Saturday, August 12, 2017

Montenegro plans big aviation investment in 2018


The Montenegrin government has unveiled a draft plan to inject 29.5 million euros into the country's aviation sector in 2018, up from this year's 200.000 euros. Subsequently, no investments are planned for 2019 and 2020. The information, outlined in the country's proposed three-year fiscal strategy gives no further details on what the sum will be spent on, although it is believed to be linked to Montenegro Airlines' restructuring process. The Special State Prosecutor's Office recently launched an investigation into alleged state aid provided to the Montenegrin carrier earlier this year. The government granted two million euros to the airline in order for it to pay off some of its outstanding bank loans. However, the state claims the funds will be payed back by the company over the coming period, noting, "A detailed analysis, which will include optimizing the business and workforce, will soon make things clearer".

Montenegro Airlines recently finalised a draft recovery plan after the company posted a record 11.4 million euro loss in 2016. The carrier said that work on its long-term development strategy has been completed and submitted to the government for approval. "The strategy includes an evaluation of the current financial situation in terms of debt, our position on the market, as well as the structure of our workforce. We will suggest several solutions for the future. Keeping in mind the airline's importance for the continued development of the transportation sector in Montenegro, we want the government to recognise the direct impact the company has on the tourism industry", Montenegro Airlines said recently. It added that a greater emphasis is being put on optimising its operations. "Ongoing optimisation entails the reduction of costs, but also defining the company's position on the market", it noted.

The Montenegrin government is unlikely to invest the 29.5 million euro sum into the country's two international airports which have been earmarked for a concession - although an exact privatisation model is yet to be chosen. "Several well established companies have already shown serious interest. We are currently working on preparing a concession model with the World Bank and I believe this process will be completed swiftly", Montenegro's Prime Minister, Duško Marković, said recently. He added that the concession is vital in order for Tivat Airport to follow through with its plans to build a new passenger terminal, extend its runway and overhaul its taxiways. Opposition parties have slammed the plans and are demanding for a referendum to be called on whether the country's airports should be offered to foreign investors.

60 comments:

  1. Does it have something to do with that Crna Gora Airways?

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    1. http://www.exyuaviation.com/2017/07/iranian-airline-execs-set-up-crna-gora.html

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    2. Doubt it but something is definitively cooking behind the scenes.

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  2. And the Arabs are getting Tivat Airport according to media.

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    1. Yes, apparently the same guys that own Porto Montenegro.

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  3. That's a lot on cash to throw away. Flights to NYC and China also on the radar? What Montenegro needs to do is negotiate an arrangement with Wizz And base aircraft there, similar to Macedonia. Problem fixed

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  4. It could be founding capital for new airline.

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    1. Sounds plausable. They will shut down the old company and create a new one debt free. Been done before.

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    2. And what then? They put the same people in charge to run the new company which will create the same losses.

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  5. They will give even more money than that.

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  6. Someone mentioned the other day that Serbia, as an EU candidate country, can't give subsidies to Air Serbia. What about Montenegro? I suppose you can give subsidies if you're a candidate for the EU, but not if you're a member.

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    1. The European Comission has no jurisdiction on state aid granted by governments who are candidate countries. But the commission monitors state aid as part of the accession process and can give recommendations. Potentially they could, if they want, make talks with the EU difficult over state aid granted to some company.

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  7. What's the point of throwing money at Montenegro Airlines? It's a bottomless pit with no improvement in service, new routes, new aircraft. If they give the 30 million euros it will probably be used to cover debt which is around 70 million.

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    1. The only hope for them is to get bought by someone.

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    2. Or shut down.

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  8. Sorry but I think this is beyond repair. Those losses and debt are staggering and it's not just that. All of their operational results are terrible.

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  9. This is nothing compared to the subsidies Air Serbia is getting.

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    1. True. Not even close.

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    2. What subsidies? Air Serbia reported a profit of €900k and loads / cargo on its pride route to JFK are good albeit unprofitable.

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    3. You can report a profit with subsidies. In fact, that's why they had a profit.

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    4. Thanks anon 11.19 AM I was being facetious.
      Yes creative accounting ahead of Etihad pulling out their investment. What a financial disaster for EY investments. Virgin Australia posted a $186m loss on Thursday. How could James Hogan get it so wrong?

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    5. Why would they pull out when the government is covering all their costs? They said just a few days ago they were not pulling out of JU. And what does today's topic have to do with JU?

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  10. I think the best way is to liquidate it and start fresh with a professional management team and without all the debt.

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    1. But someone is going to have to pay for that debt wheather the company exists or not. Also so many party members are employed at MGX (and I mean family of party members and so on). If they profesionalised the management they would all loose their jobs. Not gonna happen.

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  11. Maybe Bosnia, Montenegro and Macedonia could jointly open up a new company that would be competitive to Croatia Airlines and Air Serbia in the region.

