certificates require continuous work and progress in the segment of environmental protection, in 2020 Croatia Airlines adopted the ISO 50001:2018 version with stricter and more precise requirements for energy consumption, i.e. it calls for more detailed planning by taking into account the ‘operating environment’, thus providing a more realistic overview of energy consumption, and positively affecting its management. The audit was carried out in the 2021 pandemic setting through the use of modern communication platforms, allowing the participants to be present in real time at several Company’s locations and in several counties.

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Carbon Offsetting and Reduction Scheme for International Aviation

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Aircraft fuel consumption is the most significant aspect affecting the environment and energy consumption at Croatia Airlines, so it is in this segment that biggest improvements are expected. The Company strives to boost energy efficiency with each upgrade of technical resources (primarily aircraft). With this in mind, in 2019 expert teams assessed the use of sustainable fuels in the operation of Croatia Airlines’ aircraft. The assessment showed readiness for such an initiative, but the next steps will depend on the supplier’s infrastructure and economic aspects of the market, considering a higher price of such fuels and an accelerated introduction of infrastructure for the production and distribution of sustainable fuels. In 2021, there was a strong focus on increasing the use of ‘green technologies’ in the post-pandemic period.

In addition to the already mentioned sustainable fuels (the so-called Sustainable Aviation Fuel - SAF), the industry is developing hydrogen technologies and techniques, expected to be largely deployed by 2030.

There were no instances of non-compliance or penalties in 2021 in relation to environmental protection.

For the health protection and safety purposes, a certain number of employees worked from home for longer periods. Due to this, the planned measurement of the Company’s resource consumption was not carried out as the conditions were not stable (which is one of the requirements of the environmental protection management system).

Environmental protection management systems have been set up to ensure more efficient monitoring of environmental protection and better coordination at Company level. The introduction of the system has enabled the Company to check and monitor relevant indicators, and facilitated the identification of related goals. This has allowed it to introduce positive business practices in its processes.

Croatia Airlines implements several policies within its management system. The first and most important one is the Safety Policy, followed by the Quality Assurance Policy, Aircraft Maintenance Quality Policy, Protection Policy and the Environmental Protection and Energy Efficiency Policy.

By introducing ISO 50001 (Energy Management System) and ISO 14001 (Environmental Management System) systems in late 2016, Croatia Airlines joined a small circle of global airline companies with an implemented range of ISO management systems (ISO 9001/14001/50001). Their introduction and subsequent monitoring have resulted in certain savings, as shown by indicators for which 2015 is still taken as a baseline year; however, measurements and comparisons with previous years have been set up, as

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well as the planned/realised ratio, pointing to a more dynamic approach to data gathering. In 2021, data for all indicators were collected on a quarterly basis so as to enable more precise monitoring of recovery potentials, with an ongoing ‘energy audit’ being conducted at the same time.

The Company adheres to all applicable legal regulations on environmental protection and energy preservation at national and global level, including waste management regulations.

It also strives to implement new technologies and measures for a permanent improvement of energy performance, as well as to monitor and reduce greenhouse gas emissions, and raise awareness about efficient environmental protection and the strengthening of energy efficiency standards through employee education. Material aspects have also been harmonised with business partners using the same infrastructure, for example, with Zagreb International Airport, with which Croatia Airlines shares water drainage infrastructure.

The application of all principles of sustainable development is limited by certain restrictions arising from the particular nature of air transport. This primarily applies to the Safety Policy, regarded as the most important policy on the principles of which the Quality Assurance Policy and the Environmental Protection and Energy Efficiency Policy are based. Due to the particular nature of its business operations, the consumption of energy and resources within Croatia Airlines is analysed in three separate segments: flight operations, Technical Sector, and the administrative segment of the Company.

Flight operations consume the most energy at Croatia Airlines, with relevant regulations and procedures for safe air traffic having the absolute priority. Due to congested airspace, the EU carriers have been forced to act in coordination with numerous factors of air traffic, which sometimes makes it hard to apply an environmentally friendly approach to business. In 2021, Croatia Airlines introduced a more recent version of Airbus A319 aircraft into the fleet for the summer flight schedule. However, like the rest of the fleet it operated on a reduced scope due to the pandemic. In late 2021, the Company made a decision to take the oldest Airbus 320 out of service, which resulted in a somewhat better energy ‘balance’. A standard EU ETS MRV method was used to collect CO2 emissions data through the use of the 3.15 emission factor, meaning that one tonne of aviation fuel produces 3.15 tonnes of CO2.

