Croatian domestic flights face funding shortfall


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 just two weeks. 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. 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.

Croatia Airlines plans to maintain all of its domestic routes this summer, despite a lack of PSO funding, with the understanding the cost will be retroactively covered. However, Trade Air, which wetleases a turboprop aircraft for its inter-Croatian routes, has no tickets on sale for any of its existing scheduled services, which link six cities in the country, past March 29. Despite warnings from local politicians that certain airports, most notably Osijek, will suffer from the government’s lack of initiative, the Minister for Sea, Transport and Infrastructure, Oleg Butković, has refused to directly respond to the claims, noting that politicians from the country’s largest opposition party are stoking unnecessary fear.

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.




Comments

  1. Anonymous09:03

    This is just crazy. I don't know what the government is playing here.

    ReplyDelete
    Replies
    1. Anonymous09:09

      I'm starting to think they tied Croatia Airlines' capital injection to PSO. Maybe they promised EU they wouldn't apply for PSO funding.

      Delete
    2. Anonymous09:12

      Anon 09.09 that's not an option for sure. There is just luck of professionalism in the relevant Ministry and there is no push from medias about this topic so probably it will stay like this for some time...idiots.

      Delete
    3. Anonymous09:24

      But if they were negotiating last year for more funding, they were obviously aware that the contracts are expiring soon. So all of this makes no sense.

      Delete
    4. I'd say there is other EU carriers putting in a bid which they are hoping will eventually lose interest so they can give it to whoever they want.

      Delete
  2. Anonymous09:05

    Greek government has already started tender for PSO routes which expire in October. And Croatian government hasn't\'t even started.

    ReplyDelete
    Replies
    1. Anonymous09:07

      Yes. For current PSO contract (March 2016-March 2020) Croatian government started tender in November 2015.

      Delete
    2. Anonymous09:57

      And here we are in March 2020 without any tender for next PSO funding. great.

      Delete
  3. Anonymous09:08

    Irresponsible.

    ReplyDelete
    Replies
    1. Anonymous09:18

      +1

      Delete
    2. Anonymous11:07

      True. Domestic routes are extremely important for a country and contribute heavily to its economy.

      Delete
  4. Anonymous09:09

    OSI could be particularly impacted by this.

    ReplyDelete
    Replies
    1. Anonymous09:11

      I think the best solution would be to shut OSI down, there is no point in keeping it after so many airlines failed there. Also eastern Croatia is empty, everyone moved out, it's sad but it's the reality. You drive through villages and there are only old people left.

      Delete
    2. Anonymous09:15

      So Osijek is left with seasonal Stuttgart route by Eurowings and seasonal Dubrovnik and Split by Croatia Airlines.

      Delete
    3. Anonymous09:15

      That means there will be no flights during winter season from Osijek Airport now that Trade Air won't be flying anymore.

      Delete
    4. Anonymous09:18

      ^ That's correct. No flights in winter.

      Delete
    5. Anonymous09:18

      Well not necessarily. They could start the tender soon so it can be in effect by winter.

      Delete
    6. Anonymous09:32

      If they started the tender this month, new PSO routes could start by mid September.

      Delete
    7. Anonymous09:57

      Doubt they will start PSO tender any time soon.

      Delete
  5. Anonymous09:17

    And Croatian airports were hoping how PSO funding would be increased an more routes introduced. So much for that...

    ReplyDelete
  6. Anonymous09:20

    But why???? Why hasn't the government started PSO tender? It's not like the money would come from their pockets.

    ReplyDelete
    Replies
    1. Anonymous09:22

      They haven't started it because of pure ignorance. That's why.

      Delete
    2. Anonymous09:27

      I don't understand it too. Not sure what they are doing.

      Delete
  7. Anonymous09:22

    What's more worrying that no one seems to care. Where are the airport to put preassure on the government?

    ReplyDelete
    Replies
    1. Anonymous09:23

      Because the people running the airports were appointed by the government and party. They don't want to complain and seem ungrateful.

      Delete
  8. Anonymous09:23

    Someone should be responsible for this.

    ReplyDelete
    Replies
    1. Someone should be held responsible for a lot of things in Croatia.

      Delete
  9. Anonymous09:27

    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

      I agree. ZAG-DBV and ZAG-SPU is really unnecessary. I'm sure these can be profit making.

      Delete
    2. Anonymous09:58

      Zagreb - Split and Zagreb - Dubrovnik shouldn't be under PSO contract since Croatia Airlines is always full planes on these lines, even during the winter months.

      Delete
    3. Anonymous10:04

      The planes might be full but can they make a profit?

      Delete
    4. Anonymous10:05

      Probably not.

      Delete
    5. Anonymous10:23

      I think PSO for DBV and SPU is just an excuse to give some money to Croatia Airlines.

