Ljubljana Jože Pučnik Airport believes the Slovenian government should try and offer subsidies to foreign carriers rather than set up a new national airline. Speaking to the Slovenian daily “Večer”, Ljubljana Airport’s General Manager, Zmago Skobir, said, “The relevant ministry told us they are studying the possibility of setting up a national carrier, but officially nothing more than that. Having a reputable carrier, which has various agreements in place, compared to a new airline starting from scratch, makes a huge difference in financial resources. My opinion is that we should try to work on what we have and nurture it”. The airport has submitted an incentive plan to the Ministry for Infrastructure, which is in review.
Croatia Airlines has submitted a plan to the ministry to base aircraft in the Slovenian capital and introduce scheduled services, while talks have also taken place with the Ljubljana-based cargo operator Solinair over the potential launch of subsidised passenger flights or the creation of a new national carrier. “Airport costs account for 4% - 8% of flight expenditure and it is not a decisive factor in establishing a service, regardless of the discounts and charges. If there is no product or demand for the destination and if there is nothing to do in Slovenia, people will not visit, even if we waive all fees and charges. As a result, the planes will be empty, and the carrier will amass losses on the route. Guests come because Slovenia is economically prosperous and attractive for tourists, regardless of whether airport costs are low”, Mr Skobir explains.
Some fifty workers and trade unionists gathered in front of Ljubljana Airport last Thursday to protest against the planned layoff of a quarter of operator Fraport Slovenia’s workforce. The company’s management was again called to take advantage of state aid and wait until the end of the year before taking such drastic measures, maintaining that the situation in the aviation industry will become clearer as time passes. However, Mr Skobir noted redundancies would begin this month as the company can no longer wait. “If we were to strictly look at the traffic forecast for this year, we would have to lay off significantly more people than we plan. We will try to be as socially minded as possible, but it will not work without layoffs. We are currently living off money we accumulated in recent years due to good business. This money, a good 25 million euros, will be spent by the end of the year, including on investments, and we will still have to borrow. That being said, next year, even with an optimistic outlook, we will be far from the numbers we were achieving before the pandemic. This year, we expect to handle between 400.000 and 500.000 passengers.
Must say I agree with Skobir. It would cheaper and more effective to give airlines subsidies than set up a new airline.
ReplyDeleteor create something like airbaltic with OU ... also solves the alliance problem
DeleteI hope this finally means we could see more flights from easyjet and Wizz and maybe even Ryanair comes.
ReplyDeletei wouldn't say airport costs don't play a role in airlined deciding where they are going to fly
ReplyDeleteTrying to start a new airline in the middle of a pandemic where things remain shaky and will for some time, doesn't seem like a wise thing to do, no matter whose money it is. Incentives are a better way to try to rebuild traffic until the situation stabilises
ReplyDelete+1
Deleteincentives don't seem to be really effective though - even in 'normal' times
Deleteif they decide to set up a national airline they might have well renationalized Adria.
ReplyDeleteI'm not sure that would be the cheaper option worth JP's debt.
Delete100m EUR just to clear the debt. And you're still stuck with the same old Adria - expensive Airbus leases, employees who still think it's 1980s, same business model that hasn't worked for the last 40 years, etc.
DeleteMuch easier to set up a new airline.
Finally some reason!
ReplyDeleteLet's wait and see if the government has any.
DeleteHopefully they stimulate some new arrivals.
ReplyDeleteThe best thing would be for an LCC to open a base in LJU. Even if you paid them. It would secure strong passenger growth and better connectivity.
ReplyDeleteIt would pay off more than a new national airline.
DeleteLJU airport fees are quite high and the market is relatively small and in close proximity to more affordable airports. So it is not surprising why a lot of LCCs are avoiding LJU.
DeleteHope it works out. Handling between 400k and 500k passengers is really depressing :(
ReplyDeleteWithout a hub airline operating at LJU numbers will never reach pre Adria levels again, pandemic or no pandemic.