Croatia Airlines strives to operate as asocially responsible company, taking into account the by-products of its operations and their impact on both the environment and the community.

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COOPERATIONWe cooperate with regulatory bodies and interested parties such as educational institutions and individuals to share information and experience in the field of environmental protection and energy These are the pre-pandemic results that we are trying to achieve during the pandemic as well, and improve them by optimising the fleet utilisation.

CO2 MANAGEMENT - The Company compensates CO2 through the EU ETS and related systems (CH ETS) and will be doing so in future through CORSIA and UK ETS; data is collected for each flight, then verified and delivered to relevant bodies

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NOISE MANAGEMENTall of our aircraft comply with the Chapter IV standards for aircraft noise; changes made on Airbus aircraft in 2019 enabled us to exceed these standards

Energy and water consumption

Measurement unit

2021

2020

2019

2015

1,757,568

1,656,624

1,764,760

1,690,244

Indeks 2021/2019

Indeks 2021/2020

Indeks 2021/2015

Električna energija Electrical energy consumption - total

kWh

100

106

104

Electrical energy consumption - Buzin

kWh

337,578

312,780

389,578

436,972

87

108

77

Electrical energy consumption - Technical Sector

kWh

1,419,990

1,343,844

1,375,182

1,253,272

103

106

113

m3

40,271

37,255

33,246

25,785

121

93

156

Gas consumption - Buzin

m

3

13,046

14,881

10,885

25,785

120

88

51

Gas consumption - Technical Sector

m3

27,225

22,374

22,361

0

122

122

0

m3

Gas Gas consumption - total

Water Water consumption - total

2,915

4,545

7,655

3,176

38

64

92

Water consumption - Buzin

3

m

916

1,312

1,521

1,025

60

70

89

Water consumption - Technical Sector

m3

1,999

3,233

6,081

2,151

33

62

93

Eurosuper 95 consumption

litre

21,582

16,575

29,506

30,230

73

130

71

Eurodiesel consumption

litre

9,687

5,620

16,065

17,110

60

172

57

Eurosuper 95 consumption

l/km

0.166

0.092

0.089

0.130

187

180

128

Eurodiesel consumption

l/km

0.132

0.061

0.104

0.150

127

216

88

Motor fuels

Energy consumption data was retrieved using US Energy Information Administration-https://www.eia.gov

The consumption of aircraft fuel in tonnes is considered a business secret and as such is not stated herein.

All measurement systems (Swiss ETS, UK ETS, CORSIA) are compliant with the above method.

As the Company aimed to witness signs of recovery in 2021 compared to 2019, the indicators shown in the tables are set as 2021 against 2019, 2021 against 2020, and 2021 against 2015 as the baseline year.

Energy and water consumption In 2021, the Company’s administrative segment consumed 337,578 kWh, or 7.9% more electricity compared to 2020. The consumption was reduced through regular renewal of IT equipment in 2019/2020, which continued throughout 2021, so the average consumption per computer is currently about 65 W. It should also be noted that annual consumption was to a large extent influenced by remote work.

We should mention here that the electricity used by Croatia Airlines holds a HEP ZelEn certificate, meaning that it is produced from renewable sources and that the greenhouse emissions amount to zero.

The Technical Sector consumed 1.419,990 kWh during various aircraft maintenance activities, or 5.6% more compared to the previous year, pointing to almost the same level of maintenance works in 2021 as in the pre-pandemic period. It should be noted here that aircraft maintenance activities are focused primarily on the quality of work and safety, with energy efficiency following suit. Along with maintaining Croatia Airlines’ fleet, the Technical Sector also performs maintenance works for other companies. As the demand for maintenance works for other companies is growing, it is expected that the use of resources will increase, and so will the amount of hazardous and non-hazardous waste. The segment of base aircraft maintenance (major check-ups) shows the biggest growth.

The Company’s administrative segment recorded a slight increase in the consumption of electricity, while the consumption of gas (used for heating) recorded a decline. According to the data of the Croatian Meteorological and Hydrological Service, deviations of the average air temperature in 2021 in relation to the reference period 1981-2010 range from 0.3 °C (Pazin) to 1.2 °C (Gospić). The air temperature was higher than the multi-year average at all stations.

