All EX-YU carriers to receive state support in 2020


The three remaining flag carriers from the former Yugoslavia - Croatia Airlines, Air Serbia and Montenegro Airlines - will all receive state funds next year, each exceeding twenty million euros.

Croatia Airlines will be the beneficiary of the second instalment of the government’s 33.7 million euro cash injection, aimed at stabilising the carrier prior to its privatisation, which is being targeted for June 2020. The airline will receive 20.2 million euros next year which will go towards aircraft maintenance, debt and loan repayments, as well as other essential investments. The flag carrier’s CEO, Jasmin Bajić, said last week, “In the third quarter we had a profit of 41 million kunas (5.5 million euros). That’s the reality for Croatia Airlines - in winter we lose money, while in the summer, when competition is at its peak, we are profitable. We need to find a solution for the winter months when we are practically the only carrier connecting Croatia to the world”. Next year, the company is also expected to benefit from greater funding for Public Service Obligation (PSO) flight contracts for the upkeep of its domestic network. It currently receives 10.3 million euros in compensation per year from the European Union. The figure is expected to be revised up from late March 2020 once a new four-year contract comes into force.

The Serbian government has approved a draft of the country’s state budget for 2020 which foresees subsidies for Air Serbia. Although the exact amount of funds has not been specified, the national carrier is one of 63 companies “of special importance“ which will share eighty million euros in subsidies among themselves. The airline was the beneficiary of 20.8 million euros "from premiums, subsidies, grants and donations" both in 2017 and 2018. In addition, Air Serbia will pocket five million euros for subsidised operations out of Niš and is widely tipped to launch operations from Kraljevo, which will be incentivised by the government to the tune of 2.7 million euros in 2020.

Late last week the Montenegrin government allocated 21 million euros for Montenegro Airlines in 2020. The Montenegrin Minister for Finance, Darko Radunović, said the funds would be used to help the company become sustainable in the future. “We have witnessed significant state protectionism in recent times and we should notify the public of it. In the region, we have the example of Croatia Airlines and in Germany the case of Thomas Cook. We simply have to recognise the importance of certain companies which serve the public interest and contribute to the state budget”.




Comments

  1. The absolute biggest subsidised are for Montenegro Airlines when you take into account the airline’s small size.

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    Replies
    1. Someones got to pay for that E195 lease next year.

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    2. They also have debt of 90 million euros and the government just said the other day they would "take care of it". So 21 million they will get is just on paper. Who knows what else they will be given. Same goes for the other two.

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    3. Let me tell you something folks. CROATIA CAN LIVE WITHOUT CROATIA AIRLINES, but Montenegro, Serbia CAN NOT live without Montenegro & Air Serbia.

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    4. Can Croatia really live without OU? We have seen a massive exodus of foreign airlines from ZAG, no one is adding more flights. OSI is as good as dead while the coast without OU in winter is as good as dead. On the other hand, foreign airlines are thriving in Belgrade and in Podgorica.

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  2. So around 20 million for everyone

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    Replies
    1. 20 million and then some more ;)

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  3. Completely agree with Bajic’s assessment of seasonality. Only thing I don’t see is how is Bajic addressing it.

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    Replies
    1. They should really try make some more routes year round from ZAG.

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  4. “In the region we have the example of Croatia Airlines”

    We have reached the point where ex-Yu governments are using subsidies provided by other ex-Yu governments to justify their own state subsidies.

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  5. I do not understand that Montenegro drawing a parallel between Thomas Cook Germany and Croatia Airlines.

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    Replies
    1. Didn't the German state government bail it out.

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    2. No it did not.

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  6. So much for free market economy

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    1. Exactly just like Wizz distorted it by being funded by an investment fund which covered its massive losses in the beginning.

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    2. So? The investment fund is private? Has no correlation with state subsidies for airlines.

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    3. They might be private but most of their wealth was made through dubious business practices.

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    4. However they made their wealth, it didn't come out of your pocket, like it does now for these half broken airlines.

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    5. But why assume we all mind supporting national airlines? Look at Italy and the billions they spent on AZ just because the people don't want to see a national brand go.