Delete+1
Deleteso, instead having a national infrastructure, we should be paying somebody else to do that? And such people were usually screaming about not giving a dime more to Adria! It is same as local bus companies! They were formed in socialist times as public service, then they were forced into privatization, big companies bought them and now THEY are being subsidized to do exactly the same thing as in socialist times! So private company (Fraport) wants state to subsidize their busines! I would like to see that in Germany! No, this can happen only in banana states....
ReplyDelete+ 1000
DeleteSkobir is completely right. Setting up a new airline from scratch is extremely difficult. It's not just about start up costs but also about agreements, slots and so on. A very complicated and expensive process.
ReplyDeleteI would prefer a new national carrier where locals can get employed and where the airline can serve the national interest.
ReplyDeleteIf a foreign airline sets up a base, like some LCC, locals can also get employed there.
Delete"where locals can get employed"
DeleteIn EU, you are not allowed to discriminate based on nationality when it comes to employment.
"where the airline can serve the national interest"
What is the national interest? Flying people from Pristina to Frankfurt? Flying wet lease for Lufthansa?
The national interest part, I agree. The locals employed part, I disagree, simply because employer can set employment conditions, which are, for example excellent knowledge of Slovenian language, or maximum 30 years of age, or female. So, if one is EU citizen, but does not speak Slovenian, or is 38, or male, will not be selected and employed, and it is not discrimination based on nationality, or age, or gender, but failure to fulfill conditions and criteria set for the job
DeleteSimply subsidize 5 or 10 destinations of interest and you're set!
ReplyDeleteI will never understand this fetish of having a 'national airline'. Especially for a country like Slovenia.
Well I think we see what happens when your national airline fails. Few destinations and few frequencies which impacts the tourism, hotel and conference industry. At least that was the case when Adria went bust.
DeleteHence the need for subsidies for those critical routes and destinations. It will always be cheaper than keeping an entire airline alive.
DeleteAll Skobir cares about is his job. If the government sets up a new national carrier, Fraport will be more or less forced to give some sort of incentive to the new airline (as was the case with Adria). That means less money for Fraport, i.e. Skobir didn't do his homework.
ReplyDeleteWith government subsidies, Fraport gets all the benefit with no risk.
+1000
DeleteIt can sound stupid , but this is ideal time to set up a new airline under really cheap aircraft deals.
ReplyDeleteI think that Slovenia realizes now , how big and huge impact JP had on their countries economy, and after it has gone for almost a year now.
I don't vote for giving money to any other airline and bring them.
Importance for many economy areas are huge , and now but its late they see that.
Anyway we will see what will happen and who will survive.
My point of view, this has been set up for upcoming interest of Croatia Airlines to start the flights out of LJU.
+1
DeleteI really hope a solution will be found where Ljubljana can grow but locals can get a better variety of destinations and frequencies.
ReplyDeleteGood luck.
DeleteThe more time passes the less of a possibility there is to establish a flag carrier.
ReplyDeleteIt's a very expensive idea with uncertain return.
DeleteThis will not work.
ReplyDeleteWhat?
DeleteI hope the government realizes a new national airline is a waste of money and a pointless idea.
ReplyDeleteExactly. No need to burn taxpayers money again.
Deleteif there is no need to burn taxpayers money in aviation, then they should not burn it on other projects with uncertain outcome either
DeleteI honestly don't know why they are rushing with this. The market is not ready for more flights. Even ZAG that's three times the size of LJU only welcomed 44.000 passengers in June. LJU was probably around 15.000. Not enough for some megalomania. They need to wait a bit more.
ReplyDeleteThey can't because they're burning cash like hell (poor assessment of LJU project overall). If they cannot find a way to compensate their losses from the Slovenian government, Fraport may dump the project within a year. No time to wait for Skobir, he has to try to lobby in every channel.
DeleteDoes the Slovenian public support the creation of a new national airline?
ReplyDeleteMostly no.
DeleteOpinion is quite divided.
DeleteThey should just spend the money to subsidise any missing routes.
ReplyDeleteWhy doesn't Slovenia just do what Macedonia did. Invest 2 million per year into Wizz Air to open a base and launch routes. It would be much more beneficial for the public.