According to percentile distribution, climate conditions in Croatia in 2021 have been classified as follows: normal (central Istria), warm (eastern, central and part of the mountainous Croatia, Istrian coast, Kvarner with some of the islands, part of central Dalmatia, Korčula) and very warm (some of Kvarner islands, part of the mountainous Croatia, northern Dalmatia, part of central Dalmatia, and southern Dalmatia, excluding Korčula).

In 2021, gas consumption at the Technical Sector totalled 27,225 m3, which is a mild increase compared to 2020.

62

Measurement unit

CO2 emissions

2021

2020

2019

2015

Indeks 2021/2019

Indeks 2021/2020

Indeks 2021/2015

Total CO2 emissions CO2 amount (aircraft)

kg

99,768,986

78,631,620

206,332,154

177,967,887

48

127

56

CO2 amount (total)

kg

99,919,648

78,754,346

206,516,792

178,130,840

48

127

56

Amount of CO2 emissions within RC by RPK

kg

0.304

0.292

0.187

0.188

163

104

162

Amount of CO2 emissions in international traffic by RPK

kg

0.166

0.171

0.096

0.119

173

97

139

Amount of CO2 emissions within RC by RPK

kg

0.233

0.247

0.167

0.175

140

94

133

Amount of CO2 emissions in international traffic by RPK

kg

0.161

0.167

0.125

0.131

129

96

123

A320/A319 aircraft

Q400 aircraft

Regarding water consumption in Buzin, it amounted to 916 m3, or 30% less than in 2020. As there is no water recovery system, it is considered that all the water spent was released to appropriate drainage systems according to earlier data on both key locations. The average age of the vehicle fleet in late 2021 was approximately 13 years, which contributes to the expected increase of consumption indicators. The fact that the vehicles of the Technical Sector are used for a specific purpose requires adherence to additional safety rules related to vehicle movement on airport surfaces.

Amidst a reduced demand due to the pandemic, Croatia Airlines did not operate other companies’ aircraft in 2021. Compared to 2020, an analysis of CO2 emissions per revenue passenger kilometre (RPK) as an indicator of energy consumption and volume of emissions shows a decrease, resulting from reduced cabin load and traffic scope due to the pandemic, but the figures are still higher than in 2019.

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

6

A 63

indicator, most commonly used in the airline industry for presenting the data.

The factor used to calculate the total direct emissions of other energy 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 the IPCC 2006 Guidelines for National Greenhouse Gas Inventories.

The total direct emissions of the Company in 2021 with regard to consumed energy products amounted to 150,662 kg CO2, i.e. 22.7% more compared to the previous year. In 2019, the volume of direct emissions of the Company was 184,638 kg CO2.

Since the Company uses the HEP ZelEn certified electricity, there are no greenhouse gas emissions for this segment (Scope 2), which can be emphasised as an exceptional business achievement.

Through its product ZelEn, HEP Supply sells the electricity generated in HEP’s hydro power plants registered in the relevant database of guarantees of origin and delivers the proof of origin to its customers based on the Methodology for Establishing the Origin of Electricity (OG 133/14). Croatian Energy Market Operator (HROTE) is responsible for issuing guarantees of origin and for setting up and managing a database thereof. In 2021, Croatia Airlines’ cumulative CO2 emission impact amounted to 99,919,648 kg CO2e.

Compared to 2019, the total amount of CO2e recorded a drastic 52% fall due to pandemic restrictions in air traffic.

Waste The application of the waste management system using a responsible approach ensures that none of the elements that might jeopardise the environment come into contact with it. Upon delivery of waste to an authorised collector and entering relevant data (for example for hazardous waste) into the Hazardous Waste Register, the so-called waste flow is monitored from its emergence to the final disposal by authorised companies. Croatia Airlines has in place a waste disposal system and pays equal attention to managing both hazardous and non-hazardous waste.

At the general organisational level, the Company has successfully engaged in rationalising the consumption of stationery and office supplies. Where applicable, the print default on single-model printers has been set on both pages. In addition, the employees have been familiarised with the need for conscious printing, by which the Company makes savings on both the input (paper, toner, electricity) and output (waste management and archiving as by-products) resources.

Along with municipal 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 2021, increased capacities for waste management were still in effect and precise waste separation was further enabled.