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    6. 09:16 is so far out of touch with reality.

      Have you heard about dividends? How about ROI? How about public equity?

      Forever stuck in Tito's Yugoslavia..

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    7. Are you implying these governments are not getting ROI when they invest in their carriers? How many people are directly employed by the national airlines? How much more stable and predictable are these carriers? Wizz Air and Ryanair are one day there and the next they are gone creating a shock for the market. It's a well known tactic they use in order to blackmail various authorities.

      Latvia and Poland were smart when they invested in their national carriers in stead of relying on these LCC thugs.

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    8. Polish market is much more developed than exYu.

      Ryanair was the biggest carrier in Poland in 2018 with 11.6m pax, LOT was second with 8.7m and Wizz Air third with 8.4m pax.

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    9. Then take Latvia which is about the same as ex-YU. Also just because the Polish market is more developed doesn't mean ex-YU airlines can't have professionally run airlines.

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    10. Latvia is same as ex-YU? Which aspects are same?

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    11. Historic background, Communism, mass migration, corruption ... you name it.

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    12. And airBaltic make loss 26 million euros during the first nine months of this year.

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    13. Sorry, during first six months

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    14. @Anon 11:36
      Yes, there are some historical similarities. But difference is the way how country has gone through transition from history to 21st century.
      Now, if we talk about system, economical environment, business mentality...there is huge difference between Latvia/Baltics and Ex-YU. Now they are way ahead of this region.

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    15. "Exactly just like Wizz distorted it by being funded by an investment fund"

      Admin, maybe its time to ban comments on this blog altogether.

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  7. Komentar uz financijsko izvješće (podaci za prošlu zimu):
    Kompanija se hvali kako je ona jedna od rijetkih koji lete tijekom zime i time omogućuje otvorenost zračnih luka i zimi. I protom „zaboravlja“ spomenuti da za isto dobiva preko 10 milijuna EUR PSO (Public Service Obligation) godišnje. Končano, nije istina da tijekom zime iz hrvatskih zračnih luka ne lete druge kompanije. Iz Hrvatske tijekom zime leti čak 20 kompanija, koje imaju skoro duplo više linija od Croatie. U svim hrvatskim zračnim lukama, osim Zadra i Pule, ostale kompanije imaju više linija od Croatie zimi. Ostale kompanije imaju i više letova tjedno nego Croatia (218 tjednih letova), te obave preko 230 tjednih letova zimi.

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  8. Don't see anything wrong with it.

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  9. Isn't JU already receive money from Abu Dhabi? I don't think 20 million € is enough hehe

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    1. What money did it receive from Abu Dhabi?

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    2. JU received a big fat zero from Abu Dhabi ... Arabs are not giving JU a penny, they can only take it from the national carrier.

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  10. Among these 3 companies only Croatia is in EU.

    It can be very dangerous

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    Replies
    1. Italy is in the EU yet it has been receiving aid for a few years now.

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    2. Croatia won't have problems regarding state subsidies, don't worry! ;)

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    3. Croatia is not even close to be so important in EU as Italy is.

      Croatia Airlines belongs to the group of Malev, Cyprus Airways, Estoanian Air etc.

      Guess where they are now as they had to return financial help to their Governments...

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  11. Most European flag carriers receive some sort of state support.

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  12. ErSrbija dobija naj manje subvencije a ima naj vecu flotu+1 A330. To samo po sebi sve govori. Ocigledno rade dobar posao jer se te subvencije iz godine u godinu smanjuju.

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    1. Уз све то користе средства за раст и побољшање конкурентности. Погледајмо само раст ове зиме и како су били спремни када је Адрија пропадала. Летови у 13.10 имају одличну попуњеност сада у новембру те се надам да ће додати још летова наредног лета! Ко би помислио да ће Љубљана имати скоро летова колико и Подгорица!

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    2. Siguran sam da ce dodati bar jos Nedelju u trecem talasu

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    3. Мислим да неће уколико не додају још авиона. Та Љубљана је уведена након што је Тирана повећана на А319. Ко зна, битно да се пуни са путницима који лете ка западној Европи.

