Wednesday, June 1, 2016

Critical year for Montenegro Airlines


Montenegro Airlines faces a critical year ahead with mounting financial losses, unhappy employees, increased competition from low cost carriers and little interest from foreign investors to take part in the carrier's privatisation process. Montenegro Airlines' debt currently stands at 71 million euros (31.2 million to service providers, 10.1 million towards banks and 18.8 million euros for the financial lease of its Embraer fleet), while its net loss is estimated to have totalled 10.2 million euros in 2015. The carrier has conceded that the majority of its workforce has not been paid in months, noting that February wages were processed on May 15. On May 13, the Montenegrin government approved some 500.000 euros in support in order for the late wages to be paid. Furthermore, the company has received millions in support from the state over the past few years in an attempt to restructure its business, while this January it requested an urgent one million euro cash injection as a guarantee to the local fuel supplier, to which it owes 1.5 million euros, and a further 1.2 million euros as a payment to the Brazilian BNDES bank, to which it owes 18.8 million euros, for the financial lease of its Embraer aircraft. In addition, the company is in debt towards Airports of Montenegro (13.2 million euros), Belgrade Airport (1.5 million) and the Serbia and Montenegro Air Traffic Services Agency (9.4 million euros).

The airline's CEO, Daliborka Pejović, notes that from this year onwards the company will no longer receive state aid. "So far we have largely been able to make good on all our financial obligations towards our partners in accordance to an established schedule, which will continue throughout the year. We would like to emphasise that state aid was solely used to settle obligations concerning the financial lease of our Embraer fleet", Ms Pejović says. Due to currency fluctuations and an unfavourable agreement, the airline is now paying significantly more for its Embraers than it did a year ago. The European Commission (EC) has requested information from Montenegrin authorities concerning state aid granted to the airline as part of its restructuring process over the past three years. Since Montenegro is not a European Union member state, the EC has no jurisdiction on state aid granted by local authorities. However, the Commission told EX-YU Aviation News that as part of the accession process, it monitors the Montenegrin State Aid Control Authority, which has approved several million euros worth of state aid to Montenegro Airlines over the past few years.

Montenegro Airlines faces increased competition from low cost carriers, with Ryanair strengthening its operations in the country, while Wizz Air will launch services to Podgorica in August. Furthermore, this summer sees the arrival of Russian no frills carrier Pobeda on the popular Moscow route. "Montenegro Airlines has strong competition from carriers that enjoy significant state subsidies on a market that is relatively small", Ms Pejović notes. Despite ongoing issues, the CEO is bullish on the company's future prospects. "In the first quarter of this year, we handled 111.879 passengers, which is up 4% on the year before. We are optimistic for what the future holds and will continue to reduce our loan obligations, make additional savings in operations and create a new restructuring plan which will be based on realistic indicators, in order to offer our founder, the government, a viable model of governance that will fully justify the existence of our company", Ms Pejović explains.

In February, Etihad Airways presented its plans to return Montenegro Airlines back to profitability and improve its overall business, as part of a recent Commercial Cooperation Agreement signed between the two carriers. However, the agreement is subject to an investigation by the Montenegrin State Prosecutor, although the reason for this has not been revealed. The government has earmarked the airline for sale this year. "While there has been interest from several companies for the acquisition of Montenegro Airlines, it is insufficient in order for tender procedures to be launched", the Privatisation and Capital Investment Council says. On the other hand, Ms Pejović notes, "We are in serious talks with airlines and this could be an outstanding opportunity for us to achieve our goals, based on realistic indicators, which will secure our long-term success".

94 comments:

  1. Unfortunately this is reminds me more and more of MAT. It won't be long now before some of their planes get repossessed and from what I hear they also owe Eurocontrol which as a big no no.

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    1. They've already had their plane impounded by Pristina Airport for not paying for services and Skopje refusing them landing so nothing would surprise me from them.

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  2. What a mess of an airline. No wonder no one wants to buy them and I don't see how anyone would.

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  3. Just a few months ago they extended CEO's term. It must be for all this fantastic work. She blames previous management for all problems. I agree it was a disaster but she has been running the airline for four years and it is still the same disaster.

