State denies fresh Air Serbia subsidies


The Serbian government has rejected claims it is providing the country's national carrier with subsidies after the airline's 2018 financial report revealed it received 20.9 million euros "from premiums, subsidies, grants and donations". The Serbian Prime Minister, Ana Brnabić, noted, "The Government of the Republic of Serbia did not give a single dinar, euro, dollar or any other currency to subsidise Air Serbia. What you see as income from premiums is to pay off the debt accumulated by Jat, which we have taken upon ourselves. Their [Air Serbia's] financial reports will display these payments until 2023 because this is debt owed by Jat".

Earlier this summer, Adria Airways 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. The Serbian Finance Minister, Siniša Mali, noted that Jat's debt amounts to 380 million dollars, which was taken over by the state in 2013 and will take a decade to pay off. "We did not have 380 million dollars to pay off Jat's debt straight away. Instead, we will be making payments over a ten-year period. We process the loan as debt repayments either through Air Serbia or directly. However, none of the money goes into Air Serbia itself", Mr Mali, who previously headed the company's Supervisory Board, said.

Air Serbia has noted it will continue to rationalise its business this year. "In 2019, Air Serbia will continue with internal consolidation, improving its business and undertaking commercial initiatives so passengers are offered greater choice (both before and after their flight), with the main focus being on technology and offering the best digital experience". It added, "Air Serbia is constantly evaluating its fleet and destination network, with a strong desire to continue linking Serbia with the rest of the world in the coming period. In addition, we plan to improve our information system, such as enterprise resource planning (ERP), with the aim to support and improve our business".




Comments

  1. Interesting how the Jat debt will be paid off conveniently at the end of Etihad's second 5-year deal.

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    Replies
    1. The issue for me aren't rhese 20 million in subsidies which is not that much. The issue is that Etihad did not invest a single penny and it never contributed to improving Air Serbia's liquidity.

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    2. You are more than right with it.
      But let's be honest and say if JU would ever receive back deposit from Airbus if Etihad was not in the game?

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    3. The return on investment is worth it.

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  2. These subsidies attacks are getting boring especially coming from a failing airline which operates triangular routes in the 21st century.

    If Serbia has a greater benefit from subsidized JU then so be it. EK also received subsidies, SU does today... What matters is what the airline does with the money it gets. JU is growing organically and that's what matters the most.

    Now bring BEG-YYZ.

    ReplyDelete
    Replies
    1. Do you really think the attack is from Adria? It's just being used as a messenger.

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    2. Doesn't matter, they are the one who attacked them directly.

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    3. Or look at protectionist policies in Turkey. Only 2% of traffic at IST is from LCCs.

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    4. This has Lufthansa written all over it. Has nothing to do with Adria. And they conveniently remembered to report them in the year they introduce 20+ new routes.

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    5. LH can shut up, they better concentrate on OS and EW who are losing billions every year. Also the German government on purpose ddn't shut down AB so as to give LH time to strike back at the competition once they go bankrupt.

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    6. Dude, Austrian is profitable since years - non stop. They will also be profitable this year according to their officials. What's this constant misleading OS bashing on here?

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    7. Austrian finances went horribly bad in Q1 this year, their passenger number rose but their losses increased a lot. Also LH Group had a loss in H1 due to OS and EW. OS might have been profitable in the past but that's no longer the case my friend.

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    8. When presentation of last quarter happened their CEO von Hoensbroech or something like that explicitly stressed that overall also this year OS will be in the black. You probably missed that.
      Furthermore, values of one or two quarters do not equal a year.

      Delete
  3. The 20 million is still nothing when you compare how much was given for example to GSP, the Belgrade public transport company. Or for example Montenegro Airlines which with 5 planes will get 20 million to restructure https://www.exyuaviation.com/2019/06/montenegro-airlines-to-restructure.html

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  4. I'm far from being a JU fan but compare the wording of this
    "with a strong desire to continue linking Serbia with the rest of the world in the coming period"

    to Adria's
    "The Slovenian market is not going to grow and the growth will be somewhere else"

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  5. "Air Serbia is constantly evaluating its fleet and destination network, with a strong desire to continue linking Serbia with the rest of the world in the coming period. "

    Could this be an indication of more new routes to come?

    ReplyDelete
    Replies
    1. I still think we will get long haul expansion in 2020.

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    2. I hope not because it would be another burden on their performance. Better to keep expanding short haul network and possibly replace ageing ATRs.

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    3. I agree they should focus on fleet renewal next year.

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  6. Call it what you want, this company is not profitable.

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  7. If 19 million is to pay off Jat debt, how is the "development for tourism" donation accounted for?

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    Replies
    1. *20.9 million

      Delete
    2. It's part of this 20.9 million donation. They are obviously lying about Jat debt, which was never 380 million dollars.