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    4. Morace da dodaju bar jos 1 ATR zbog Kraljeva. 3 dana ce taj avion biti rezervisan samo za Bec
      BEG-VIE-KVO-VIE-BEG,a ostalim danima bice rasporedjen na drugim linijama

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    5. Само нека додају авионе јер без њих не могу постићи критичну масу која им толико треба.

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    6. "Kriticna masa"?Termin u avio industriji poznat kao...?Prosvetli me,molim te

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    7. Критична маса није термин који се искључиво користи у ваздухопловству већ и у многим другим индустријама. Она индикује довољно велики број корисника чији просечни приход омогућава да се покрију оперативни трошкови али и да остане још капитала са стране. Ето неко је споменуо аеродром у Будимпешти, њима је била потребна критична маса од 15 милиона да би дошли до нуле.

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    8. "Kriticna masa"?Termin u avio industriji poznat kao...?Prosvetli me,molim te

      Бато сад ћу да те просветлим. Ево рецимо Туркиш и Стамбол. Критична маса је одавно пробијена па додавање било које нове линије гарантује да ће линија бити попуњена. Лете за Хавану и Каракас јер имају стотине дестинација које могу да доведу трансфер путнике. Поетским речником, као грудва која се захуктала низ брдо и свака нова пахуља снега је чини још већом.

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  13. Adria as well?! Ah, right, Adria is Ex-Ex-Yu carrier :) XXU :)

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  14. These airlines going bankrupt would cost these small local economies much more than these subsidies.

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    Replies
    1. I guess someone should let Slovenes know that they are about to go down.

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    2. The Slovenian economy is in much better shape than the three countries we are discussing here so it can sustain the collapse of its airline more easily.

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    3. Macedonia did just fine without MAT.

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    4. Well income from passenger drop is definitely being felt.

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    5. So what if it is in better shape? You really think that other airlines wouldn't fill the gaps where the money can be made? Or you're worried about all those from partija that would lose their jobs?

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    6. @9.23
      It is a common misconception (by many Macedonians too), but MAT was not state owned. It was a private company that assumed the title of being a flag carrier. They didn’t receive money from the state budget.

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    7. @frishki
      Foreign airlines would fill the gaps somewhat. But I think in tourism reliant country especially like Croatia and Montenegro, these national airlines play a very important role in bringing in tourists.

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    8. I wonder how tourists found Hungary after Malev went belly up...

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    9. But in Hungary there was already Wizz Air - a locally based LCC which could step in without major issue. The same can not be said for Podgorica or Zagreb. Also tourism in Hungary is different to the one in CRO and Montenegro. It is more city break based which is easier to cater for.

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    10. Well after Malev went bankrupt BUD kept recording losses for a decade, they only recorded some profit last year. What a phenomenal success, ten years and 15 million passengers were required for the airport to start doing well. That said we will have to see how their finances perform this year since cargo is in a freefall. I think -15% right now.

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    11. Excuses, excuses.

      Let's just keep on pouring millions each year under the pretense that is the only way countries around these parts could have any kind of connection to the world.

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    12. And how many millions did LCCs get from local governments, airports, regions ... to set up flights under the pretense that is the only way countries/airports around those parts could have any kind of connection to the world?

      Why is ZAD giving money to FR if other airlines are adding flights without any form of support?

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    13. Because the return on investment is greater than the investment itself.

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    14. ZAD isn't the whole country. This is Government giving our tax money for loss making companies. I'm happy you're willing to pony up your tax money for these companies that are dead in the water, thankfully I'll be out of here before they take another dime from me.

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    15. I can only speak for Serbia and we would definitely lose out from not having JU. Who would fly to TIA, KRR, KBP, SKG, BEY, MAD, HEL, SJJ, LJU ...

      Without Air Serbia the market would be far less competitive. Also these subsidies are not hampering growth since so far for next year foreign airlines are leading growth at BEG.

      Delete
    16. Your understanding of competitive market is interesting.