According to the waste documentation, in 2021, the Technical Sector located in Zagreb produced 12,236 kg of hazardous waste as a result of complex works on the Company’s fleet and those performed on third party aircraft, and 14,759 kg of non-hazardous waste. When we exclude 2,150 kg of waste kerosene (which can vary significantly due to the specific nature of aircraft maintenance and has, therefore, been separately indicated in the tables), the Company produced 10,086 kg of hazardous waste in 2021, or 15% less compared to 2020. In 2021, Croatia Airlines repeated its request to its maintenance partners to make better plans in view of the remaining fuel on aircraft brought in for maintenance, which resulted in a significant decrease in waste kerosene. The amount of non-hazardous waste produced fell by 20%.

The collection of municipal 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 the local community. In this segment, paper represents the most significant type of waste: 10,437 kg of paper was collected in 2021 at the following locations: Zagreb Airport, Buzin, and Zrinjevac branch office. The Company supports all activities aimed at improving waste management and will do its best to increase the percentage of waste separation across all premises, in line with the capacities of the local community, and thus reduce the impact of its operations on the environment.

Index 2021/2019

Index 2021/2020

Index 2021/2015

Measurement unit

2021

2020

2019

2015

Waste kerosene

kg

2,150

600

8,240

1,000

26

358

215

Other hazardous waste

kg

10,086

11,821

9,965

11,845

101

85

85

kg

14,759

18,432

13,470

1,375

110

80

1073

Waste Hazardous waste

Non-hazardous waste Non-hazardous waste

64 Total waste weight by type and disposal method

Measurement unit

2021

2020

2019

2018

Index 2017 2021/2020

Reuse

kg

-

-

-

-

-

-

Recycling (paper and clean plastics)

kg

12,400

12,287

11,223

8,199

10,346

101

Composting

kg

-

-

-

-

-

-

Recovery, including energy recovery

kg

-

-

-

-

-

-

Incineration (hazardous waste, waste without kerosene and contaminated plastics)

kg

10,086

11,821

9,965

11,927

12,921

85 358

Incineration (waste kerosene)

kg

2,150

600

8,240

6,700

32,100

Deep well injection

kg

-

-

-

-

-

-

Storage

kg

-

-

-

-

-

-

On-site storage

kg

-

-

-

-

-

-

Other

kg

2,359

6,145

2,247

4,805

5,940

38

Incineration of hazardous waste 12,236 kg, or 45% of total waste (hazardous and non-hazardous)

Recycling (paper and clean plastics) 12,400 kg, or 46% of total waste (hazardous and non-hazardous)

Other 2,359 kg - 9%

7 . GRI index

Chapter

General disclosure 102-1

7

A

Economic performance

Environmental

65

Social

102-55

Page

Name of the organization

5.1.

Company name and head office

11

102-2

Activities, brands, products, and services (fleet)

5.6.

5.7.

5.8.

5.10.

5.11.

5.15.

6.9.

Croatia Airlines as a brand Fleet and capacities Main services and activities Destinations/airports/routes Other transport services Company history Responsibility to passengers

12 14 16 16 17 24 52

102-3

Location of headquarters

5.1.

Company name and head office

11

102-4

Location of operations

5.9.

Countries/markets of operation

16

102-5

Ownership and legal form

5.2.

5.3.

Ownership and legal form Major shareholders

11 11

102-6

Markets served

5.9.

Countries/markets of operation

16

102-8

Information on employees and other workers

5.12. Employee data

102-9

Supply chain

5.13. Supply chain 6.3. Material aspects of the Company’s business activities and their effect on sustainable development

20-21 36

102-10 Significant changes to the organization and its supply chain

5.5. Significant changes during the reporting period 5.13. Supply chain

12 20-21

102-11 Precautionary Principle or approach

6.8. 6.9. Responsibility to passengers 6.11. Environmental impact of bussines activites

52 57

102-12 External initiatives

6.5.

Safety and andvancements as business imperatives

43

102-13 Membership of associations

5.14. Membership in professional associations and organisations

22

102-14 Statement from senior decision-maker

1.

A foreword by the President and CEO

102-15 Key impacts, risks, and opportunities

6.1.

Operational risks and opportunities

102-16 Values, principles, standards, and norms of behavior

6.7.

6.8.

Business ethics Anti-corruption Programme

102-18 Governance structure

5.4.

Management structure

102-40 List of stakeholder groups

6.2.

Stakeholders

18

5 27-29 51 52 12 30-31

102-41 Collective bargaining agreements

6.6.

