Growing concern over Croatian PSO tender


The Croatian government is yet to begin tender procedures for awarding Public Service Obligation (PSO) flight contracts to airlines despite the existing four-year agreement with Croatia Airlines and Trade Air expiring in late March. PSOs make European funds available for unprofitable, primarily domestic, routes which are vital for the economic development of the region they serve. The call for tender for a renewed PSO contract period and the information notice, which must be published in the EU’s official journal, is six months before the projected start of any new concession. Croatian officials are warning that parts of the country could be “isolated” as no funds will be made available for the upkeep of domestic services.

Last year, the Croatian government held talks with the European Commission in an attempt to increase funding for PSO flight contracts in the country. “Getting by train to Slavonia takes four and a half hours in the best of cases, while by bus some five hours are needed. You will get faster from any destination in Europe to Zagreb then from Zagreb to Osijek. With the start of the 2020 summer season, Osijek will no longer have any domestic flights”, the member of parliament, Domagoj Hajduković, said yesterday. “With the start of the summer season, Osijek will have no domestic services and Trade Air has closed bookings past March 29. Even if the government begins tender procedures for a new PSO contract today, the flights would start no earlier than September”, he added. For its part, the Croatian government has not commented on the matter.

The current PSO contracts in Croatia cover the national carrier's routes from Zagreb to Dubrovnik, Split, Zadar, Pula and Brač, as well as from Dubrovnik and Split to Osijek. It also includes Trade Air's services from Osijek to Dubrovnik, Split, Pula, Zagreb and Rijeka, as well as from Rijeka to Dubrovnik and Split. The Croatian national carrier receives 11.4 million euros in annual compensation for the domestic services. The largest amount, 4.2 million euros per year, goes towards maintaining flights between Split and Zagreb, where the airline is remunerated some 22 euros per passenger carried, although the largest compensation per traveller is on the Zagreb – Pula - Zadar service, totalling 177 euros. The value of Trade Air's PSO contracts amount to 2.5 million euros per year. The largest share of the subsidies goes towards the upkeep of the Osijek - Zagreb service (1.3 million euros per year), where the airline is compensated approximately 599 euros per passenger.

Rijeka Airport has urged the Croatian government to do more to include the city in its PSO contracts. "We cannot be satisfied with the PSO concept because Rijeka Airport receives crumbles from these contracts. Pula and Zadar airports handle between 50.000 and 70.000 passengers solely as a result of the PSO routes", the Deputy of the Primorje - Gorski Kotar County, Marko Boras Mandić, said last year. Croatia Airlines carried 397.308 travellers on its domestic services during the first three quarters of last year, representing a decrease of 3.7% on the same period in 2018. The average cabin load factor on these routes stood at 69%, down 3.4 points.




Comments

  1. Anonymous09:02

    I here I was wondering what routes have been included in the new PSO tender and they have't even started!

    ReplyDelete
  2. Anonymous09:03

    For the last contract (2016-2020) the tender started on 1 November 2015!! What are they doing?

    ReplyDelete
  3. Anonymous09:04

    OSI could be particularly impacted by this. Actually the most.

    ReplyDelete
  4. Anonymous09:06

    Are PSO tenders open just for airlines from that particular country or can any EU airline apply?

    ReplyDelete
    Replies
    1. Anonymous09:09

      Anyone can apply. If only there was a tender to apply for.

      Delete
    2. Anonymous09:11

      I doubt Croatian government would select a foreign airline and give them money to fly domestic routes. No way.

      Delete
    3. Anonymous14:57

      Depends on exact conditions such as Wizz or ASL does: other aircrafts of airline must be based in a certain country or staff must speak a language... they could make sure only OU can apply if they wish to.

      Delete
  5. Anonymous09:09

    Can they extend the current PSO for a year?

    ReplyDelete
  6. Anonymous09:14

    This is happpening only because of the Ministry. Can't believe that even EU system is not pushing the Gouverment to do tenders like this one on time.

    OU will fly those PSO routes even without fundings, and the Gouverment will pay beck to them once when contract is signed, something like this happen before too. But I'm not sure about Trade Air.