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    3. And this year they will get subsidies from the Nis flights.

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    4. And don't forget that they got money for the A330 Serbia branding.

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    5. Is it strange for INI?

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    6. It is just one of the many instances of state subsidies.

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    7. Something like PSO in Croatia

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    8. All the next years they will get several extra millions for the INI routes on top.

      This cannot compare to PSO - those must be officially granted by the EU regulators for domestic flights only.

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    9. Luckily Serbia is not in the EU nor are we going to be anytime soon so who cares what their regulation says.

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    10. Subvencije su subvencije kako god ih zvao

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    11. Субвенције нису увек лоше те не видим шта је ту спорно. Зашто пола ЕУ буџета иде на субвенционисање пољопривреде? Посебно јер га неке државе користе како би се обрачунале са конкуренцијом (добар пример је Француска са производњом вина).

      Delete
  8. So they find a way to pump money into the airline by claiming its Jat debt.

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    Replies
    1. They are not pumping money, they are really paying Jat's debt.

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    2. Do you really think they could lie to the European Commission, especially after an airline filed a complaint against them?

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    3. If this is just about repaying debt and not about making Air Serbia look profitable, then why are the amounts each year different and conveniently above what Air Serbia needs to be "profitable"? Last year ~16 million euros, this year 20,9 million euros...why wouldn't they just pay the same amount every year?

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    4. It already passed once EK when much more powerful LH directly attacked Air Serbia.

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    5. You obviously haven't read their reports or any article here. Last year they got exactly the same 20.9 million which was written in the article about Air Serbia's financial results. You can see it for yourself. Their report is straightforward to read. 16 million you are referring to was NET PROFIT last year.

      Delete
    6. "Air Serbia was the beneficiary of state aid in 2018 to the amount of 20.9 million euros, which is the same figure it received the previous year but down from 41.8 million it benefited from in 2016."
      https://www.exyuaviation.com/2019/08/air-serbia-posts-122-million-profit-for.html

      Delete
    7. Sorry, I made a mistake, it was 20,8 million in 2017, and 41,8 million in 2016; yes that looks very consistent :D

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    8. Umm have you thought that some years they pay more? If they pay 20.9 million each year for ten years they would not repay off the debt.

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    9. Thats exactly the point; why not just pay 38 million per year?

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    10. Because they might not want to direct so much funds every year.

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    11. It also can depend on what their debt pay-off deal is with their creditors. Some might want the money quickly, others are happy to take it over a longer period; some could be saying split it equally over x years, others are wanting more up front in the short term. If it was 380 over 10 years equally, they'd be subsidising 38m a year.

      Delete
  9. It looks like Air Serbia crushed Austrian Airlines on the route to Krasnodar, as OS will be discontinuing KRR from the start of the winter season.

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    Replies
    1. Well that didn't last long.

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    2. lol sure the gigant JU crushed OS ^^

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    3. Well they are ending the route after several years in the same year Air Serbia started the route.

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    4. Actually, it did. They were both going for the same market, transfer passengers to Europe. However, JU had a much more convenient schedule than OS, and they lost a lot of passengers. OS has been flying this route since 2003, and they decided to drop it exactly this year. Coincidence?

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    5. JU surely did not crash OS but it only helped them to leave KRR earlier

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    6. Maybe it had a small influence on OS' decision but remember OS was flying KRR with 80 seater F70 and now their smallest suitable ac is a 120 seater. They struggle ever since they got rid of F70s and it is obvious that the E195 can operate more profitable on shorter intra European routes.

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    7. Also don't forget JU had another advantage, BEG is way more to the south than VIE so the detour around Crimea doesn't affect JU as much as it affects OS. Good job on JU for crushing that dinosaur OS. Good to see them leave KRR, hopefully JU does even better now there.

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    8. This shows JU can compete with the likes of OS and LO on Eastern destinations.

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    9. Also JU offered much better times because it flew in the middle of the night. You could be in Paris by 08.45 in the morning via BEG while OS flew in the afternoon so you would be in Paris at night.

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    10. Regrading LO, they pushed easyJet out of Berlin-Warsaw market and are increasing their own flights to four daily this winter. Mind you they only launched Berlin a few years ago.

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    11. Just checked, in December 2017 they introduced second daily. Less than two years later they have a monopoly with 4 daily, so double the flights. Impressive!

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  10. What is enterprise resource planning?

    ReplyDelete
    Replies
    1. https://en.wikipedia.org/wiki/Enterprise_resource_planning

      Delete
  11. Looks like Air Serbia won't be able to start service to Toronto with more than two weekly frequencies. Bilateral limits each side to 2pw as published. Two is a low number.

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    Replies
    1. Where on earth did you get that from

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    2. Published agreement. Look it up. It became official on Mar 29. Compared to AC+TS combined services to ZAG, two per week seems low. Unless AC also starts 2pw from their side. Number can be increased if mutually agreed.