      Delete
    6. Anonymous10:24

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

      Delete
  10. Anonymous09:28

    Hopefully they work it out. These routes are important.

    ReplyDelete
  11. Anonymous09:29

    Had the CEO of the airports and Croatia Airlines put pressure on the government maybe it would have been a different story.

    ReplyDelete
    Replies
    1. Anonymous09:31

      Are you serious? You think OU is in a position to pressure the government? They just got 33 million from that same government. They are counting their lucky starts. Certainly won't complain.

      Delete
  12. Anonymous09:33

    Idiots

    ReplyDelete
    Replies
    1. Anonymous09:33

      the government I mean.

      Delete
  13. Anonymous09:35

    How is the PSO budget set for each country?

    ReplyDelete
    Replies
    1. Anonymous09:38

      It is negotiated between the government and the EU but certain things are taken into account, like population size, GDP etc.

      Delete
    2. Anonymous09:59

      I see. Thank you.

      Delete
  14. Anonymous09:38

    Wow 600 euros per pax between Zagreb and Osijek!

    ReplyDelete
    Replies
    1. Anonymous09:51

      Route becomes profitable with one passenger haha.

      Delete
    2. Anonymous10:01

      It usually has one passenger. That's why the compensation is high.

      Delete
  15. Anonymous09:41

    This has really become a mess.

    ReplyDelete
  16. Anonymous09:43

    I don't think there is even a chance for Trade Air to participate any PSO anymore. Their wetlease contract for the turbolet plan they use is ending this month. All other aircraft in their fleet will be in use over summer for charters. Especially since one will be based in LJU.

    ReplyDelete
    Replies
    1. Anonymous09:45

      They can always sign a new wet-lease contract with someone.

      Delete
    2. Anonymous09:46

      There were rumors that that the capacity on PSO routes would be increased so Trade Air would use ATR.

      Delete
    3. Anonymous10:01

      So which plane does Trade Air use currently for these routes?

      Delete
    4. Anonymous10:04

      L-410 Turbolet

      Delete
    5. Anonymous10:06

      19 seat capacity.

      Delete
    6. Anonymous10:06

      I wasn't clear. I know which plane type they use but I can't find the registration.

      Delete
    7. Anonymous10:11

      Reg: OK-LAZ

      Delete
    8. Anonymous10:16

      At the ripe age of 29.

      Delete
  17. Anonymous09:47

    Anyone know the real reason why the government hasn't started the tender?

    ReplyDelete
    Replies
    1. Anonymous09:49

      No one knows. It's inexplicable.

      Delete
    2. Anonymous09:50

      Butkovic too busy to deal with this...

      Delete
    3. Anonymous09:53

      Fools in government.

      Delete
  18. Anonymous09:50

    Is OU selling tickets for the domestic PSO routes?

    ReplyDelete
    Replies
    1. Anonymous09:52

      Yes

      Delete
    2. Anonymous09:52

      "Croatia Airlines plans to maintain all of its domestic routes this summer, despite a lack of PSO funding, with the understanding the cost will be retroactively covered."

      Delete
    3. Anonymous09:55

      They are but original plan was for them to increase frequencies. For example Zagreb-Brac was expected to go up to 4 weekly. Now it stays the same as previous years.

      Delete
  19. Anonymous09:51

    What a disaster.

    ReplyDelete
  20. Anonymous09:54

    In addition to the coronavirus, this could have a very negative effect on domestic air travel and airport passenger performance. Shame on the government.

    ReplyDelete
  21. Anonymous09:54

    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.

    ReplyDelete
  22. Anonymous09:55

    Can non-Croatian registered airlines participate in this tender?

    ReplyDelete
    Replies
    1. Anonymous10:00

      I believe any EU-registered airline can apply for PSO flights inside the EU. In essence they are domestic airlines.

      Delete
    2. Anonymous11:08

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

      Delete
    3. Anonymous11:43

      Some PSO rules:

      Transparency-1: All awards, modifications and any
      abolition of PSO routes, as well as the corresponding
      calls for tenders, must be announced in the Official
      Journal of the European Union (OJ EU).

      Transparency-2: Air fares and conditions can be
      quoted to users (in most cases maximum fares
      are imposed)

      Market failure: Market forces alone have failed to
      create incentives for air carriers to provide scheduled
      air services on the route.

      No obstacle to market functioning: A PSO should
      not limit the possibility for air carriers to provide
      a higher level of service in terms of capacity and
      frequency than minimum obligations required
      under the PSO award. National authorities should
      not interfere with the way the market fulfils these
      obligations. In any case where more than one carrier
      is interested to operate a route as an open PSO,
      national authorities should not distribute frequencies
      or capacities between those air carriers concerned.

      Necessity: Routes are considered vital for the
      economic and social development of the region
      served (routes to an airport serving a peripheral or
      development region or thin routes to any airport).

