Croatia and Montenegro have both delayed funding for Public Service Obligation (PSO) flights, impacting airlines operating under the scheme, as well as airports which depend on them. PSOs allow for the allocation of state or European funding to support unprofitable routes deemed essential for the economic development of the regions they serve.
The Croatian government has yet to launch tender procedures for the renewal of domestic PSO flight contracts, despite the current four-year agreement with Croatia Airlines and Trade Air having expired in March. Under European Union rules, a call for tender for a new PSO period, together with the required information notice published in the Official Journal of the European Union, should be issued at least six months before the intended start date of the new concession. As a result, Trade Air has discontinued its domestic services and terminated the wet-lease of a Saab 340 aircraft that operated these flights. Croatia Airlines, however, has continued services and is expected to be retroactively compensated for maintaining domestic flights.
The delay in funding for domestic flight operations in Croatia has impacted airports such as Osijek and Rijeka, which rely heavily on PSO services. The expired four-year PSO contract was valued at a total of 78.7 million euros. “The Ministry of the Sea, Transport and Infrastructure is preparing a new programme and procedure for the continuation of PSO services, with the timeline tied to alignment with European Union state aid rules. The Ministry emphasised this does not represent an abandonment of the programme, but rather a temporary suspension of some flights until the necessary procedure is completed”, Osijek Airport said in a statement.
Montenegro, which had been due to introduce PSO funding on six international routes from June 1, including services from Podgorica to Brussels, Frankfurt, Paris Charles de Gaulle, Amsterdam, Zagreb and Bari, will miss its deadline. The government has yet to begin tender procedures to award the contract, which is estimated to be worth 5.5 million euros per year. The Montenegrin Ministry of Transport, said, “In line with best practice and market testing principles, before introducing public support measures, the Ministry is conducting a market assessment procedure to determine whether there is interest among airlines to operate the routes in question on a commercial basis, without the need for state financial support. If this process confirms a lack of market interest in maintaining regular and sustainable services on these routes, the Ministry will proceed with a public tender for the establishment of public service obligation routes, in full accordance with the principles of transparency, competitiveness and non-discrimination”.
The PSO measures are seen as a means of supporting Air Montenegro, which is facing significant competition this year from Wizz Air, following the airline’s opening of a new base in Podgorica in March and the phased launch of seventeen new routes. “The Ministry of Transport is making every effort to ensure the entire process is carried out efficiently and within optimal timeframes, bearing in mind the importance of the timely establishment of public service obligation routes. In this regard, the goal is to ensure legal certainty, a high-quality selection of operators and the sustainability of the services introduced, which requires careful management of every step in the process”, the Ministry concluded.
Could be worse... They could always say that they are going to do PSO and they end up releasing the 10th same tender
ReplyDeleteWell I think they simply don't have the money. Unlike that one poster who claims otherwise, the EU is in deep financial crisis.
ReplyDeleteGermany just announced their 2027 budget with major cuts to subsidies.
I see it more as EU pressuring Croatia about this support. Remember the government just gave financial aid to OU and another tranche is coming next year. My guess is the EU said enough is enough.
DeleteMaybe the governments are quietly trying to reduce subsidy exposure without admitting it publicly. Delays can sometimes be policy by other means.
Delete1. The EU is not in a deep financial crisis. It's not even in a small financial crisis - GDP is not falling.
Delete2. PSO funding comes from the Croatian state, not the EU.
3. Croatia is awash with cash and is funding all sorts of stupid things, so lack of money is not the reason.
"Croatia is awash with cash". LOL. Ajme...
DeleteNo, it's just negligence. Happened to them before too with more money in budgets.
DeleteThe Croatian PSO will be another copy and paste from previous year. I don't understand why it is taking so long.
ReplyDeleteThe Montenegrin government is only now having a look if these routes could be profitable without financial aid. Why name them then in the first place?
ReplyDeleteAd hoc planning
DeleteLove the ATR in OU colors.
ReplyDelete+1
DeleteHope there will be more
Delete"he expired four-year PSO contract was valued at a total of 78.7 million euros."
ReplyDeleteWHAT!!?
That's almost 20 million euros per year! For what?
Cutting down OU losses
DeleteImagine if they gave this to Ryanair. Every village airport in Croatia would have flights for 20 euros.
Delete^ true
DeleteOf course not!
DeleteWell, the islands are so poorly connected to the mainland that it hurts, but there is 20+ millions to spend on kradeze so called "aviation connectivity". This maddness should end and instead high speed railways should be put in place Europe wide. Can you imagine what collosal waste of resources is to fly few people from Pula to Split for instance? High speed boat line with several daily rotations should be operating instead. Cro is the only maritime country that is not using sea to larger extend to connect coastal cities.
DeleteI don't know if RJK is considered an island airport, so essentially PSO includes only one full scale island airport and there are weeks with 0 PSO flights. That just can't justify this money burning.
DeleteIt's just incompetence from ministers in both governments
ReplyDeleteThe Croatian ministry only had 4 years to prepare for it....
ReplyDeletewhy PSO contracts don't automatically roll over until a new tender is completed? It would avoid exactly this kind of disruption.
DeleteYou do not understand word "proracun"?
Delete@ 09.56 because the process has to be timely and transparent, at least on the paper.
DeleteCould it be that the EU is putting more heat on the government over these subsidies? That's how I read their response.
ReplyDeleteMost likely.
