Thursday, June 7, 2018

Austrian complains over Macedonian LCC subsidies


Austrian Airlines has complained that the subsidies provided by the Macedonian government to stimulate low cost airlines to operate flights to the country are unfair and distort competition. The carrier noted it is difficult to compete in such an environment and under such circumstances. Although it has no direct competition on its double daily flights between Vienna and Skopje, rival Wizz Air will commence services from the Austrian capital to Ohrid this October. Vienna was the third busiest route out of Macedonia last year following Istanbul (both international airports) and Zurich. The Macedonian government has announced it will soon offer 880.000 euros per year over a three-year period to stimulate budget airlines to introduce new routes to the country, particularly to Ohrid. Tender procedures to award the subsidies are expected to commence this month.

The government has adopted the Program for Determining Funds Needed for Granting Financial Support to Domestic and Foreign Air Carriers, but it is yet to be determined which companies will be awarded the subsidies. "This Regulation sets out the conditions, the manner and the procedure for granting financial assistance, the content of the contract, as well as the rights and obligations of the lender and the beneficiary of the financial support. We do not yet know who, how and when these contracts will be signed and who will be interested", government spokesman Mile Bošnjakovski told "Radio Free Europe". It will be the third time that Macedonia will be offering incentives to no frills carriers, following the policy's success in 2012 and 2015, from which Wizz Air was the sole beneficiary.

Pristina Airport has previously also complained about the policy, requesting for the European Commission to investigate state subsidies offered to low cost airlines operating out of Skopje. Pristina Airport's General Manager, Haldun Fırat Kokturk, previously said, "We, as an airport operator, can compete with another airport operator - competition is normal, it is good. But we cannot compete with a government. If the European Commission tells the Macedonian government that these incentives are permitted then we will approach the Kosovo government to say, if the Macedonian government is doing this - can we do the same”? The European Commission (EC) has since noted that its investigation into the subsidies provided by the Macedonian government since 2012 have been inconclusive. In its annual progress report on Macedonia published in April, the EC for the first time made no mention of the subsidy policy as a cause of concern in the field of air transport.

113 comments:

  1. Better that they focus on the massive LCC expansion in Vienna rather than Skopje.

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    1. They have complained about that too. Don't worry.

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    2. +1
      Austrian should focus more on lowering its fees and improving service quality if it wants to be competitive rather than complaining about others.

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    3. Actually Wizz Air was always the first to complain about unfair competition, government subsidies etc but they have been accepting government handouts in Macedonia for 6 years!

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    4. Hypocrisy is written all over the aviation market. Wizz Air isn't the only one.

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    5. How can Austrian complain? But these are genuine passengers, not fake passengers i.e transfers or passengers that are not real, btw only Skopje airport has genuine passengers and is busiest airport in the region if we look at genuine passengers.

      Skopje is only genuine destination in entire region, ok fake monuments and Hollywood set public buildings erected in past 10 years was just the phase.

      But Skopje is a genuine destination. Honestly.

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    6. Shiny barriers

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    7. Shiny crash barriers!


      :))

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    8. yes. you're absolutely correct,
      and motorway that is so black and clean, sun rays reflect from it.

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  2. I wonder how OS is performing on its SKP flights.

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    1. They had passenger decline for several years but numbers improved in 2017.

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  3. All airlines have been affected by Wizz at Skopje, not just Austrian.

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    1. Who need Austrian. Soon we can fly to VIE with Wizz, unfortunately not beyond though.

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    2. and thats why we need Austrian- u cant transfer anywhere from Friedrichshafen or, dunno... Hanover
      and u can fly with Wizz to Vienna from Ohrid, not from Skopje

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    3. Plus, there are tons of passengers who would pay premium just to fly with a decent airline, and, of course, transfers...

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    4. ...just the short-haul service of OS is not that premium anymore..., actually its hardly different from an LCC

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  4. OMG they don't even have any competition on Skopje-Vienna route. But I assume they lost lots of transfers to other European cities (Scandinavia in particular).

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  5. The amount that is being given as a subsidy is not a lot actually.

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    1. i bet incentives given from VIE are much bigger

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    2. @anon 9:07: if the subsidies are so insignificant, why can is wizz lobbying so hard to keep them?

      @anon 10:10: can you elaborate a little more about the incentives austrian gets in VIE; to me it looks like VIE is doing everything to prep easyjet, lauda and now even vueling because they see that austrian can not really go away with all of its investments made

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    3. airlines are getting incentives for opening unserved routes

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  6. These subsidies are not line with EU law, according to 2014 EU guidelines for state aid to airlines: http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52014XC0404(01)&from=EN

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    1. This is regulation for EU member states. Last time I checked Macedonia was not one of them and I doubt it will become one in 3 years so there is not issue.

