The following article talks about the second oil crisis which hit Yugoslavia and the world in 1979. The first crisis took place in 1976, which Yugoslav Airlines managed to overcome successfully. In 2008 the world went through another oil shock which caused mass financial losses to all Ex-Yu carriers while the 1979 oil shock is reminiscent of the 2008 global financial crisis.
Surviving the oil crisis
The prices of fuel for aircraft in Yugoslavia rose by an incredible 280% in 1979 and the first half of 1980. Among other things, this was the first indication of the deteriorating economic situation, the consequences of which would have serious impact on JAT’s operations and business. In the following years, the company would constantly be recording financial losses.
However, the situation for Yugoslav Airlines was particularly difficult because of two events which took place, unrelated to the oil crisis. The first one was the disastrous earthquake which hit Montenegro’s coast leading to mass cancelation of services from European countries to Tivat and Titograd. Then, following an American Airlines DC10 crash in Chicago, the aircraft manufacturer grounded all aircraft of this type until a full investigation was complete throwing JAT’s international services into disarray. Once the flight ban was lifted JAT resumed services to New York, Sydney and Melbourne with this aircraft and deployed it on services to the Iraqi capital Baghdad. In 1979 the airline carried 4 million passengers, 2.145.983 of which travelled on domestic services. In 1980 living standards began rapidly declining across Yugoslavia. JAT knew it had to respond to these challenges and instead of cutting frequency and capacity it first introduced charter services to Chicago. A few months later the service became an all year round line. Cleveland was introduced as a stopover on these flights during the summer season, thus greatly enhancing the route’s economic viability and boosting the cabin load factor. Furthermore, 2 flights were added to the regular New York service. Also, another flight was introduced to the Sydney and Melbourne flights.
The crisis continued into 1981 and the measures taken by JAT (focusing on international services) did not work. British Airways, like it would be in 2009, was hard hit, sacking 3.000 employees, cutting down frequencies and dumping services. The year 1982 was immensely difficult for JAT. Due to the shortage of kerosene at airports in Yugoslavia, JAT’s aircraft mostly took on fuel from abroad. The year was described as the most difficult in the airline’s history to that date. JAT opened merger talks with Zagreb based Trans Adria which eventually merged with Yugoslav Airlines on April 7, 1982. Many of JAT’s unprofitable services had to be re-examined. Traffic on domestic services was reduced, many services were merged but losses persisted. The upside that year was the increase in passenger numbers (over 4 million). However, in 1983 the crisis continued and passenger numbers declined despite the fact that the airline resumed services to Beirut and began new flights to Algiers, Thessaloniki, Kuwait and Warsaw. JAT leased 2 Boeing B727s to Air Africa and cut costs where it could. The revival of the world aviation industry would begin in 1984 and JAT would fly into its “golden years”. Little did the management know that in less than 10 years the airline would change forever.
Next week: Luxury in the sky – Adriatic Class introduced on JAT