Adria files EU complaint against Air Serbia

Adria Airways has filed a complaint against Air Serbia with relevant European institutions over what it sees as illegal state aid provided by the Serbian government to its national carrier. “Adria Airways is concerned over the aid the Republic of Serbia has illegally granted to Air Serbia and believes such behaviour to be unlawful as it goes against free market principles”, the Slovenian carrier’s legal representative in Serbia, Dragan Gajin, said. He added that the aid, in the form of unlawful subsidies, which it alleges Air Serbia has benefited from over the past years, are not only contrary to local Serbian laws and regulations but also international obligations the country must adhere to as a signatory to the EU Stabilisation and Association Agreement.

Adria’s complaint comes prior to Air Serbia adding an extra 576 seats onto the Slovenian market from August with the launch of its newly subsidised two weekly service between Niš and Ljubljana, complementing its existing twelve weekly flights from Belgrade, which are codeshared by Adria itself. Exactly a year ago, Adria filed a similar claim against Alitalia after it was propped up by the Italian government following Etihad Airways’ withdrawal from the airline. The matter is still being investigated by the European Commission. The Slovenian carrier itself was subject to an investigation by the Commission several years ago over illegal state aid in a complaint filed by Ryanair. Ultimately, the airline was cleared of wrongdoing. The Slovenian carrier is facing increased competition on its home market as it continues to struggle operationally for a second year in a row. It recently denied claims it tried to blackmail the Slovenian government into providing funds to the company which is 100% privately owned.

In the European Commission’s annual progress report for Serbia, which was published last month, the body made no mention of state aid or market distortion in the chapter dedicated to air transport. The Commission had previously investigated Air Serbia in 2014 based on a Lufthansa complaint over the airline’s ownership structure. The Commission found that Etihad Airways’ investment in the Serbian carrier was in line with European Union rules on ownership and effective control of airlines. The ruling coincided with the United States Federal Aviation Administration’s findings that effective control at Air Serbia lies with the government and not its part-owner Etihad.

Air Serbia has not publically commented on Adria Airways’ complaint. The Serbian government had previously said it will continue to support its national carrier, which it believes is in line with EU rules. Last November, the Serbian Prime Minister, Ana Brnabić, said, “The government of Serbia will maintain its strong support for Air Serbia. This support will be in line with European Union regulations, as it has been so far, however, no one can prevent us or limit our support for Air Serbia”. The airline posted a record sixteen million euro profit in 2017. Those record results were achieved in part due to a significant reduction in expenditures and an increase in revenue. However, the state provided a twenty million euro subsidy, which is half of what the company used to receive from its majority shareholder following its relaunch in late 2013. In April, Serbia's Finance Minister, Siniša Mali, said the country's national carrier had operated with a profit over the past year and has not been a recipient of state subsidies. "Air Serbia has not been receiving subsidies for the past two years, and that is not down to me or the government but the European Commission which monitors state support", Mr Mali said. Air Serbia's financial results for last year are expected to be made public later this month or in early July by the Serbian Business Registers Agency.

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