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    2. Plus like it says in the text EC did not have an issue with it.

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    3. All EU state aid rules are applicable by virtue of Stabilisation and Association Agreement.

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    4. They are in line with these guidelines, despite being published before these rules were brought to light. Instead of linking the guidelines, please quote which rule the current subsidies are breaking.

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    5. Annex, table 2

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    6. Macedonia won't be in the EU for a very very very long time. Now many EU members will hold a referendum on each new member state as per rule by some national parliaments, Austria, Germany, France, Netherlands, Sweden, Denmark.

      Getting in to the EU will be much harder from now on, only one member state can say no and entire process must be repeated by the applicant state.

      I don't expect new EU member states before 2030.

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  7. Grow up Austrian Airlines.

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  8. Competition is just getting tighter for the old national airlines of the west which used to rule in this region over the past 20 years. More low cost competition and the rise of the likes of LOT and Aegean does not help them one bit.

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  9. I really don't see an issue with these subsidies. If I remember correctly they were open to all low cost airlines and were offered on a tender. Obviously selecting Wizz Air was a smart choice since they have opened so many routes and based aircraft in SKP.

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    1. The issue is that it is offered only to LCCs.

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    2. Governments should not be allowed to distort the market. If SKP wants to attract airlines then it should come from their own pockets. They were given up for concession for a reason.

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    3. No, they were not open only to LCCs.

      They were - and all of the future ones will be - open to all airlines. The curent government's put their foot in their mouth by talking about LCCs. Otherwise there are no limitations to entry.

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    4. Well its the same with LH and MUC. They are distorting the market by not allowing other cariers. Not only LCC are the beasts

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  10. It's good that they will extend this assistance until 2021.

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    1. I think they did the right thing here. They managed to lure Wizz Air to base 4 planes. That's a good deal.

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  11. Kakva glupost. Da li se Air Serbia, Croatia, Turkish i drugi zale? Smanjite cene pa ce te biti kompetentni. Hvala bogu sto Wizz otvara bazu u VIE, nadam se da ce zapoceti Beograd i smanjiti cene Air Serbie i Austriana.

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    1. U principu i AirSerbia i Croatia bi se trebale žaliti zajedno sa Austrianom. Jer ovakav način subvencija/pranja para je sve samo ne normalno funkcioniranje.

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    2. Ne znam kako bilo tko može podržavati wizz način rada u istočnim aerodromima.

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    3. * istočno europskim

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    4. Kakav je to nacin rada u istocnoj Evropi? Sta oni tako strasno rade?

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    5. Pa ne lete nigdje gdje ih se pošteno ne podmaže, a uredno su spremni otići preko noći.

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    6. Ne bi o njihovim "kompentencijama" ali o konkurentnosti se da raspravljati.

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    7. A najbolje je sto se ta prica nije uopste obistinila u ovom slucaju, posebno u Skoplju. Za razliku od Ryanair-a koji se uistinu ponasa bas kako si opisao..

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    8. @ anon 9:31

      O kakvom 'pranju para' je reč, već nekoliko puta se spominje, pretpostavljam isti fan.

      Ako je pricate o Wizz-u, koji je na berzi u Londonu i poslovanje izlozeno javnosti svaki dan, onda dajte da indruge kompanije nauče kako da 'peru' pare tako dobro da im na kraju ostane nesto.
      ExYu aviokompanije kad peru sve im odlazi u kanalizaciju (down the drain'.



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    9. Anon 9:51
      Evo u Beogradu lete, prvo su imali popuste dok je jos propali Jat bio, ali nakon toga su im ukinuti svi popusti i posluju kao i svi ostali na BEG.Uprkos tome sto nemaju finansijsku podrsku od strane BEG, oni su prosle godine bazirali drugi A320. Sve se moze samo ne treba popustati. Wizz se boji da I'm Ryan ne uleti na trziste i zbog toga pristaju na sve.

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  12. Austrian has been quite used to monopolist behavior in certain ex-Yu markets - Serbia, Macedonia, Montenegro, Bosnia so not surprised.

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    1. i do not know about the countries, but in bosnia austrian is hardly a monopolist with about 7% market share; its share was higher long time ago, but they will hardly reach 5% in the next months

      considering that, i am not sure what those monopolistic behaviors you are thinking about?