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    1. And the previous management run the airline for almost 20 years.

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    2. Speaking of Daliborka. She gave her secretary a monthly wage of 1.165 EUR!

      Sekretarica predsjednice odbora direktora Ana Pejović, koja ima završenu srednju školu, u februaru je primila 1.165 eura Prema uredbi, direktori sektora treba da primaju oko 720 eura. Sadašnji v.d. direktora, a donedavno šef pravne službe Lidija Pantović, u februaru je primila 1.673 eura, koordinator za bezbjednost Miloš Vučinić 1.885 eura, komercijalni direktor Predrag Marković 1.389 eura.

      A OSTALI RADNICI PLATU ZA FEBRUAR PRIMAJU U MAJU!!! Sve u zatvor.

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    3. She also famously took a plane out of service so she and the Montenegro Airlines management board could fly to Spain to watch a water polo match

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    4. They also had a special charter to fly high ranking officials to Belgrade for a day to watch Davis Cup match between Serbia and Canada

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  4. I don't care about them anymore. The important thing is that their monopoly is over and LCC can fly to Montenegro now. The government probably realized they can no longer do anything with MGX and decided to open the gates to others.

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  5. 10.2 million loss for an airline with 6 planes and 20 destinations.,,,

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  6. Still don't get why Etihad-Montenegro deal is being investigated (and by Montenegro of all sides).

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    1. Someone probably didn't get the cash they wanted under the table.

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    2. I think Etihad was at first interested around 2 years ago. Even the Serbian government said that Montenegro Airlines could be purchased through Air Serbia. But then last year Etihad started screening Montenegro Airlines and found this mess. They probably realized it was beyond repair and not worth getting involved with.

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    3. EY has had almost no luck turning around any of their European airlines. They don't need another failure...

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    4. Anonymous June 1, 2016 at 10:24 AM

      "Any" as in Air Berlin, primarily, and to a certain extent Darwin.

      Air Serbia and Air Lingus are doing pretty damn fine. As for Al Italia, it's too early to judge either yay or nay for the restructuring plan.

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    5. I thought Air Lingus was only 3% share and that company is sold to IAG.
      We'll have to gi e more time to judge others.

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    6. Aer Lingus is not Etihad airline. It is 98.05% owned by IAG, Etihad sold their 2,9% shares.

      Alitalia is still in huge minus. 199 million EUR last year.

      Darwin and Air Berlin are as good as dead.

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    7. Anonymous 11:58 AM
      Alitalia continues to be loss making at a time that every other airline in Europe is having record profitability!
      If they cant make profits at the height of the market cycle what is going to happen in the inevitable downturn.

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    8. Small correction, every airline in Europe not owned by EY is having record profitability! ;)

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    9. Alitalia loss is bigger then most of the years in past (I thing just 2 or 3 years were worst than 2015). Etihad bought shares in June 2014. That year Alitalia had more than 500 million minus what is record minus in history of company, much bigger than ever. In 2015 199 million. One of the worst.

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    10. Turkish airlines is NOT owned by EY and they reported a record Q1 loss.

      People, you need to be far more objective in your comment making

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    11. TK was profitable in 2015 and it will also be profitable in 2016.

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  7. I usually wouldn't support closing an airline and leaving people out of work but Montenegro Airlines is not a normal company. It's practically owned by the party, 95% of employees are sisters, brothers, wives, husbands, lovers of the ruling elite. That's why it will never get sold.

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  8. Has MGX payed Etihad for those "recovery plan" services. I wouldn't be surprised.

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  9. A lot of people have said that Air Serbia should buy Montenegro Airlines. In my opinion it should steer clear of them.

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  10. The war of two factions in DPS (the only party that has ever ruled Montenegro) continues. Ones are loyal to the current management, the others to former management. Each of them have filed corruption claims against each other. Daliborka Pejovic is being investigated for fixing public tenders, the past manager Djurisic is being investigated for terms of Embraer lease and covering up millions of EUR he made in losses.

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    Replies
    1. Investigation against Djursic has been dropped by prosecutors. Of course he is the husband of Montenegro's Minister of Defense.

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    2. Lol!
      Balkan way all the way!
      No doubt this region will continue to be Europe's poorest.