      Having state-funded national carrier operates a lot of routes isn't competitive, as it just eliminates competition. Who is going to fly BEG-x now, if JU is happy to operate them at loss (not saying a specific route is loss making, except JFK, but more at the end of the year as a whole)?

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    17. Ok so tell me which competition did JU eliminate on the routes that are mentioned above? You know since they are kept away by the evil loss making national carrier.

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    18. Look at JP for example. As they were for decades sponsored by the government, other airlines didn't see much interest in competing with them. No competition resulted in high prices.

      Look what happened this year - plenty of new airlines and in some cases ridiculously low prices even for long haul connections from LJU.

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    19. You can't compare the two, Belgrade sees a lot of foreign airlines which wasn't the case with LJU. Also growth for next year is being led by foreign airlines so what now?

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    20. last anon: no, the previous anon is in essence right: the concept is totally the same wichever airport or airline you pick. The reasoning bein why should we compete with a state backed airline who will be able to sustain flying for 0 ticket price, as the state will cover any loss no matter what. The idea is that there is no end with dumping prices. The foreign one (let's asume privately owned) will have to give up such contest first as it has a commitment to the shareholders.

      There are nuances when there is some other competition at the airport but the economic-political rasoning behind it is the same.

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    21. Well I gave you a concrete example of Belgrade where Air Serbia actually suspended some markets meaning that they have some business sense and that they are not relying on government to pay their bills ... no matter what. That is probably why foreign carriers are booming in Belgrade.

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  15. Frankly, I'm quite shocked at the ridiculous amount of PSO money OU gets every year. Air Serbia is subsidised with 20 million EUR for its network of 40+ routes, whereas OU receives 10 million just for a couple of domestic routes. I mean, there's no way it would cost them 10 million a year even if the planes were flying empty, which is far from being the case. And despite all that, they STILL manage to make such losses as to require a state bailout. Incompetence of the highest degree.

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    Replies
    1. But Air Serbia gets 5 million from Nis for 22 flights per week. Croatia Airlines operates 22+ flights per week just from Zagreb to Dubrovnik in winter.

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    2. Quite honestly I think both are ridiculous. The Croatian one is ridiculous because I'm certain that not all of those routes are unprofitable to qualify for PSO, especially ZAG-DBV and ZAD-SPU. The Serbian one is ridiculous because of the amount. 2.7 million EUR for two routes out of Kraljevo. I mean seriously

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    3. * Correction I meant to write ZAG-SPU.

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    4. Yes but flights out of INI are not commercially viable so they are subsidized. I am sure DBV-ZAG could be viable on its own, without subsidies.

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    5. The notion of some of these routes being of "public interest" from Nis is questionable.

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    6. It's not questionable because they purposely omitted certain major airports to leave for other airlines as was the case with Malta for example.

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    7. More like they purposely chose destinations from which Wizz Air and Ryanair were most likely to launch flights.

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    8. JU started receiving money for INI from 2019 and OU kept receiving PSO for decades...

      And still JU opens so many new routes and OU makes copy / paste from previous winter season.

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    9. well, they could've launched those flights if they wanted to

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    10. Anon 09.57

      If that was true then JU would have launched BVA, EIN, BCN ... and not some random cities like FKB or NUE.

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    11. Maybe they would. The fact that many routes selected are not in the public interest is shown by the launch and suspension of Budapest. Route purely launched in the fear that Wizz Air might do so.

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    12. My above comment was addressed ti anon 10.15.

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    13. So Wizz Air should launch it now, right? I mean BUD-INI, you know since we constantly hear how JU did it to spite Wizz.

      Maybe LO is launching BUD-BEG for the same reason?

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    14. No, Wizz Air was not that stupid and did some research so of course they are not going to launch it.

      BUD-BEG has nothing to do with INI-BUD.

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    15. Well they could have launched BEG after B2 removed the stop, they were eligible for Hungarian tax money to operate this unprofitable route. I guess LO is getting the money now.

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    16. I already explained this to you but you constantly play dumb. The route between Budapest and Belgrade is not subsidized and I don't know where you got the idea it is. If you are referring to the subsidies the Hungarian government is giving to Wizz Air for Balkan routes read the tender brief again. Belgrade is not included whatsoever. It includes Sarajevo, Tirana, Pristina, Podgorica and Sofia.

