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.
This is just crazy. I don't know what the government is playing here.
ReplyDeleteI'm starting to think they tied Croatia Airlines' capital injection to PSO. Maybe they promised EU they wouldn't apply for PSO funding.
DeleteAnon 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.
DeleteBut 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.
DeleteI'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.
DeleteGreek government has already started tender for PSO routes which expire in October. And Croatian government hasn't\'t even started.
ReplyDeleteYes. For current PSO contract (March 2016-March 2020) Croatian government started tender in November 2015.
DeleteAnd here we are in March 2020 without any tender for next PSO funding. great.
DeleteIrresponsible.
ReplyDelete+1
DeleteTrue. Domestic routes are extremely important for a country and contribute heavily to its economy.
DeleteOSI could be particularly impacted by this.
ReplyDeleteI 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.
DeleteSo Osijek is left with seasonal Stuttgart route by Eurowings and seasonal Dubrovnik and Split by Croatia Airlines.
DeleteThat means there will be no flights during winter season from Osijek Airport now that Trade Air won't be flying anymore.
Delete^ That's correct. No flights in winter.
DeleteWell not necessarily. They could start the tender soon so it can be in effect by winter.
DeleteIf they started the tender this month, new PSO routes could start by mid September.
DeleteDoubt they will start PSO tender any time soon.
DeleteAnd Croatian airports were hoping how PSO funding would be increased an more routes introduced. So much for that...
ReplyDeleteBut why???? Why hasn't the government started PSO tender? It's not like the money would come from their pockets.
ReplyDeleteThey haven't started it because of pure ignorance. That's why.
DeleteI don't understand it too. Not sure what they are doing.
DeleteWhat's more worrying that no one seems to care. Where are the airport to put preassure on the government?
ReplyDeleteBecause the people running the airports were appointed by the government and party. They don't want to complain and seem ungrateful.
DeleteSomeone should be responsible for this.
ReplyDeleteSomeone should be held responsible for a lot of things in Croatia.
DeleteI hope they do revise the PSO contracts because I think some route are unnecessary while others not included would be really beneficial.
ReplyDeleteI agree. ZAG-DBV and ZAG-SPU is really unnecessary. I'm sure these can be profit making.
DeleteZagreb - 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.
DeleteThe planes might be full but can they make a profit?
DeleteProbably not.
DeleteI think PSO for DBV and SPU is just an excuse to give some money to Croatia Airlines.
DeletePlus OU gets some subsidies from local city authorities on these flights.
DeleteHopefully they work it out. These routes are important.
ReplyDeleteHad the CEO of the airports and Croatia Airlines put pressure on the government maybe it would have been a different story.
ReplyDeleteAre 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.
DeleteIdiots
ReplyDeletethe government I mean.
DeleteHow is the PSO budget set for each country?
ReplyDeleteIt is negotiated between the government and the EU but certain things are taken into account, like population size, GDP etc.
DeleteI see. Thank you.
DeleteWow 600 euros per pax between Zagreb and Osijek!
ReplyDeleteRoute becomes profitable with one passenger haha.
DeleteIt usually has one passenger. That's why the compensation is high.
DeleteThis has really become a mess.
ReplyDeleteI 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.
ReplyDeleteThey can always sign a new wet-lease contract with someone.
DeleteThere were rumors that that the capacity on PSO routes would be increased so Trade Air would use ATR.
DeleteSo which plane does Trade Air use currently for these routes?
DeleteL-410 Turbolet
Delete19 seat capacity.
DeleteI wasn't clear. I know which plane type they use but I can't find the registration.
DeleteReg: OK-LAZ
DeleteAt the ripe age of 29.
DeleteAnyone know the real reason why the government hasn't started the tender?
ReplyDeleteNo one knows. It's inexplicable.
DeleteButkovic too busy to deal with this...
DeleteFools in government.
DeleteIs OU selling tickets for the domestic PSO routes?
ReplyDelete"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."
DeleteThey 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.
DeleteWhat a disaster.
ReplyDeleteIn addition to the coronavirus, this could have a very negative effect on domestic air travel and airport passenger performance. Shame on the government.
ReplyDeleteAgree
DeleteThese 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.
ReplyDeleteCan non-Croatian registered airlines participate in this tender?
ReplyDeleteI believe any EU-registered airline can apply for PSO flights inside the EU. In essence they are domestic airlines.
DeleteI doubt Croatian government would select a foreign airline and give them money to fly domestic routes. No way.
DeleteSome PSO rules:
DeleteTransparency-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.
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?
DeleteIf 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.
ReplyDeleteBravo Hrvatska! LOL
ReplyDeleteWe 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.
ReplyDeleteMe too. No other reason makes sense.
DeleteThey are up to something, that's for sure.
DeleteThis is not good
ReplyDeleteGood luck Croatia Airlines and Trade Air.
ReplyDeleteSo basically this means all domestic services in Croatia will likely be terminated at the end of March?
ReplyDeleteRead the article. OU will keep flying and the government will pay them retroactively after the tender. As for Trade Air, they will stop flying.
DeleteHow 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.
DeleteHeheh and then later on we hear that PSO in Croatia is not made for OU.
DeleteStart the tender ASAP.
ReplyDeleteWhat a waste of resources to fund Osijek-Zagreb route. There is a perfectly fine highway connecting both cities.
ReplyDeleteEspecially since the distance is short.
Delete11 million for PSO? Quite a bit.
ReplyDeleteOne of the lower amounts in Europe for PSO.
DeleteI hope they do revise the PSO contracts because I think some route are unnecessary while others not included would be really beneficial.
ReplyDeleteSo 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?
ReplyDeleteStrange.
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.
DeleteDubrovnik and Zagreb are poor?
DeleteAs 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?
DeleteOr they are all poor?
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?
ReplyDeleteI'm also quite interested in loads if anyone knows...
Delete"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."
ReplyDeleteHow on Earth do you know that you will be chosen for PSO?
Not fixed, right?
It happened in the past too...
DeleteAnd 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?
DeleteHypocrisy.
They having a "feeling" that they might win public bid if they try really hard :) :)
DeleteLove that Trade Air livery
ReplyDelete+1
Delete