State to bail out Montenegro Airlines


The Montenegrin government has proposed a revision to the 2017 state budget in order to inject 5.2 million euros into the national flag carrier to keep it flying past the end of the year. The funds will be used to cover outstanding debt to various providers, most notably Eurocontrol, which regulates air traffic across the continent. Failure to meet its obligations could restrict the airline's operations. Global parts supplier Celestial Aviation, Brazilian plane manufacturer Embraer, Rolls Royce, Fokker Aircraft Maintenance and Generali insurance will also be paid out from the financial injection. It comes as a detailed report is compiled on the airline's future, which will be submitted to the Montenegrin government.

This year, Montenegro Airlines took out several short-term loans, while the government ordered Airports of Montenegro, the profitable public operator of Podgorica and Tivat airports, to use its profits as a guarantee for another 2.3 million euro bank loan for the airline. Furthermore, the carrier has been locked in a lawsuit with the Serbia and Montenegro Air Traffic Services Agency, to which it owes several million euros. The European Commission (EC) has previously said it is monitoring state aid grants to the airline. Since the country is not a European Union member, 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 the airline over the past few years.

The Montenegrin government is due to make a decision on the carrier's future next spring. Montenegro Airlines itself has noted there were two scenarios for its future, one which involves wide-ranging restructuring, and the other, less likelier option, insolvency proceedings. "The airline's management is undertaking analysis and calculations with the aim to either seek out a financial model for operational restructuring and long-term stability, or, the less likelier but still viable option of declaring insolvency, taking into account all the negative consequences that brings with it", the compant said in a statement. It added that the management is drafting a five-year business plan, which includes a review of the carrier's fleet and finances. The Montenegrin national airline recorded a net loss of 11.4 million euros in 2016. Despite its ongoing troubles, Montenegro Airlines unveiled its new-look webpage during the week and has announced the launch of charter flights between Podgorica and Tehran starting March of next year..

Comments

  1. When will they learn?

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    Replies
    1. never if the government keeps saving them.

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  2. OT W6 BEG-LCA 110/174
    LF 63%

    Mostly foreigners onboard. There was a group of some 20 Croats from Zagreb.

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    1. Hmm I think there is more demand for non-gasterbajter routes from Zagreb than people think. OU just is ignoring the market mainly.

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    2. LCA, and TLV definitely have potential from Croatia even if it is just seasonally.

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    3. Wizz Air would be perfect for both markets as it would offer cheap fares

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    4. You forgot Malta. Much more demand compared to Cyprus. 5 weekly flights in summer BEG-MLA.

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    5. More potential for tourists visiting Croatia from Israel and Cyprus than Malta.
      Bigger markets who also avoid destinations in muslim countries.

      Just my 2cents

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    6. BEG-LCA has 9 weekly flights in summer so four more flights.

      Cypriots don't avoid Muslim countries, quite the opposite actually.

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    7. Yes, but it is not always about Croatia. Now people can try different countries like Malta, Montenegro, Bulgaria, Israel.
      Malta is becoming attractive for living too.

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    8. with 63% LF it must be one of their worst performing routes from BEG

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    9. I never understood how people who claim they are aviation enthusiasts here judge a route's performance by their load factor on a single one way flight.

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  3. Unprofessional leadership led them here, chosen by the government, without any work experience! RIP Montenegro

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    1. I wouldn't day RIP. They will be fine. They always survive. Especially now they paid Eurocontrol for its services.

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    2. +100 exactly. At the end of the day all of this will blow over and Montenegro Airlines will live another day... until the next crisis in a few months and then again and again. It's been like that for years.

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    3. This crisis is much more serious than the ones before. If the government had not injected this money now, Euroctontrol would have blocked MGX operations on 1st January 2018 and Fokker would no longer do maintenance for the F100s.

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  4. I remember a time when Montenegro Airlines was an example of a well managed company with the most modern fleet in ex-yu :(

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    1. They were never an example. It was all fabricated like they fabricated their financial reports at the time. They bought new planes from loans. Loans which they can't pay off.

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  5. Waste of taxpayer's money.

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    1. But how much does Montenegro get back into the budget by attracting tourists which are mostly transported by Montenegro Airlines. There is two sides to each story.

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    2. If there is demand, someone else would step in and cover the gap in the market. Rather than subsidising an inefficient airline, they could incentivise all airlines to serve the country for much less money. Other airlines would likely do a better job attracting inbound tourists anyway.

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  6. That is the Balkan way of running airlines.
    They are just a prestige project of politicians to hire their most loyal voters.
    They are ALL overstaffed with overpaid rude and lazy employees.
    Dinosaurs who cost millions to the tax payers each year.

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    1. So what? There are thing more important than money. The national pride for example. It seems it got forgotten on Balkans. And when Russians do it then it is a normal thing to do. Hypocrisy, my dear Watson!

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    2. Nobody is proud that they are spending millions every year for voters, friends and relatives of politicians to have a highly paid job with zero accountability.
      Not only it is not a point of pried for the country but a source of ridicule.

      PS: The Russians are an example to avoid, not follow!

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  7. Of course they have to keep the company afloat, and they are privileged that they can until they enter the EU one day. Giving the airline a few million is peanuts to energize a multi billion tourist industry. What do you think the Dubai government does with EK.