    I remember tender for last PSO, The Gouverment even published details with description for every PSO route, 5-6 months before start of New PSO 5y period. Right now there is nothing. Horrible!! Someone should be responsible for this!

    ReplyDelete
    Replies
    1. Anonymous09:15

      +1

      Delete
    2. Anonymous09:27

      @Anon 9.14 do you know the reason why they haven't started the tender? I mean I don't get it. If they were negotiating last year for more funding, they were obviously aware that the contracts are expiring soon.

      Delete
    3. Anonymous09:46

      Yeah anon 09:27, I don't understand it too. Not sure what they are doing, just read Butkovic reply to this parlament guy and his answer is like this:
      "the Ministry is checking all decisions which are made from the Osijek Airport and if something is illegal, the Ministry will react. We don't espect pax decrease in Osijek airport. All airports in Croatia have double digit pax increase in last 2 years." so actually, no any word about PSO, just empty words, without any explanation. The fact is that Trade Air did not open reserv for any PSO route from APR20.

      Delete
    4. Anonymous09:57

      What a response from the minister... really concerning.

      Delete
    5. Anonymous10:00

      What does he mean that he doesn't expect passenger drop at OSI? Numbers have collapsed since Wizz Air left!

      Delete
    6. Anonymous12:39

      ^ It shows how much he is involved with his job.

      Delete
  7. Anonymous09:14

    I hope they do revise the PSO contracts because I think some route are unnecessary while others not included would be really beneficial.

    ReplyDelete
    Replies
    1. Anonymous09:31

      The new tender must be published and due to EU regulation they have to analyze every single route (those from current PSO and new ones).

      Delete
  8. Anonymous09:24

    Hopefully they work it out. These routes are important.

    ReplyDelete
  9. Anonymous09:26

    How is the PSO budget set. I mean does the EU take in the size of the country, population, GDP? Or is it negotiated directly with the government?

    ReplyDelete
    Replies
    1. Anonymous09:31

      I think it is negotiated directly with the government.

      Delete
    2. Anonymous10:08

      Negotiations with govt. but the metrics you listed are taken into consideration.

      Delete
  10. Anonymous09:27

    I'm also getting concerned about this PSO mess.

    ReplyDelete
  11. Anonymous09:28

    So, in case Trade Air gets involved can they manage both PSO flights and LJU charters at the same time? Clearly, those charters will make more money. Thoughts?

    ReplyDelete
    Replies
    1. Anonymous09:31

      I'm not so sure will they make more money. PSO means guaranteed at least 2.5 million EUR per year. They fly with a very small plane so I don't think the costs are big (it just depends on the lease contract they have for that plane and how expensive it is).

      Delete
    2. Anonymous09:34

      Trade Air can manage because PSOs are operated by wet-leased plane, not their own equipment. While they will use own equipment from Ljubljana. They will probably end wet lease in March because there will be no routes to fly, and when they eventually get a new PSO contract in the middle of summer it might be difficult to find an aircraft to lease.

      Delete
    3. Anonymous09:50

      Well, not really, since the Gouverment wants this small A/C and no one else in this world flies with it, so this type of A/C you cand lease almost anytime. There are people saying that caapacity will be increase in the new PSO period, to ATR42. That A/C is also not profitabile so this A/C can be found on the market for lease also without big problem. The only problem is that domestic routes will not be served for the peak of summer season.

      Delete
  12. Anonymous09:29

    No tickets are being sold from ZAG to BWK either on Croatia Airlines. I guess this is the reason?

    ReplyDelete
    Replies
    1. Anonymous09:33

      Interesting how in the past they would operate the flights and then they would get compensated. I guess now they can no longer afford it or they want to get out of PSO flying on certain routes?

      Delete
  13. Anonymous09:39

    Butkovic too busy to deal with this...

    ReplyDelete
  14. Anonymous09:48

    599 eur per one passenger?
    Break even, one passenger... Or with C150, half passenger...

    ReplyDelete
  15. Anonymous09:55

    What a disaster.

    ReplyDelete
  16. Anonymous09:58

    What if the money the money they would get over next 4 years for PSO was substituted in favor of giving OU the aid package? Can they do that?

    ReplyDelete
    Replies
    1. Anonymous10:01

      No, PSO is strictly for unprofitable flying on routes that are deemed of vital commercial interest.