DeleteThe EU allows Croatia to do far worse things than this.
DeletePSOs should support regional development, not prop up inefficient airlines. There is a difference, and too often governments blur that line.
ReplyDeleteThe irony is both countries talk constantly about tourism and connectivity, yet struggle to fund the very routes that support access.
ReplyDeleteOsijek-Zagreb and Rijeka-Zadar have precisely zero impact on tourism.
DeleteA flight between Rijeka and Zadar is a crime against the environment.
DeleteTourism is commercial non-essential thing, can't be part of PSO.
DeleteDelays could make competition even tougher for Air Montenegro this summer.
ReplyDeleteDon't worry, they will get state money either way.
DeleteDo I remember correctly that Ryanair called on the Croatian government to abolish PSO?
ReplyDeleteNo
DeleteThey said
Delete"Significant funds are also being allocated to PSO routes with very low load factors, indicating that they do not correspond to the real needs of passengers”.
https://www.exyuaviation.com/2026/03/ryanair-warns-croatia-to-scrap-tax-and.html
Thanks, knew they mentioned it recently.
DeleteThis shows why airports dependent on PSO traffic need to diversify. If a subsidy delay can disrupt your traffic overnight, your business model has a problem.
ReplyDeleteIf so called essential routes can be suspended due to administrative delays the system itself needs fixing.
DeleteThe bigger loser here may be regional economies, not airlines. Reduced connectivity affects business travel, healthcare access and tourism, not just passenger numbers.
DeleteAre you all ok? Zagreb-Osijek flights had 2 or 3 passengers per day and you're talking about the impact on regional economies? Healthcare access??
DeleteBut it sounds professional, full of wisdom.
Delete90% of people on here don't actually know what they are talking about.
Delete:D:D
DeleteGreat thing that Montenegrin govt. just now " conducting a market assessment procedure "
ReplyDeleteHow will this impact Trade Air? Do they make a lot from PSO once all costs are covered?
ReplyDeleteI am also very interested in how much they make from these operations. Keep in mind they wet lease a plane for it.
DeleteI doubt it is too much. They are also paying a PSS just because of these flights.
DeleteMess
ReplyDeleteMaybe this is actually a sign the PSO model is outdated. Instead of repeatedly subsidising the same routes, governments should ask why they cannot stand on their own after years of support.
ReplyDeleteNo, no one should ask that. The whole point of PSO is to support routes that cannot stand on their own.
DeleteMarxism at its best. Pump funds into bottomless funnels.
DeleteYes it is, free education, universal healthcare, subsidized public transportation, social and pension scheme... But, for the regular normal average people, it's good.
DeleteIf ZAG-DBV or ZAG-SPU cannot be profitable you just need to look at the running of the airline on these monopoly routes.
DeleteOf course they can, it’s fake PSO. Although with not this much frequencies in winter.
Delete11.13
DeleteFully agree. Marxism at its best. Simultaneously praising and hypocritically advocating "free trade", "free market", "market economy", "democracy", "rule of the law" and similar BS, which does not exist even in traces, especially recently, with and after "pLandemic" - flu used as an excuse to reintroduce slavery or feudalism the best
I am not convinced all Croatian domestic routes need subsidies in their current form. Some could perhaps be replaced by improved rail or road links at lower cost.
ReplyDeleteMontenegro may have overestimated demand for some of those planned routes.
ReplyDeleteAgree! I would not be surprised if Montenegro scales back the six proposed routes before any tender is issued. The original plan may prove too ambitious.
DeleteMaybe Wizz Air’s arrival has changed the whole equation in Montenegro. If the market is suddenly more competitive, the original PSO assumptions may no longer hold.
DeleteThis is bad timing for Air Montenegro. Just as Wizz Air expands aggressively.
ReplyDeleteBut is this the best year to expand aggressively? We’ll see.
DeleteRijeka and Osijek deserve better
ReplyDeleteRijeka deserves new management, Osijek deserves closure.
DeletePerhaps this will force airlines to come up with more creative commercial models instead of relying on public money. Not necessarily a bad thing in the long run.
ReplyDeleteIt's too early for Jasmin to be thinking outside the box
DeleteAgree. Better to be caesious. Jasmin lion will take care. Dont be jealous on him and his knowledge.
DeleteI love you 13.12 😍
Deleteaviation planning does not work on vague timelines. Airlines need certainty months in advance. Especially in this economic climate.
ReplyDeletesubsidising flights to Paris and Amsterdam is nuts. Sorry.
ReplyDeleteCouldn't agree more
DeleteWhy? Does someone wants to launch these routes?
Deletethese PSOs were never economically justified in the first place.
ReplyDeleteGood, cause PSO is not economically justified by design.
Deletelooks less like an aviation issue and more like administrative incompetence.
ReplyDeleteBoth.
DeleteRecommendation for Jasmin. Cut now those pso routes. I wrote some time ago to cut specific routes and someone wrote that was pso routes and good income for OU. Now Jasmin can react to cut more losses and to stabilize company financing. Lion knows what is the best,
ReplyDelete1 more month and Croatian PSOs won't be able to restart until 2027
ReplyDeleteI'm guessing the Montenegrin and Croatian pso are not subject to the same rules from EU?
ReplyDeletewow Montenegro, 5.5m € yearly for six routes??
ReplyDeleteand then you wonder how Air Montenegro is "profitable"
There’s still no PSO in MNE, it’s not OK to justify past results with future events.
Delete