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".