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    2. @12:10pm are you serious? In SJJ especially they hold a monopoly

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    3. The only reason for just 5-7% share at SJJ is the large number of flights towards the Middle East which skews the statistics.
      If you only counted the European/North America bound pax the share would be much larger. And let's not forget that their main competition on those flights are LH and OU, making all three pretty much the same thing with what must be 60%+ pax share on European and North American bound flights.

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  13. I don't think it distorts competition because these subsidies are only being offered for new routes, not for Wizz to keep its entire network in Macedonia.

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    1. They created a completely new market from Macedonia.

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    2. Indeed this is for NEW routes. Boosting connectivity.

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  14. Classical German attitude: if I can't win then I'll complain.

    Austrian Airlines is just bitter and angry because their home market is under attack. In other words, other airlines will be doing to them what they have been doing to eastern European and Balkan airlines for decades- that is making their life hell no matter what the cost.

    OS will most likely lose its dominant position in many markets where they will face direct competition from airlines such as Vueling, Wizz Air and Laudamotion.

    It's SKP's decision to find ways to make their offer as diverse as possible. Austrian Airlines is more than welcome to launch Graz/Linz/Salzburg-SKP if they wish to get their hands on taxpayers' money offered by the government. No one is stopping them. They can cry, scream and shout as much as they want but in the end nothing will come of it like we've seen in PRN's case.

    That said, I think airlines such as JU, JP, YM and OU need to prepare themselves as it's only a matter of time before one of the lCCs starts competing with them to VIE.


    /////////////////

    Slightly OT but two family members are flying out of BEG today. One on TK which is full and on which there are roughly 80 to 90 Chinese tourists (mostly younger people).

    Another is going to London and she was told that the load is 12 in business and 120 in economy meaning there are only six empty seats on the flight!

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    1. OS are right, SKP is giving preference to W6.
      As for BEG, London is still a destination that can do better.
      Yesterday, U2 launched flights from SOF to Southend. I hope SKP and BEG follow.

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    2. Well, VIE was giving OS a preferential treatment for years. All airports do their best to protect their main customer, it's normal after all. SKP boomed thanks to Wizz Air, not Austrian Airlines.

      Well, Sofia is a different case as many, many Bulgarians emigrated there and is one of the most popular destination out of SOF. BEG would be nice but I don't see it happening any time soon.

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    3. SKP has ended up giving preferential status to W6 since it was THE ONLY AIRLINE THAT EVER APPLIED TO OPERATE NEW ROUTES until 2017.

      Re-read the above a few times and think about it.

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    4. It's not just about the subsidies it received, Wizz Air also pays less to the airport based on the number of passengers it carries.

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    5. Nemje
      We definitely need new route from China. Shanghai is great potential, much better than Beijing

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    6. It's not (only) German attitude, it's a big business attitude. If they think that there is a ground for complaint to help business they will try it. Sometime it is to get official, sometime is because of PR.

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  15. With all due respect, why is this market soo important for them?

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    1. Austrian used to be a self styled Balkan specialist. It used to fly even to Banja Luka, its planes were named after cities in ex-Yu. They were the number 1 airline for people from ex-Yu. With the region opening up and the free sky agreement implemented they have lost a lot of passengers.

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    2. I don't think this has much to do with the Macedonian market as it does with Vienna Airport from which Wizz is expanding like crazy. Austrian is probably now looking at anything to accuse Wizz of unfair competition.

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    3. i think it is, beacuse this region is not develop in context of long haul flights, but diaspora, tourist and others are traveling, so they are trying attract as many as possible people go through vienna

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    4. And don't forget that Austrian having issues with profitability, which was addressed even by Lufthansa Group officials...

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    5. because SKP is one of OS's last remaining exclusive east europen destinations from VIE. LH opened most of them from MUC putting Austrian's Fokus East under pressure.

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    6. @Anon 9:35

      Yupp, their planes were named after virtually any city in Central and Eastern Europe, only not after Belgrade. It's my reason not to like the Habsburg Airlines.

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    7. lol have they removed the names or do they still call them after these cities?

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    8. @ 9.31 you would be surprised how lucrative the ex-yu market was for many airlines in the 90s.

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  16. poor austrian,
    things are not developing as they were planning
    looking forward for wizz base in Vienna

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    1. not only wizz base, Laudamotion Vueling ...

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    2. Any chance of Ryanair opening a base there too. Although they are in Bratislava.

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  17. Like an angry kid when it loses its toy.

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  18. Subsidy Wizz receives in BUD for some routes in the region is more interesting. It helps Wizz fly to some expensive airports like SJJ. Wizz is expected to introduce connecting flights in BUD. Customers would pay for connections in some form of a transfer service fee. That will allow Wizz to offer connections from SJJ via BUD to many destinations instead of developing point to point network out of expensive SJJ. Connections will be a threat to traditional airlines in the reagion like Austrian or Air Serbia.