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    Replies
    1. Agree. This is nothing compared to what some other companies around the world get from their governments.

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  8. And what about the SMATSA debt?

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    1. There is a court case ongoing about that. I think they owe them 7 million EUR or something like that.

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    2. They better pay up...

      My worry is that the Serbia side will be stupid and give the Montenegro side a pass on the debt for the sake of "brotherly relations", or some BS like that.

      Split SMATSA up and let each country handle their own ATC duties.

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    3. No ATC in the world would give up monitoring an extended area.

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  9. Bilo bi dobro da se YM oporavi pre nego sto mozda to iskoriste druge LCC kompanije sto bi im odnelo jos vise putnika.

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  10. When will it end?

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    Replies
    1. Only when Montenegro enters the EU.
      Which it wont be any time soon so the YM fiasco will continue for many, many more years.

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  11. Montenegro needs a decent national LCC like Macedonia to bring traffic and economic prosperity.

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    Replies
    1. Wizz, Ryanair, Easy Jet, Norwegian Air Shuttle, Transavia all fly to Montenegro.

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  12. I just checked out their new website and must say it looks good.

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    1. A huge improvement on before.

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    2. Nice to see all ex-Yu airlines now have a modern and functional web page.

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    3. Nice, clean and easy to navigate site.

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  13. They somehow lowered the prices on their official website, a couple of months ago they were crazy expensive:

    https://montenegroairlines.com/najbolje_u_ponudi/aktuelne_tarife

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    Replies
    1. How stupid .. they are losing money hand over fist and instead of raising fares to a sustainable level, they reduce them even more, which will only add to their losses

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  14. Replace Montenegro Airlines with Adria Airways, and Montenegro with Slovenia, and you have the same story....with probably same end result (4K).

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    Replies
    1. I do think MGX will eventually end up under the 4K umbrella.

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  15. So they are getting money to sustain continued operations yet their CEO a few weeks ago was saying how they will be getting B737 MAX planes...

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    Replies
    1. Those were just the CEO's dreams. Few days after the CEO talked about the fleet, the company said they are not ruling out insolvency.

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  16. Anyone know how many passengers MGX had this year?

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    1. Montenegro Airlines estimates its passenger numbers this year will decline just over 5% when compared to 2016. The Montenegrin carrier said it handled 464.115 travellers during the first three quarters, with plans to welcome a further 86.000 passengers in the last quarter of 2017, totalling some 550.000 travellers by year's end. The airline predicted the decline as early as April when it said, "Plans for 2017 are based on the reduction of costs and the maximum utilisation of all available capacity, as well as business optimisation on all levels. As a result, and keeping in mind the state of the existing fleet, the company anticipates a decrease in the number of passengers, with an improved average cabin load factor". Montenegro Airlines estimates its numbers will improve in 2018 when it expects to handle 620.000 passengers.

      http://www.exyuaviation.com/2017/10/montenegro-airlines-foresees-5.html

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    2. Thanks. Missed that news.

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  17. I like the MGX branded stairs on the photo :D

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  18. Unlike most here I would like to see national carriers survive. Hopefully after doing the review mentioned in the article, they manage to find a solution to their problems.

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    1. The "solution to their problems" that they found was the exact same "solution" that every other state owned carrier has found.
      To keep getting subventions from the taxpayers.

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  19. Will YM ever return to INI????

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    1. Very soon. INI is the key to success

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    2. They flew to INI because they got paid to fly there.

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  20. What on God's earth is going on with this airline?
    Will it ever be able to recover?

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    Replies
    1. It would be able to recover with a non-political professional management. Unfortunately it hasn't had one of those since its creation.

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  21. I do like their new website.

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  22. Montenegrin finance Minister said on Friday that since the state budget was bigger than expected, they can spend money where they need to cover costs. So instead of spending it on improving living standards they sink it into a black hole.

    Crnogorski ministar finansija Darko Radunović je rekao na današnjoj konferenciji za novinare da su budžetski prihodi Crne Gore u prvih jedanaest mjeseci uvećani za 64 miliona evra u odnosu na uporedni period prethodne godine, prenosi portal TangoSix.

    "Do kraja godine očekuje se da ukupno uvećanje bude oko 90 miliona evra u odnosu na 2016. godinu. To je dalo Vladi mogućnost da, između ostalog, izdvoji novac i za program civilnog vazduhoplovstva, odnosno sa Montenegro airlines, u iznosu od 5,2 miliona evra. Radili smo bolje od plana i time obezbijedili više novca i to nam je dalo priliku da dodatna sredstva raspodelimo gdje smo procijenili da je najpotrebnije, tačnije da izmirimo obaveze koje su već dospjele", izjavio je ministar.

    Kako je objasnio, novac za civilno vazduhoplovstvo biće usmeren Montenegro airlinesu za plaćanje dospjelih obaveza prema Celestialu, Eurocontrolu, kompanijama Embraer, Rolls Royceu, Fokker Tećniku, kao i Generali osiguranju.

    ReplyDelete
    Replies
    1. The grounding of the aircraft of Montenegro Airlines would inflict an enormous damage to the budget of Montenegro.

      Delete

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