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    3. @ Plane Mad 12.31....totally agree with you 100 per cent. The whole ex yu region could have been prosperous, but as long as everyone is playing the blame game, it will all stay the same if not deteriorate even more.

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  11. wow the bitterness in today's comments is quite high.

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    1. The comments are fine. In fact they show that the situation in MGX is even worse than what the article says.

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  12. Just shut them down already. Montenegro can be perfectly served by Air Serbia, Ryanair and Wizz Air. It's a tiny market, twice the size of Novi Beograd!


    That said, if YM does go belly up, the the regulators should allow Wizz Air to step in and launch BEG-MNE flights, even if it holds a foreign AOC.

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    1. +1

      could wizz air fly 14 weekly beg - tiv in summer?

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    2. Actually if YM goes bust that could be the last chance that we see another Serbia-based airline. I mean a lowcoster with a couple of birds, serving the routes in Montenegro as well as something that could pay off abroad.

      I would rather see that compared to Wizz. Although Ryanair will probably be the fastest one there.

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    3. I mentioned Wizz Air because they already operate a base in Belgrade.
      I don't see Ryanair for two reasons:

      1. high charges at BEG.
      2. they don't operate a base at either of the two countries.

      I don't think we'll ever see a new Serbian airline as the circumstances have changed, especially since both Ryanair and Wizz Air keep on expanding in the region around BEG.

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    4. Дечко ТзарJune 1, 2016 at 3:24 PM

      @Nemjee

      "regulators should allow Wizz Air to step in and launch BEG-MNE flights"

      Oh, the regulators already exposed their supreme brilliance when asked the same on FCO-BEG route as a requirement for EY/AZ merger approval. Major fail dear regulators!

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    5. Дечко Тзар

      You can't compare the two markets, they are fundamentally different.
      The market between Italy and Serbia is incomparably smaller and several airlines failed to make it work, including Wizz Air.

      On the other hand, the market between Belgrade and Montenegro is massive and there is room for several players.

      Even if JU/AZ have a monopoly to Italy, it's not such a big deal, especially since fares are ok. That said, a lowcost option to Montenegro is desperately needed, especially in summer months when both JU and YM tend to charge €300 for a 50 minute flight.

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    6. Дечко ТзарJune 1, 2016 at 8:20 PM

      Thank you for indirectly confirming EC decision on FCO-BEG was a failure.

      OU charges almost 250-300 EUR return for peak summer weekends on routes like ZAG-DBV and they have monopoly. Introduce Wizz/Ryan on those routes if you are concerned about protecting EU consumer.

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    7. Excuse me but have I ever implied that the FCO-BEG directive was a smart one? No, I have not so I don't see why you are even bringing it up.

      You can't compare the two. The market between Serbia and Montenegro is protected and regulated by a strict bilateral which requires the operating airline to have the AOC of either country. Now, the market is big but it's not that big for an outside airline to bother with all that bureaucracy and extra expenses. The reason why I mentioned Wizz Air was because they already have a base in Belgrade and they would be the most likely candidate to step in.

      Now, the ZAG-DBV route is in the EU which means that ANY European Union airline can step in and introduce its own flights. There are no bureaucratic or legal obstacles similar to the ones mentioned in the previous paragraph. If any EU-registered airline has not launched it yet then it can only mean that the market is simply not that big or not that lucrative.

      You compared apples to oranges. I think we can all agree on the fact that no consumer has ever profited from an airline's monopoly.

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    8. ZAG-DBV is expensive, but it is never more than 200 EUR for return ticket. It is not 250-300 EUR! That is lie!

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    9. Nemjee, claiming that any EU airline would not have bureaucratic or other obstacles to start ZAG-DBV or SPU is a BS. Airport fees not bilaterals are used to restict market access within EU. Ryanair slammed airport monopolists in Slovenia just two weeks ago! We all know ZAG fees are preventing Wizz from flying there. If LH complained to EC about OU monopoly on routes like ZAG-DBV and SPU that would force OU to have LCC competition on couple of those routes, OU would lose its profitability. And we agree no consumer profited from airline's monopoly, in this case OU's monopoly, unlike BEG-TGD/TIV where at least consumers have duopoly. EC should take care of EU consumers first and prevent mentioned monopolies within EU (SLO, CRO) before venturing out to "help" consumers outside EU.