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    3. They obviously asked for that much. ZAG service is regulated by EU bilateral which has almost no limits.

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    4. Not sure if they asked for 2pw but that's what was negotiated. Two is more than enough for winter but insufficient for summer. For comparison, SkyGreece started in 2015 1pw, then Transat took over with 1pw in 2016, increased to 2pw in 2017, then AC added 4pw to the mix in 2018. Route needs time to grow, but on the other side, case of Canada-UAE bilateral shows it can take quite some time before it grows.

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    5. Like I said Croatia is in the EU. It does not have a separate bilateral agreement, it is regulated by the EU-Canada bilateral which allows almost unlimited flying.

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    6. Any link proving it is only 2 pw?

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    7. If Air Serbia one day decides to get second A330 to launch YYZ, this means they will need another destination as well. For example 1day to JFK to help bring JFK service to daily, then 2days for YYZ rotations and you still have 2-3 days left for another long haul destination provided it fits within 24h. Could it be ORD or new Beijing Daxing airport?

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    8. Google it up for the complete text. Start with Transport Canada site first and it will take you to another site for complete text, probably Foreign Affairs. Use Air in the search field.

      Delete
    9. Is it so dofficult for you to post a link?

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    10. Use the leftover second A332 to serve BKK, DPS in winter and VRA, PUJ....or any intra-cotcinental charters where there is enough demand can handle widebodies

      Delete
  12. Why cant they just run the airline without subsidies, run the airline properly and you wont need subsidies.

    ReplyDelete
    Replies
    1. because there is not a single european airline with less tha 50 machines that made a real profit in 2016-2018

      (yes, every year there were some, but nobody showed that they can do this consistently)

      Delete
  13. It's beyond me how Jat managed to make EUR380 million in debt!

    ReplyDelete
    Replies
    1. Because it was getting loans which were then (the money) taken by the government. It also didn't have control over it finances so cash shortages were extremely common so borrowing was the only way out. Over time that number reached 380 million.

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    2. It was run for two decades without paying for airplanes.

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    3. Nobody wanted to lend them money without GoS to guarantee the money will be paid back

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    4. Don't forget that JAT was a cash cow for the politicians in power to get cash. Most of the debt that the government sponsored was only funneled through JAT to various pockets that had nothing to do with JAT and aviation. It was a scheme that served well for many!

      Delete
  14. Let's wait and see their finances in 2020. The ghost flights to London to babysit Etihad's slot certainly won't help.

    ReplyDelete
    Replies
    1. And you have any proof Air Serbia is paying for it?

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    2. You don't know the agreement between JU and EY, and therefore cannot make assumptions on the profitability of this route.

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    3. Those flights have only one purpose to keep slots on LHR and they are completely financed by Etihad. It's much cheaper for them to send empty A320 from Belgrade to London than some bigger bird from Abu Dhabi. The only reason those flights are officially operated by JU is because EY can't operate flights from Serbia to EU.

      Delete
  15. Like with many things in Serbia, the problem is structural. They are throwing money at JU while its management is still clueless. With the money they got so far they could have completely renewed their fleet and gotten smaller regional jets.

    ReplyDelete
    Replies
    1. Yes, sure...One more expert.

      Delete
  16. 380m isnt little

    ReplyDelete
  17. Tko ljeti prima državnu pomoč = vrijedi. Tko ne ljeti ne vrijedi i zato ne prima pomoč gospodarstva.

    ReplyDelete
  18. That is what all airlines across Europe are doing. Getting hidden incentives from their governments, airports, tourist boards, regions etc.

    ReplyDelete
  19. What would be the alternative?

    ReplyDelete
  20. Seems to me the Serbian government learned to give subsidies in a way not offend EU regulators and have a cover story. The same thing many EU governments are doing.

    ReplyDelete
    Replies
    1. The EU can't do anything because if they launch a witch hunt against JU it will push Serbia even closer to Russia and China. It's already bad enough for them that there are Chinese-Serbian friendship billboards around the city

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    2. I'm sure they are worried about the billboards.

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    3. Of course they are, its the expansion of China''s soft power. Haven't you seen the huge cultural center they are building?! The EU knows very well about this. That's why the EU won't do absolutely anything about subsidies for JU.

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  21. I do not mind state aid. I support it since when looking at the greater picture Air Serbia is indeed contributing a lot to Serbian economy. The money they get is nothing compared to what Serbia is getting in return.

    ReplyDelete
    Replies
    1. I would like to see if the return on investment is enough to cover the investment.

      Delete
  22. I find it interesting that in Serbia people get upset about JU subsidies, media write about it all the time, but they are not upset the millions upon millions being given to other state owned company, to a much larger extend than Air Serbia. And this was the same case during Jat.

