Macedonian government mulls fresh LCC subsidies

The Macedonian government is likely to continue offering subsidies to low cost carriers as the current three-year agreement with Wizz Air is set to end in late 2022. At a recent cabinet meeting, the government discussed the possibility of launching a new tender next year. It would mark the fourth consecutive time the state has offered subsidies for the launch of new routes, with all three previous tenders won by Wizz Air, which was the only one to apply for the financial assistance. The current subsidy contract had to be halted last year after Wizz Air was unable to deliver on the agreement as a result of the coronavirus pandemic. However, the budget airline is set to expand operations from its Skopje base with the stationing of a fifth aircraft and the launch of three new routes from mid-December. Furthermore, it will add a new destination from Ohrid as well.

The operator of the country’s two international airports, TAV Macedonia, has endorsed the policy. “State subsidies for low cost airlines were one of the foundations of growth and prosperity on the Macedonian aviation market prior to Covid-19. As an airport operator, we have supported this model from the very beginning of its implementation, because we believe this is the right tool for emerging markets, such as the Macedonian one”, Metin Batak, the General Manager of TAV Macedonia, recently said. He added, “Government subsidies, along with our efforts to attract new airlines, have resulted in a fourfold increase in passenger traffic within ten years, from 2010 to 2020. New destinations that were launched in the past ten years created a completely new category of passengers, who previously did not even consider air transport as an alternative to land transport. Therefore, we will continue to support government subsidies for low cost flights and continue to invest our global knowledge and skills in order to attract new airlines and expand our network of destinations from Skopje and Ohrid airports”.

On the other hand, Pristina Airport and Austrian Airlines have previously complained about the policy. The Austrian carrier said the subsidies provided by the Macedonian government to stimulate low cost airlines to operate flights to the country were unfair and distorted competition. At the time, the carrier noted it was difficult to compete in such an environment and under such circumstances. Pristina Airport had requested for the European Commission to investigate state subsidies offered to low cost airlines operating out of Skopje. Pristina Airport's General Manager, Haldun Fırat Kokturk, previously said, "We, as an airport operator, can compete with another airport operator - competition is normal, it is good. But we cannot compete with a government”. In its 2020 progress report on North Macedonia, the European Commission noted, “The financial incentive scheme for Skopje and Ohrid airports that grants financial support to domestic and foreign airline companies needs to be revised to confirm that it complies with the EU State aid acquis and the SAA [Stabilisation and Association Agreement]”.