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    10. Last anon,

      Well, I did specify that they wouldn't face obstacles similar to the ones I mentioned in the previous paragraph, that is legal ones. I never implied it wouldn't be without any kind of 'challenges.'

      It was mentioned on here a few days ago that Dubrovnik is negotiating with Ryanair. What's stopping FR from launching CIA-DBV-ZAG-DBV-CIA? Sure, the charges in ZAG are higher than what they are used to paying but they could fly the route for a few months until OU suspends it in which case they could blackmail ZAG into lowering the fares or they would withdraw from the market (as they've done with other European airports).

      My point is that the DBV-ZAG market is open for anyone while BEG-MNE isn't. Even in summer when fares are well over €300, the price difference between JU and YM is usually not greater than €10.

      That's why I said that both regulators in Serbia and Montenegro should agree that in case YM goes bankrupt, a second airline should be allowed to launch flights despite not have the necessary AOC. Both Serbia and Montenegro are aspiring to become EU members so why not deal with the inevitable right away? Montenegro has so much more to lose than Serbia if JU ends up having a monopoly.

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    11. Just a small note, when I spoke of regulators, I did not mean the one from Brussels but the local ones, that is the Serbian and Montenegrin ones.

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    12. That is not true that one can prevent on any way Ryanair to fly ZAG-DBV. They can not as they could not prevent eaysJet to fly CDG-TLS for example.

      Price of airports are not obstacle. They are same for everyone. Ryanair pays exactly the same price as Croatia. Not a penny less not a penny more. Unlike in Belgrade where Air Serbia has enormous discounts. Problem is that Ryanair wants some subventions to fly there from airport.

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  13. Numbers May 2016??

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    1. It's 10AM 1st June, do you expect to have numbers published by now?

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    2. from what i've heard, minor + (like +0,5%)

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    3. likely


      Does Skopje will exceed Pristina for the month of May. Mystery

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  14. Eh Friends;)





    Are there any news for Wizzair who wanted to start flights from Budapest to Pristina , Sarajevo , Podgorica and Skopje

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    1. Flights probably won't start until winter

      http://www.exyuaviation.com/2016/05/wizz-air-bids-for-new-ex-yu-routes-from.html

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    2. Very good news for alls:)

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    3. I still doubt that Wizzair will initiate flights to Pristina.

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    4. This is a real problem for Wizzair and Pristina , because if Wizzair launching flights to Pristina for example the Germany , Italy, France , Switzerland ....
      they would shine
      osts in Pristina are problems

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    5. Pisi druze na svom jeziku, niko te ne razume ovako...

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    6. hahahaha, what?????? I really can not understand this google translator.

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  15. My guess is those Vienna-Tuzla flight adventure didn't help

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  16. Montenegro Airlines needs to change something fast.

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    1. That I feel is too late

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    2. More importantly, Montenegro needs to change something (someone) fast.

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  17. If the EC is asking questions about Montenegro Airlines and subsidies, then they surely must be asking questions about Air Serbia.

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    1. Oh really? Why?

      P.S. Which over regurgitated story will you tell us: "free service at BEG airport; 70 million euro in aid last year; "free fuel and other service from other "struggling" state companies?

      If any of the above, then you are a troll.

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    2. One is troll just because you said so? And who makes you god?

      Oprostite visočanstvo nisam vas prepozno!

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    3. The EC should be asking questions of Turkish Airlines

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    4. They should, but we all know that it is not same standards for Croatia and Lufthansa as there are not for Montenegro or Air Serbia and Turkish

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    5. HELLO!!! TK and LH are privatised long time ago this EC issue must considered by the state owned airlines, for example AirSerbia.....

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    6. TK is not private.

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    7. Please do not state something if you are not sure.

      Republic of Turkey's Prime Ministry owns a 49.12% interest in THY, while 50.88% of shares are private.

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  18. OT: This is not 100% info, but JU`s A330 might be flying to ZAG on the 17.6. on both daily flights.