Responsibility to employees

102-42 Identifying and selecting stakeholders

6.2.

Stakeholders

30-31

102-43 Approach to stakeholder engagement

6.2.

6.3.

6.6.

6.9.

6.10.

Stakeholders Material aspects of the Company’s business activities and their effect on sustainable development Responsibility to employees Responsibility to passengers Helping the community through cooperation projects

30-31 36 48 52 55

102-44 Key topics and concerns raised

6.3.

6.6.

6.9.

6.10.

6.11.

Material aspects of the Company’s business activities and their effect on sustainable development Responsibility to employees Responsibility to passengers Helping the community through cooperation projects Environmental impact of business activites

36 48 52 55 57

102-45 Entities included in the consolidated financial statements

2.1.

Entities included in consolidated financial statements

102-46 Defining report content and topic Boundaries

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

36

102-47 List of material topics

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

36

102-48 Restatements of information

2.

About the Non-Financial Statement

6

102-49 Changes in reporting

2.

About the Non-Financial Statement

6

102-50 Reporting period

2.

About the Non-Financial Statement

6

102-51 Date of most recent report

2.

About the Non-Financial Statement

6

102-52 Reporting cycle

2.

About the Non-Financial Statement

6

102-53 Contact point for questions regarding the report

2.

About the Non-Financial Statement

6

102-54 Claims of reporting in accordance with the GRI Standards

2.

About the Non-Financial Statement

102-55 GRI content index

7.

GRI Index

65 36

48

6

6

103-1

Explanation of the material topic and its Boundary

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

103-2

The management approach and its components

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

36

103-3

Evaluation of management approach

4.

6.3.

Key performance indicators Material aspects of the Company’s business activities and their effect on sustainable development

8-9 36

201-1

Direct economic value generated and distributed

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

36

103-1

Explanation of the material topic and its Boundary

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

36

103-2

The management approach and its components

6.3. Material aspects of the Company’s business activities and their effect on sustainable developmen 6.11. Environmental impact of business activities

36 57

103-2

Evaluation of management approach

6.9. Responsibility to passengers 6.11. Environmental impact of business activities

52 57

302-1

Energy consumption within the organization

6.11. Environmental impact of business activities

57

303-1

Water withdrawal by source

6.11. Environmental impact of business activities

57

303-2

Water sources significantly affected by withdrawal of water

6.11. Environmental impact of business activities

57

303-3

Water recycled and reused

6.11. Environmental impact of business activities

57

303-4

Water discharge

6.11. Environmental impact of business activities

57

303-5

Water consumption

6.11. Environmental impact of business activities

57

305-1

Direct (Scope 1) GHG emissions

6.11. Environmental impact of business activities

57

305-2

Energy indirect (Scope 2) GHG emissions

6.11. Environmental impact of business activities

57

305-4

GHG emissions intensity

6.11. Environmental impact of business activities

57

306-1

Water discharge by quality and destination

6.11. Environmental impact of business activities

57

306-2

Waste by type and disposal method

6.11. Environmental impact of business activities

57

307-1

Non-compliance with environmental laws and regulations

6.11. Environmental impact of business activities

57

103-1

Explanation of the material topic and its Boundary

6.3.

Material aspects of the Company’s business activities and their effect on sustainable development

103-2

The management approach and its components

6.5.

6.6.

6.9.

6.10.

Safety and advancements as business imperatives Responsibility to employees Responsibility to passengers Helping the community through cooperation projects

43-46 48 52 55

103-3

Evaluation of management approach

6.6.

6.7.

6.8.

6.9.

6.10.

Responsibility to employees Business ethics Anti-corruption Programme Responsibility to passengers Helping the community through cooperation projects

48 52 52 52 55

401-1

New employee hires and employee turnover

6.6.

Responsibility to employees

48

401-3

Parental leave

5.12. Information on employees

18

404-2

Programs for upgrading employee skills and transition assistance programs

6.6.

Responsibility to employees

48

406-1

Incidents of discrimination and corrective actions taken

6.6.

Responsibility to employees

48

413-1

Operations with local community engagement, impact assessments, and development programs

6.10. Helping the community through cooperation projects

55

415-1

Political contributions

6.10. Helping the community through cooperation projects

55

416-1

Assessment of the health and safety impacts of product and service categories

6.9.

Responsibility to passengers

52

417-1

Requirements for product and service information and labeling 6.9.

Responsibility to passengers

52

36