      Proportionality & non-discrimination: PSOs are a
      useful tool to enhance the contribution of aviation to
      the overall competitiveness of the regions concerned.
      They must be imposed in a non-discriminatory and
      proportionate manner (e.g. no restrictions based on
      passenger’s nationality or on the air carrier’s state of
      origin, no selective promotion of specific air carriers/
      airports).

      No alternative: Inadequacy of alternative transport
      modes connecting the route(s) under PSO.

      EU law: Full compliance with EU Regulation 1008/2008
      (compliance with national law only is insufficient).

      Route-by-route basis: Necessity of PSO award
      must be assessed for each route separately (no
      network routes). A PSO cannot link two cities or
      two regions, routes must be defined from airport to
      airport. States may not make the award to one route

      Geographic scope: A PSO route between an EU
      airport and a non-EU (except EEA members) country
      is not allowed. Intra-EU routes (not exclusively
      domestic) are however allowed.

      Delete
    4. Judging by the last paragraph, not many domestic routs would be eligible for PSO despite maybe some routes from Osijek to the coast. Maybe they are being investigated by the EU?

      Delete
  23. Anonymous10:00

    If even during the height of the coronavirus crisis the Italian government managed to begin PSO tendering the other day, then the Croatian government really has no excuse.

    ReplyDelete
  24. Anonymous10:34

    We all don't know the real reason behind this but yes I do have a feeling it somehow has to do with the state loan just given to OU recently.

    ReplyDelete
    Replies
    1. Anonymous10:36

      Me too. No other reason makes sense.

      Delete
    2. Anonymous10:56

      They are up to something, that's for sure.

      Delete
  25. Anonymous10:35

    This is not good

    ReplyDelete
  26. Anonymous10:41

    Good luck Croatia Airlines and Trade Air.

    ReplyDelete
  27. Anonymous10:52

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

    ReplyDelete
    Replies
    1. Anonymous10:55

      Read the article. OU will keep flying and the government will pay them retroactively after the tender. As for Trade Air, they will stop flying.

      Delete
    2. Prepelica11:46

      How 1. they know 100% that they will win the tender, 2. if the financial terms within the tender will be sufficient to make those routes profitable (if they are not profitable without PSO)? It's unbeliveable level of amateurism and corruption. But hey, this is Balkan after all.

      Delete
    3. Anonymous13:06

      Heheh and then later on we hear that PSO in Croatia is not made for OU.

      Delete
  28. Anonymous11:03

    Start the tender ASAP.

    ReplyDelete
  29. Anonymous11:10

    What a waste of resources to fund Osijek-Zagreb route. There is a perfectly fine highway connecting both cities.

    ReplyDelete
    Replies
    1. Anonymous11:24

      Especially since the distance is short.

      Delete
  30. Anonymous11:23

    11 million for PSO? Quite a bit.

    ReplyDelete
    Replies
    1. Anonymous13:04

      One of the lower amounts in Europe for PSO.

      Delete
  31. Anonymous11:37

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

    ReplyDelete
  32. Anonymous11:41

    So we should understand here that AA can fly during the summer from USA to DBV and to be profitable but OU can't fly during the summer DBV-ZAG without PSO?

    Strange.

    ReplyDelete
    Replies
    1. Anonymous11:54

      PSO in Croatia is used exactly for the purpose it is intended for. It connects the poorest part of the country with its rest to enable it to grow, because there is no way for carriers to make money there.

      Delete
    2. Anonymous12:02

      Dubrovnik and Zagreb are poor?

      Delete
    3. Anonymous13:05

      As PSO is intended for all domestic routes in Croatia does it mean that all the parts of Croatia are poor and only Zagreb is rich or that Zagreb is poor and all the other parts are rich?

      Or they are all poor?

      Delete
  33. Anonymous12:19

    What are generally the loads on these domestic Croatian flights? If they are marked as PSO it's probably not great outside of peak summer?

    ReplyDelete
    Replies
    1. Anonymous14:45

      I'm also quite interested in loads if anyone knows...

      Delete
  34. Anonymous14:41

    "Croatia Airlines plans to maintain all of its domestic routes this summer, despite a lack of PSO funding, with the understanding the cost will be retroactively covered."

    How on Earth do you know that you will be chosen for PSO?

    Not fixed, right?

    ReplyDelete
    Replies
    1. Anonymous14:45

      It happened in the past too...

      Delete
    2. Anonymous14:57

      And then we have "experts" asking how is it possible PSO in Serbia to be made on the way only one air company could fullfil its conditions?

      Hypocrisy.

      Delete
    3. Anonymous15:47

      They having a "feeling" that they might win public bid if they try really hard :) :)

      Delete
  35. Anonymous15:13

    Love that Trade Air livery

    ReplyDelete

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