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    1. Purger had suggested a few weeks ago that it would be a smart and cheap marketing opportunity to fly the A330 in key markets.

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  19. Preuzeti samo Srbe i avione. Wait oni nemaju Srbe medju zaposlenima. Zdravo.

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    1. Ima, ima, al se ne smeju tako iznjasavati.

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    2. Preuzeti samo Srbe???? Pa ti si veći diskriminator od njih, a bogami oni se pokazaše kao totalne nule, opšti diskriminatori. Preuzeti samo Srbe???? Kao da si pobego iz 18 veka!?!?!?!

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    3. pod ironija u recniku pod hitno...

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    4. Anon 3.52 a gde si ti bio da ovako komentarises kada je objavljeno da su pootpustali sve Srbe iz firme?

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    5. Na istom ovom blogu! I bio jednako žestok!

      Šovinizam, nacionalizam i diskriminacija je uvek ista, nije bitno sa koje strane granice je radiš. To što si ti iz Srbije ne znači da nisi diskriminator ovakvim pisanjem ko i ovi Crnogorci koji su to učinili pre par godina.

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    6. Dok postoji covek postojace i diskriminacija... deal with it.

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    7. Tačno, dok postoji čovek postojaće i ubistva. No, to ne znači da moram i jedno od toga da prihvatim. Kao ni društvo, koje i jedno i drugo mora da odbaci i sankcioniše.

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  20. Airline must be doing brilliantly since Daliborka Pejovic has enough time to be state secretary for sustainable development and tourism at the same time. Because being CEO is just not enough.

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  21. OT:
    Ryan have canceled Pula & Zadar services from Oslo Rygge.

    This have happened after they announced the cancellation in the base there following the government decision to introduce new taxes.

    http://corporate.ryanair.com/news/news/160601-oslo-rygge-base-closure-16-route-cancellations-after-norwegian-govt-introduces-environmentally-friendly-tax/?market=ie

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  22. When does the financial lease for those Montenegro Embraers expire?

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  23. OT: new issue of Air Serbia in-flight magazine has a great section on history of JAT flights to the USA with exclusive content and photos, a must for all Ex Yu aviation fans. They also cover new destination New York with spectacular photos, well worth checking out online:

    http://bit.ly/Elevate2016

    Elevate however does not include onboard entertainment section in the magazine like most other in-flight magazines. Abu Dhabi flights have a separate card with entertainment selection and Air Serbia might do the same with JFK.

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    Replies
    1. It's a nice article with nice information. But I would not say the photos are exclusive. Almost all have appeared here in vintage section. Many airlines now have separate publication for inflight entertainment so I assume that's the case with JU.

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    2. Pages 104-119 are a nice tribute with some pictures we saw before (they are mostly scans from JAT monograph) but also rare photos and docs. Enjoyable read even if you are not Air Serbia fan!

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  24. Montenegro Airlines took out another major loan yesterday to pay wages. I don't think the airline has ever been in a worse situation.

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  25. OT: some of the fellow participants/readers of Exyu have asked about the new photos of Zagreb Airport's New Terminal... well here are some that look fairly fresh...
    http://www.viadukt.hr/medjunarodna-zracna-luka-zagreb

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    1. Beautiful, and it makes me even more upset about those awful jetways... Also, a garage - or even just a parking - with a green roof would have been perfect.

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    2. Such a beautiful building ruined by such horrible jetways.

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  26. Why don't they cut down on some routes?.. and speaking of Daliborka Pejovic, anyone know what her salary is? I'd be very curious to find out

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    1. Also, anyone know which are Montenegro Airline's best and worst routes, in terms of profitability/Pax numbers?

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    2. I can only tell you in terms of pax numbers

      Best route is Belgrade, then Moscow, Vienna and then Copenhagen.

      Worst route was for very long Ljubljana but it has improved in the past year. then it's London and Rome.

      One of the worst performing routes ever was Milan with LF of just 21%. That's why it was suspneded in 2012.

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    3. Officially her pay is just 550 euros per months which is complete bullshit because her secretary (who shares the same surname wink) had a monthly wage of 1.200 euros and all executive board members all have an official monthly wage of over 1.500.

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    ReplyDelete

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