The Montenegrin government has adopted a new strategy for the development of transport in the country between 2019 and 2036, which outlines the planned restructuring of the national carrier and its potential privatisation. The strategy, which was adopted by the cabinet on Thursday, notes, "The restructuring of Montenegro Airlines is necessary, since the company is constantly producing losses and has a high level of debt". While the 185-page document says the carrier has significantly improved its operational results in 2018 and continues to perform well in 2019, it estimates the state will have to fork out twenty million euros to restructure Montenegro Airlines. According to the government's timeline, the restructuring should begin immediately, in 2019, and be completed in 2020.
The Montenegrin government began talks with a "German investment fund" in late 2018 over its potential takeover of the national airline. In February of this year, unnamed sources at the German turnaround fund 4K Invest, a part-owner in Slovenia's Adria Airways, said it had given up on purchasing a stake in Montenegro Airlines due to "both internal and external limiting factors". They added, "We had contact with [Montenegrin] government representatives but we do not see a sustainable way to make the company profitable. Debts are a major issue, as well as the current state of the aviation industry, both in Montenegro and abroad".
Montenegro Airlines registered a loss of 1.97 million euros in 2018. It represented the company's best result in ten years. "The strong, and often unfair, competition on the market, the high price of fuel, high aircraft leasing costs and the overhaul of aircraft engines, as well as inherited losses, in large part affect the company's performance", Montenegro Airlines said on Friday. It added, "Together with our majority shareholder - the government - we expect to complete the process of financial consolidation in 2019 and adopt a development strategy, which includes fleet renewal and organisational restructuring of the company".
Basically this means Montenegro Airlines is getting 20 million EUR from the government this year. They just added the restructuring to justify such a large amount.
ReplyDeleteExactly just a way to pour more cash into this failed project,
DeleteWhatever they get it is better to give them state aid now when they are still not in the EU and are more or less allowed to do it than for the entire airline to collapse the second they enter the EU.
DeleteThank goodness the deal with 4K didn't happen.
ReplyDeleteWhile it is good it also shows that no one will ever buy them. 4K was their best shot.
DeleteThat's true. I don't see anyone buying them any time soon.
DeleteThe only airline that could have bought them was Etihad during the Hogan era, but that ship has sailed.
DeleteThe issue is that no one will buy a company with so much debt. If the government does not write off the debt then the same problem will persist.
DeleteAnyone know how big their debt is at the moment?
ReplyDeleteNot sure about total debt but at the end of 2018 their debt towards Montenegro airports was 28 million euros!
DeleteThe problem with this debt is that it is stalling the concession of the airports because the government knows that when a private operator comes, they will want MGX''s debt settled and they won't allow for MGX not to pay for anything.
Delete"Montenegro Airlines registered a loss of 1.97 million euros in 2018. It represented the company's best result in ten years."
ReplyDeletewow
Montenegro Airlines' financial results during the summer are insufficient to cover losses incurred during the winter months. Winter is highly unprofitable for them. Same story with Croatia Airlines.
DeleteI'm glad they managed to decrease losses but in my opinion an airline of that size should not have such big losses let alone debt.
DeleteSeasonality is an issue with all ex-Yu airlines but naturally most prominent at OU and YM.
DeleteTrue, but OU still has much more traffic in winter than YM. Zagreb is a tourist attraction throughout the year and has tourists coming regularly, while I do not see tourists hoping on a plan just to visit TIvat or Podgorica.
DeleteAnd YM's "best result in a decade" was managed because of state aid.
DeleteZagreb has 200.000 pax in February.
DeleteEvery year the same story with them.
ReplyDeleteThey say how they have to make a fleet development plan but didn't they already develop one? Didn't they say last year how they will replace F100s either with more Embraers or go for B737 MAX?
ReplyDeleteNot only that but they even released a picture of the MAX with MA livery on it.
DeleteThat was actually 2 years ago when they said that. During that time they also said F100s would be retired in 2018 but here we are in the middle of 2019 and I doubt those planes will be going out of service anytime soon.
Delete@anon 10:02
DeleteHere it is
https://3.bp.blogspot.com/-fnrrIkC_TvA/Wqu2ajpfu0I/AAAAAAAAjFY/S5G2b3Bz01kvnkphbx7dJeNLAXwE0hJ-ACLcBGAs/s1600/montenegroairlinesmax.png
Every time they announce new plans for fleet development they need to go on business trips discussing option, presentation, probably visit some fair, go for some dinners, etc. And not to forgot, external consultancy company as a special advisor or similar...