ReplyDeleteMacedonia has a market for LCC, Slovenia unfortunately does not have that privilege. Macedonian and Kosovo diaspora is very strong (PRN is less than 1 hour away) and they can easily fulfill LCC. So forget about LCC base in LJU, it simply won't happen.
DeleteWhatever they do it will be loss making, at least for the first couple of years.
ReplyDeleteToo little too late. The government or employees should have thought of this a month before Adria went bankrupt.
ReplyDeleteAdria's bankruptcy didn't catch anyone by surprise and everyone knew they would go bust. Why didn't the government act in time to secure Slovenia's connectivity?
ReplyDeleteAct in what way?
DeleteAnd people said Slovenia was better off without Adria...
ReplyDeleteThis is the reality.
DeleteIt is.
DeleteIt is interesting that the airport isn't thrilled about a new airline.
ReplyDeleteWhy would they be? They would just have to credit another airline after Adria.
DeleteThere still hasn't been any response from LCCs at Adria going bankrupt and we are 10 months in. So it must be airport costs regardless of what Skobir says,
ReplyDeleteI was expecting more from easyjet to be honest.
DeleteI agree. LJU needs a greater LCC presence.
DeleteSkobir is right. It's not about airport costs. It's about the fact there is simply no market for an LCC to fill up an A320 or B737 with a LF of 95%-100% daily to whatever destination.
Delete@10.25
DeleteApparently, Easyjet came to Ljubljana as soon as Adria collapsed, because they wanted to open a base in Ljubljana, but Fraport gave them some sort of an ultimatum that they could open it but under certain conditions.
if that's true, what a missed opportunity for LJU.
DeleteThis goes to show that national carriers do have an important role, despite what many think here.
ReplyDeleteEven with Adria, Ljubljana was still missing many major European cities. So this is not good for them.
DeleteNow it is missing even more.
DeleteRealistically speaking, what other airlines could we see come to LJU with some incentives?
ReplyDeleteThis really was their own fault to begin with. The writing had been on the wall for many years and the management refused to diversify.
ReplyDeleteLJU will recover in some years but this was completely avoidable.
How exactly will LJU recover? Now with the virus the setback is even greater and recovery will be even longer.
DeleteThings could change quickly if new national airline is set up.
Deleteand management 'reorganized'
DeleteIn the short term it won't be easy, that's for sure.
ReplyDeletereally don't understand Skobir. Is Fraport gonna pay for new national carrier? NO! Who would gain the most in case Slovenia establish national carrier? Fraport and Slovenia as itself. So any smart CEO would go for it.
DeleteThey probably don't want to end up again with another 5m in debt when it goes bust.
Deleteand they still had 8 mio profit even without that 5 mio. it's more than clear that without national carrier they can not do business as they used to do..even without Covid19 situation would not be much better.
DeleteCash flow does not equal revenue.
DeleteYou can have billions in revenue and profit, but if your invoices don't get paid, your cash flow will be negative and you'll go bust sooner rather than later.
if your invoices don't get paid, you don't have profit at end of year. So how is current situation better than before? And don't forget, JP was not owned by the state in last few years, so don't equal national carrier and 4k private company.
DeleteI recommend a course in accounting...
DeleteI buy a product for 800 EUR (my expense, and I have paid for it in cash) and I sell it to you for 1000 EUR (revenue), but you don't pay me, i.e. you are in debt to me for 1000 EUR.
I have made 200 EUR profit, but have 800 EUR negative cash flow. Which is fine in a very short term, but sooner or later I will go bust despite making thousands of EUR in profit, because I won't be able to pay any bills.
Revenue, expenses, profit and loss are separate from actual cash flow in accounting.
Maybe now would be a good time for Mr. Skobir to get along with Ryanair..
ReplyDeleteWeather the storm LJU and don't bite the bullet about new national airline.
ReplyDeleteFocus on LCC. The government officials talking about setting up new Slovenian airline are the same who buried Adria.