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    1. Not realistic at all, Milo and friends wouldn't be proud with that... Having MoU with Etihad, only similar situation that you mentioned could be with Air Serbia. (Milo would be proud that way, as he would say it's Etihad)

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    2. I don't think Etihad is looking at taking any more investments.

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    3. @ 11.18 Yes that would work out because all three have done a marvelous job with their national airlines.

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    4. They don't need national airlines. All those markets are perfect for LCCs that can base planes there. Just look at Skopje. Sarajevo could be exactly the same if the airport management got its act together.

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  12. LCCs are building up a nice presence in Podgorica. We have Wizz with Budapest, Memmingen and Milan and Ryanair with Berlin, Charleroi, London and Stockholm. Hopefully more will be added. The need for MGX is diminishing.

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    1. The issue is that no low cost airline could fly TGD-BEG and TIV-BEG which is a huge market. Over half of Montenegro Airlines' passengers last year flew between Belgrade and Montenegro.

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    2. Air Serbia can fly those people.

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    3. And speaking of the MNE-SRB market, last year a total of 284,329 pax flew between just Podgorica and Belgrade back. There were 143.090 flying to Belgrade and 141.239 from Belgrade to Podgorica.

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    4. Most of the main LCCs now fly to Montenegro but it is still very low frequencies when compared to Croatia.

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    5. Only Serbian and Montenegrian cariers should have rights to fly those routes,everything else is nonsense,why would goverments give up that profit to some third party?

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  13. OT: JP has 672.905 pax in first seven months (all routes). Up by 11% from last year. Number of flights: +5.69%

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  14. So the government plans to spend almost 30 million euros of tax payers money on "something" in aviation but has no intent to disclose on what. Great!

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  15. If YM went under the loss for Montenegrin tourism would be huge since the majority of tourists to Montenegro still come by Montenegro Airlines. That's why I think the government will never let this airline go bankrupt and I think this "investment" concerns them.

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  16. So what happens next? What are MGX's plans?

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    1. It says in the text. They will cut capacity and reduce the number of flights.

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  17. such a small airline yet so much money pored into it over the past 15 years.

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  18. I wonder what the airfare on BEG-TGD would be on if LCCs were allowed.

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    1. It could not be much cheaper than it already is. Taxes at Podgorica/Tivat are huge.

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    2. What is the combined amount of taxes ? ~ eur 50?
      Minimum fare is eur 100 even in low season.

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    3. On an RSD 11.956 fare Belgrade-Podgorica-Belgrade with Air Serbia next week, RSD 10.754 go on taxes.

      YQ - Carrier Imposed Fuel and Security Surcharge (RSD 6.014 x1) RSD 6.014
      LG - Security Charge Serbia (RSD 539 x1)RSD 539
      RS - Airport Service Charge Serbia (RSD 2.038 x1)RSD 2.038
      RF - CAD Passenger Charge Serbia (RSD 118 x1)RSD 118
      ME - Departure Tax Montenegro (RSD 1.804 x1)RSD 1.804
      B7 - Passenger Service Charge (RSD 241 x1)

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    4. YQ is not a government-imposed tax, it goes directly to the airline. Don't confuse it with other taxes.

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    5. It's about time to end the duopoly on flights between Serbia and Montenegro.

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    6. This comment has been removed by the author.

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    7. This route is of no interest to LCCs - too short and very high taxes. Even then , it can only happen once one or both are in the EU or an LCC gets a local AOC in either country.

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    8. Taxes are:
      TGD 17EUR
      TIV 19EUR
      BEG 21EUR

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    9. So eur 60 minimum goes to airline for a 40min flight. You can by LCCs fares to fly 3hrs segment R/T for less money (for example, LON-SOF).
      Hypothetically speaking, would a start-up airline from Serbia be allowed to fly between Serbia and Montenegro?

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  19. With Etihad out of the picture now (I assume they won't be acquiring any more bankrupt European airlines) I don't see who YM could be sold off to. They had all their eggs in the Etihad basket.

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    1. An investment fund could be interested. Like it was in Adria.

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    2. Only if the govt swallowed all the accumulated debt and then paid the fund to take it off its hands as the Slovenian govt did with 4K

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  20. At this point it's a guessing game. I guess we will know soon what this money is going to be directed towards.

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  21. Why not invest in the airports? Why sell them?!

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  22. OT: Today we had 2 x 773ER in Croatia: one from Dubai to Zagreb (Emirates) and the other from Kansai to Dubrovnik and back to Tokyo Narita (ANA?).

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  23. OT: Turkish 1083 from IST to BEG flew all the way in to the Serbian airspace, descended, made a loop over Sumadija and returned back to IST, now on approach to Ataturk with the flight showing as cancelled.

    There were storms in the area, but both LX and YM landed about the same time and safely into BEG.

    Any idea what happened? If it was the weather, it cleared out pretty quickly and a 30 min hold would have done the trick?

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