DeleteThis is case behind every "new plan" done in this region, not only by Montenegro Airlines but by majority of them (or maybe, every single one).
Ako nekom nije jasno zasto je zemlja razbucana pre 30 godina nego da bi se lokalni stakori mrsili okolo. Takvi ko milo, vucic, sanader rade u magacinima u Nemackoj.
DeleteHow come they complain about high leasing costs? They leased only one plane this year and last and both planes are really old. They could not have been that expensive. And if they were, why didn't they find anything cheaper?
ReplyDeleteThis year they are leasing 2 planes. B737 and Carpatair to replace F100.
DeleteIt's really time for them to retire those F100s. They are almost 30 yrs. I think the A220 would be great replacement.
ReplyDeleteWith what money?
DeleteOr Superjets!
DeleteI think the fokkers will stay at least for next year too and that they will again lease a B737 during high season.
DeleteAgree with last anon. Those fokkers probably have two more years in them.
DeleteStick to one fleet type, either all Embraer or replace the entire fleet. 2 model fleets don't work in a small airline - there's increased maintenance, training and resourcing costs. Bad idea
DeleteNot big fan of Trade Air and the way they treat their employees, but they obviously manage to function pretty successfully with two model fleet (F100/A320) in small airline.
DeleteDead man walking.
ReplyDeleteTheir statement about "unfair competition" is hilarious. First of all how is the competition they have "unfair"? Second they are the ones that get millions from the government each year and are about to get one of their biggest payouts in years - 20 MILLION EUR! Cry me a river.
ReplyDeleteSay what you may about Montenegro Airlines but it is currently the only true legacy airline left in ex-Yu.
ReplyDeleteAt what price?
DeleteWhy doesn't YM look into long-haul? Could they afford a 330 or 767?
ReplyDeleteIn the 90s they planned to wetlease a B767 from a now defunct Italian airline to start TIV-JFK. This was around late 98/early 99. They applied for a permit with US department of transport but of course never got the license.
Deletehahahahah in their wet dreams :D
DeleteLong long years ago, and few years before ex-yu disintegrated, Aviogenex, which at that time had fleet of 10 units B737/B727, seriously considered acquiring B767, basing it in DBV, and switching part of UK flights from DBV to B767, and introducing US flights to/from DBV as well. DBV was always interesting to Americans, proving it JAT and Pan Am before and American Airlines today serving the market. So basically businesses wise it was not bad idea, knowing incompetence of Croatia Airlines and long time Americans usually take to open new markets. Of course there are other reasons why they couldn't make it happen, but idea itself, taking into account proximity of DBV and quite strong Albanian and Herzegovian diaspora, was not bad at all. If only Croatia Airlines had people who care and have such ideas, only sky would be the limit Literally
DeleteAnother waste of taxpayer's money.
ReplyDeleteAgree. I don't think that Montenegro needs this symbol of statehood any more.
DeleteBut 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.
DeleteNot true. Tourists are MOSTLY transported by other airlines during summer season. YM does not carry majority of passengers at TIV/TGD during July/August.
DeleteIf 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.
DeleteWhat's going to save this airline?
ReplyDeleteMoney.
DeleteWhen will they learn?
ReplyDeleteNever until they are getting government handouts.
DeleteWhen will it end?
DeleteOnly when Montenegro enters the EU.
DeleteThe Balkan way of running airlines. I think half of the companies in the region would go bankrupt if there was no government help.
ReplyDeleteOf 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.
ReplyDeleteUnlike 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.
ReplyDeleteTo find a solution they must be able to recognize the problem. The problem is likely people that steer and manage the airline, and decisions they made. For example, what sane management would consider 4K as a preferred partner of choice over EY/JU? Therein lies your solution: stop listening to those who push their divide et impera agenda for Montenegro (Airlines) and (Air) Serbia.
DeleteWhat on earth are you talking about? Montenegro Airlines codeshares on every single JU route. And in case you haven't seen, Etihad (and for that matter Air Serbia) is in no position to buy any airline, especially a debt stricken loss making one.
DeleteDebt stricken airline - 4K and Adria. EY/JU was interested in Montenegro some 5 years ago.
DeleteThe don't pay additional money for fuel toilet services etc on Tivat AP they land every morning at 5h no additional costs the workers of ground airport staff will work for free this season even If officially airport is opened from 6.30h.MNe A. Are protected from everyone from government the problem is that Airports are in trouble cause of them.
ReplyDelete