DeleteSlovenia is to small for LCC. Do you think they will fly to FRA twice per day with A320? Only solution for Slovenia is to have national carrier but with competent managers behind the wheel.
DeleteSlovenian market is too small for both LCC and national carrier to operate profitably.
DeleteOh but you forget the sons, daughters, nephews and nieces. They would operate profitably.
DeleteWell the new national airline fanboys can organize themselves and make a IPO and see how many suckers are there willing to throw away their money.
ReplyDeleteIn the same way we could discuss about every business in our country. I didn't wear any mask so why did we spend 200 mio for medical equipment? You could find people who does not use trains so why should Slovenia spend money on train infrastructure?
Deletewow nice analogy with masks :D
Deleteregarding trains ... Slovenia has been throwing money into train infrastructure for years. It's gotten really expensive and public doesn't seem to be opinionated on the matter at all ... but when it comes to aviation 'there's no taxpayer money for that' blah blah blah. Fair distribution of taxpayer money, fair attention, fair modernization.
well, railway sector operates on totally different legal and economical grounds. for starters, the infrastructure as in the railways themselves are government owned basically everywhere except UK and the usage thereof is charged to rail operators and the tarrifs cannot be individually negotiated. bot freight and passanger operators operate in liberalized framework. freight cannot get any state aid or be directly subsidized per EU rules. passenger transport can get aid and/or be subsidized similar to airline PSO. So the government pays the operator for routes, that are economically not justifiable by themselves.
Deletethe EU legal framework for airlines and airports is totally different.
so you cannot directly compare those things, because it quickly gets out of context.
LJU will bounce back.
ReplyDeleteImpossible without national carrier...
DeleteThey really should have just kept Adria, kicked out 4K and found a partner because that way they could have kept IATA code, codeshares, agreements etc. Now it's all from square one.
ReplyDeleteWere you willing to provide the 100m EUR to repay all the debts and some capital for a fresh start?
DeleteA chance for Wizzair to base aircraft(s) at LJU, like at SKP?
ReplyDeleteIt is not just about the airline. The 100m EUR is missing. For Slovenia, it is a lot of money, regardless of the fact that it is not a poor country.
ReplyDeleteSize of the country is not necessarily connected to the airline future. Look at Luxembourg and Luxair and Cargolux. What Adria was missing was professional agile management and the proper business plan. Pitty about the name. It is the only airline name in the whole Ex-YU which remained neutral. What would happen to the name Adria, JP, ADR etc? All wasted?
Regards,
Eight
People beating the drum against a national carrier are pretty naive. Do you really think that Ryanair, Wizzair or any other LCC will be happy long term with whatever incentive they get during the first year? They play rough.
ReplyDeleteBesides, did anyone ever do a proper comparison in terms of a financial impact between subsidized routes and a new carrier?
yes, slo's bad bank (DUTB) did an analysis for adria 2.0 with 5 CRJ-900 (leased) and appropriate staffing. Estimated loss for first year 20 mio eur.
Deletemacedonia gave Wizz subsidy of average 8 eur per departing passenger. So for let's say 500k passengers, that's 4 million EUR. Divide 20 millions loss of adria 2.0 with 4 million and you get 5 years of subsidy for just one year of loss making adria 2.0.
Deletejust a quick example.
Just posted today: cost of setting up a new airline (4 to 5 aircraft) is roughly 5 million EUR, calculated by someone who actually has experience with aviation (Solinair). I trust them more than DUTB.
Deleteagain, the cost of setting up is not the the balance sheet result as stated above. setting up just means cost of leases for aircraft, hiring enough people and contracts with airports&governments.
Deleteand only then you start flying. costs of maintenance, fuel, landing & overflight fees, etc.
so the 5 million is only the basic cost of getting things in order for one to be able to commence operations.
@Anonymous 08:45:
DeleteSo you are saying that DUTB predicted the future and came up with the 20 million figure? In that case I must ask them for next week's winning lottery number.
Won't it be easier to apply the TIA model? I think it is one of the most successful ones in the Balkans.
ReplyDelete