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    1. Wizzair transfers will have profound effect on aviation in Europe. Their sister company in the USA, Frontier, is already doing it with connection fee. Transfers will be another source of revenue for Wizzair.

      Wizzair will compete not only with regional airlines but also against Lufthansa as they expand to major airports VIE, FRA, MXP and beyond.

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  19. they are not used to competition, they are used to milking poorer and less-well connected cities and countries and charging horrendous prices for a short European flight. It will hurt, I will open a bottle of wine in their honour. Bye Austrian

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  20. WizzAir was, is and will be a success story. The time where a return ticket costed more than 450€ is over. Austrian either has to adapt the market situation in Macedonia or leave.

    Nevertheless it's time that WizzAir gets some competition from RyanAir, Eurowings or Transavia.

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    1. Oh wait, with Wizz tickets are too expensive on some routes,from BEG to BVA,LTN, BSL

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  21. Well OS certainly does not have much to be happy about for SKP.
    LOT and TK are serious competitors for transfer flights to North America and Wizz for flights to Bratislava.
    The only chance they still have are transfers within Europe, but here JP/OU/JU jump in with lower fares...

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    1. Agree. It's not surprising their market share has been reduced but I think they also fear upcoming VIE-OHD flights.

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  22. i do not agree with the Article today and imho should be renamed in Austrian complained in the past over Macedonian LCC subsidies:

    yes Austrian complained in the past, but not anymore (the articles on Slobodno Radio Evrpa and orf.at is about the past). Why would they complain now when their home airport VIE started paying subsidies to LCC and most funny to WIZZ as well. every LCC will have open an base at VIE this year. Wizz has opened a base in VIE lol

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  23. they give you Salzstangen for catering and you paying 200€ and no luggage included

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    1. Lufthansa is doing the same. They only hand out Crackers on their short flights. Shame for such a large airline. I was disappointed when they gave me a small bag with 4 chips inside on a 280€ flight.

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  24. This policy has been a great success really.

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    1. It was a great success for Wizz but name me one European LCC other than Wizz that has come to Skopje since 2012.

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    2. I would hardly call them low cost. More like hybrid. Their prices certainly ain't low cost and are in the range of many other Gulf airlines flying in the region.

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    3. Hardly European I would say....

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  25. I'm against these sort of arguments since in order to become a large carrier, Austrian would have received decades of subsidies before deregulation... why shouldn't the relatively young airlines of today not get the same privilege? Anyway, if they really wanted the subsidy, perhaps they should have committed to basing aircraft in SKP first, rather than continuing their current strategy of charging astronomical fares that most Macedonians can't afford.

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    1. Because it was different time then, every airline recieved subsidies. Before Wizz, Hungary had Malev, which had to stop existing because of illegal subsidies.

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  26. Interesting. And remember that Lufthansa complained about Air Serbia to the European Comission a few years ago too.

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    1. Ryanair complained to EC about Adria few years ago :D

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  27. I don't have anything against the polciy but why are they continuing it? I think the market has matured enough that airlines can establish and sustain flights without subsidies.

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    1. airlines are stil Ohrid-shy thatswhy

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    2. That's slowly changing too.

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    3. What is the catchment area of Ohrid airport?

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    4. Around 600.000 with Albania.

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  28. The regulations on subsidaries are valid for EU Countries. Sure they complain as all the rest of LH Group who wants to keep the monopoly on the EU market.

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  29. This is totally againist the concession agreement between TAV and Macedona state. State is unfairly donating the airlines to reduce the concession fee and losing money. This is also againist EU regulations.

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  30. Maybe they are loosing money on the Skopje route so their frustration comes from that?

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  31. SKP should try to lure Ryan, Easy-jet, Vueling, German Wings, and other LLCs. Much too much dependence on Wizz Air.

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  32. OT: WOW Air today with A333, TF-LUV, in LJU

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  33. Very interesting that an airline that was saved with a bail-out of 500m by the tax payers money (LH aquired it loss free)is complaining. They were and would be without help from LH in deep sh** and probably would have followed the fate of Malev. So they should thank to god that LH turned them around.....

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  34. OT

    Air Serbia's first flight from AYT to BNX is sold out.

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    1. Is this a planned regular summer charter?

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    2. Yup, I think there are four or six flights planned. Not sure though, it was reported on here some time ago.

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    3. http://www.exyuaviation.com/2018/04/air-serbia-to-run-banja-luka-charters.html

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