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    17. Belgrade wasn't included back then because there was Belavia already flying between the two cities. The tender could have been revised if there was any real interest.

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    18. You really don't know what you are talking about. First you claim the route is subsidised. Now you admit you made that up but claim it's not subsidised because there is no real interest. WOW. The route is not subsidised precisely because there is interest from airlines. So much so it will be operated daily. The routes that are subsidised by the government are subsidsed precisely because there was no interest for anyone to set up these routes.

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    19. I am Anon 11.42 and I didn't write the posts above, calm down Anon 11.45

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    20. Even if you didn't write it, the comment you did write makes absolutely no sense

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    21. So is the 0.5 million that FlyBosnia is looking for better or worse per route than the other airlines (and yes I know they aren't state owned)?

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  16. Until these airlines are fully privatized they will receive subsidies.

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    Replies
    1. The issue is that they will never be fully privatized.

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  17. European governments once believed they could rely on the market to ensure their links to the outside world. But many are starting to become more protective of their national airlines. In many ways, it is a return to the past.

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    Replies
    1. That's true. Dutch government quietly bought a 14% stake in Air France-KLM. The Dutch government wanted at least as much of a say in the company as the French government, which owns 14.3%, so it assembled its own stake.

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    2. Or the Finnish government keeping their share in AY.

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    3. Not just Finnair but many governments are retaining stakes in their national airlines. SAS, LOT, TAP to name a few.

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  18. JU is growing at least. which can't be said for OU. YM is somewhere in between

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  19. Which all shows how insignificant these airlines are on the European market if they rely on government handouts to survive.

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    Replies
    1. Sad but true

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    2. Is QR also insignificant?

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    3. Without government support QR would downsize significantly (like Etihad is doing) but it would survive. Without government support JU, OU and YM would disappear.

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    4. Downsize you say? With 639 mil USD loss?

      Hehehe, sure.

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    5. SU, TK, EY, EK, QR all receive governments support.

      And they are very insignificant

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  20. The airline business is a business of big numbers. All these small markets cannot sustain the competition and their reach is limited. Sustainable and significant business is possible only for Belgrade and Croatian coast - all as it was for the last 50 years. Business is one thing and emotions are something else. Regarding the airlines, probably only Air Serbia has some space to develop and eventually run its business as a positive one, without subsidies. However, at least two conditions must be met: a) to have a professional and not party management b) to be able to cover the most of the ex-yu space in one or another way.

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    Replies
    1. Can you imagine in 2030 Air Serbia will fly DBV-ZAG? :-)

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    2. Well few could have believed JU would successfully operate 17 weekly to LJU in winter. :)

      But according to some it would be better to have 2 weekly on Wizz Air.

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    3. With INI JU operates 19 weekly flights to LJU

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    4. It's funny BEG-LJU is operated with ATR, yet INI-LJU with A319. :)

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    5. When you get paid to fly even if empty they couldn't care less. Won't be surprised if our government leases them an A380 for the next 5 year Nis contract.

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    6. But INI-LJU is 2pw and BEG-LJU is 17 pw.

      Huge difference

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    7. LJU-INI was actually full in summer, all flights had around 110 passengers. So flights were not empty!

      Delete
  21. However you slice it, the old setup with the old ex-yu mindset and the old practices makes airlines unsustainable. Would be better to start clean sheet everywhere.

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    Replies
    1. Would it really? Look at Lithuania and how many failed airlines they have there or in Bosnia or in Slovakia. Just because you have a clean sheet doesn't mean you will be successful.

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    2. That's true. The problem with aviation startups is that everyone sees big numbers and think it's easy to make profit, where in fact only couple of wrong moves can easily wipe tens of millions of revenue and thus profit.

      But what is more true that it's most of the time easier to start a new airline from scratch to change the mentality of the people. Especially when you have very low workforce fluctuation and employ people for 30+ years, combined with nepotism and everything that goes along.

      Delete

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