      Delete
  17. Anonymous10:10

    If ZAG wasn't so greedy and OU so incompetent, there would be a healthy business environment so ZAG-DBV or any other domestic route could be operated by FR or W6.

    ReplyDelete
  18. Anonymous10:24

    PSO tender has to be started 6 months before routes start!!! Crazy.

    ReplyDelete
    Replies
    1. Anonymous10:34

      Fools in government.

      Delete
  19. Anonymous11:05

    This could have a very negative effect on domestic air travel and airport passenger performance. Shame on the government.

    ReplyDelete
    Replies
    1. Anonymous11:06

      These PSOs seem to be working out quite well for Trade Air since they have been able to add 3 planes to their fleet since they got their first PSO contracts. The lack of a new contract could have a negative impact on them too.

      Delete
  20. Anonymous11:07

    Zagreb-Split and Zagreb-Dubrovnik shouldn't be under PSO since Croatia Airlines is always full planes on these lines, even during the winter months. I think PSO for DBV and SPU is just an excuse to give some money to Croatia Airlines.

    ReplyDelete
    Replies
    1. Anonymous11:49

      +1

      Delete
    2. Anonymous12:38

      Plus OU gets some subsidies from Dubrovnik city authorities on these flights.

      Delete
  21. Anonymous11:10

    Why should the EU warn the government that they need to start PSO tender? In the eyes of the EU, Croatia no longer needs PSO money since the government could not be bothered to launch a tender.

    ReplyDelete
  22. Anonymous11:20

    the comparison of a flight duration from Europe to Zagreb and duration of travelling from Zagreb to Osijek is somewhat strange. comparing apples with bears. everything under 5 hours doesnt really need a flight imho but ok LH has also STR-MUC and MUC-NUE

    ReplyDelete
  23. Anonymous11:48

    This is not good

    ReplyDelete
  24. Anonymous12:06

    Which EU country get's the most from PSO funding?

    ReplyDelete
    Replies
    1. Anonymous12:27

      France

      Delete
    2. Anonymous12:30

      The highest subsidised route in the EU each year is

      Calvi - Paris Orly - €8.648.250 each year.

      The biggest PSO contract holder in EU is Air Corsica. It gets 40 million euros per year.

      Delete
    3. Anonymous12:37

      wow thanks

      Delete
  25. Anonymous12:34

    Good luck Croatia Airlines and Trade Air. With government like this you need it.

    ReplyDelete
  26. Anonymous15:27

    So basically this means all domestic services in Croatia will likely be terminated at the end of March?

    ReplyDelete
    Replies
    1. Anonymous19:13

      Like someone said, OU will probably keep flying and the government will pay them retroactively after the tender. As for Trade Air, they will probably stop flying.

      Delete
    2. Anonymous19:15

      ^ I'm not so sure about that. OU is not selling tickets on some domestic flights after MAR 30.

      Delete
  27. Anonymous19:16

    I just don't get what's the catch? Why haven't they started the tender??

    ReplyDelete
    Replies
    1. Anonymous20:33

      Who knows. My guess is that they are up to something.

      Delete
    2. Anonymous20:42

      What exactly? It makes no sense.

      Delete
  28. Anonymous20:34

    Start the tender ASAP.

    ReplyDelete
  29. Anonymous23:09

    It is still good that Croatia is doing a good job when it comes to sustain the domestic product. Domestic routes are extremely important for a country and contribute heavily to its economy.

    We have famous domestic routes such as:







    2018 2017
    1 Jeju Seoul-Gimpo 449 14,107,414 13,460,306
    2 Sapporo Tokyo-Haneda 835 9,698,639 8,726,502
    3 Sydney Melbourne 705 9,245,392 9,090,941
    4 Fukuoka Tokyo-Haneda 889 8,762,547 7,864,000
    5 Mumbai Delhi 1150 7,392,155 7,129,943
    6 Hanoi Ho Chi Minh City 1171 6,867,114
    7 Beijing Shanghai-Hongqiao

    ReplyDelete
  30. Kako bi napisao onaj naš anonimac:
    BRAVO HRVATSKA!

    ReplyDelete

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