    ReplyDelete
    Replies
    1. Because Air Serbia was not supposed to be a continuation of Jat and business as usual.

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    2. Probably because they were made to believe that after Etihad takes over there would be no more need for state assistance.

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    3. One way ticket on a two and a half hour flight cost me 180EUR - the base fare with no luggage nor any other amenities. And the LF was 95%. No wonder they make profit.

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    4. That should serve as a lesson to buy your tickets in advance! Plus most airlines sell one way tickets for more than return.

      Delete
  23. Not a single word can be trusted from the Brnabic-Mali duo.

    ReplyDelete
    Replies
    1. Fair enough. To get independent opinion on what they say is correct, imagine you are a news outlet. You can reach out to expert accounting and audit companies and ask them if Jat debt repayment is what is listed in tax report. If you don't trust local experts, reach out to international experts like EY, Deloitte, PwC etc.

      But if you don't care about expert opinion and just want someone who is not even an accounting expert to slam Air Serbia, you just ask readily available critic to say "it looks like subsidy to me" without any expert evidence and no responsibility for that statement. By denying expert review and serving only one sided opinion, it's understandable you are conditioned not to trust a single word from the duo:

      http://rs.n1info.com/Biznis/a505972/Er-Srbija-dobila-21-milion-evra-od-drzave.html

      Delete
  24. What makes me happy is the fact that Air Serbia is actually making profit, which is so uncommon among European flag carriers, especially in the Balkan region.
    Once the debt is paid off, I would be happy if the profits even reduce, as long as the network expands and ATRs are replaced.
    It looks like their management found the way of making money.
    Partnership with Etihad is the best thing that we could possibly, not even dream off.
    Can not imagine if some EU company invested in JAT....there would be a lock on JATs door a long time ago...

    ReplyDelete
  25. Interesting that state aid halve compared to a few years ago.

    ReplyDelete
    Replies
    1. The state subsidies are going down.

      Delete
  26. I don't know why are people so upset by the government's aid. It's ok when it's given to Wizz or other LCC, but it's wrong when it's given to a national carrier.

    ReplyDelete
    Replies
    1. Without government subsidies Wizz Air's network out of SKP would be 1/3 of what it currently is and 1/2 in BUD.

      Delete
    2. Notwithstanding the fact they're operating mostly out of government built airports who they're paying less than market charges i.e they rely on public funds anywhere to cover the losses.

      Delete
    3. So much malice and intentionally false statements in so few words.

      Wizz isn't supported in BUD outside of the slim West Balkan connections. Others like Ryanair have received much more support.

      Wizz support in Macedonia (SKP + OHD, more for the latter than the former) is for new routes only which are worth 1/2 a plane capacity in total, which leaves 4 and a half self-sufficient aircraft worth of year-round capacity (A321 + A320). The airports are run by TAV who are milking it for all it's worth (hence the gov support). Total support is EUR 5 mil over three years.

      You're welcome.

      Posts like the ones above are kafana worthy at best.

      Delete
    4. BUD subsidizes Wizz Air in the form of low airport charges, that's why their airport couldn't make any money for a whole decade. As for North Macedonia, well INI is following the same model so I suppose you support those moves by the Serbian government?

      Delete
  27. Even with the subsidies they waste much less money than Jat and at least they have a decent network, frequent flyer program, crew, online check in...

    ReplyDelete
  28. I am not sure what the Serbian taxpayer has to say about this. The state must clearly provide a clear explanation about the ongoing situation with Serbian Airlines.
    Additionally, more information is needed with the Etihad deal, too.

    ReplyDelete
    Replies
    1. They did. It clearly says that 20 mil. was towards paying off the debt, not pumping money in.
      Once debt is payed off, the company will be in pure profit.
      I am, as a tax payer, very happy with the way they are managing the conpany.

      Delete
    2. You are wrong.

      Obviously, if ASL's yearly financial report shows a 16 mill profit but they receive 21 mill state subsidies at the same time in order to achieve it, they are actually not profitable at all but are losing money each year!

      Delete
    3. ...at all but are losing less and less money each year!

      There, I fixed it for you.

      Delete
  29. What should Air Serbia's priorities be next year? Some of you saying fleet renewal, some long haul expansion?

    ReplyDelete
    Replies
    1. It should be partial fleet renewal and focus on quality of service. Quality of service is rapidly falling (Skytrax, TripAdvisor, FlighReview etc) in numerous sectors and all indicators are pointing that there is a negative trend from the time when the brand was re-launched.

      Delete
  30. Is JAT's debt still on Air Serbia's books? If not, then government's response doesn't make sense.

    ReplyDelete
    Replies
    1. I wanted to ask similar questions - is there any trace in JU financial report of paying old JAT debts to somebody?

      Delete

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