Regional air companies facing turbulence

07/03/2013

Burdened by heavy financial losses, regional air companies struggle for survival.

By Drazen Remikovic for Southeast European Times in Zagreb -- 07/03/13

Several regional airline companies are in serious debt. [Drazen Remikovic/SETimes]

Balkan nations are losing money by covering the debts of national airline companies and should restructure the companies to keep the airlines flying, experts said.

"The best solution for the crisis in airline companies would probably be to sell or privatise all assets of the companies and to allow some big player to enter into the market. The governments keep these companies for years because of some kind of national pride, but something needs to be done quickly because the citizens are losing the money," Miroslav Prokopijevic, an adviser at the Institute for European Studies, told SETimes.

Rising fuel cost is just one of the reasons behind the airline companies’ debt. In 2011, one tonne of airplane fuel cost 750 euros, while in 2012 the price went up by 20 percent, to 900 euros. Most air companies are also indebted to various creditors, such as banks, airports and the state.

By the end of 2012, Croatia Airlines' debt was more than 50 million euros. In an effort to save the company, management intends to lay off about 20 percent of its workers and sell part of its aircraft fleet.

"This company can work well if it had a detailed plan. Unprofitable flights should close down; unusable offices world-wide should be shut down. Debts are high, but with a good plan and a co-operation with the union, the government might turn around the situation," Tomislav Rajkovic, president of the Croatia Airline workers' union, told SETimes.

The company currently employs around 1,100 workers, with an annual transit of 2 million passengers.

"They have two options: sell one or two planes and the company-owned land, or find a strategic partner to buy 25 to 30 percent ownership of Croatia Airlines," Sinisa Hajdas Doncic, minister of maritime affairs transport and infrastructure, said.

Serbia's JAT Airways has been put up for sale twice in the past five years, but without any success.

"JAT ended last year with 170 million euros in debt. Still, with the help of the state, and purchase of new aircraft, JAT has a chance by the end of this year to be at a positive zero," Vladimir Ognjanovic, JAT general director, told SETimes.

Serbia announced late last year that the government is negotiating with United Arab Emirates' Etihad Airways on joining to form a new air company. If Etihad pays off JAT debts, it will receive a share in the airline.

A 2012 article in The Economist suggested that Balkan countries' airlines join forces, citing the example of Scandinavian Airlines which started as a co-operative venture among Norway, Denmark and Sweden airlines in 1946, then merged in 1951.

But Balkan national air companies refuse the idea.

"We have no intention to create a united Balkan air company, but we are open to any form of stronger co-operation with our colleagues from the region," Srecko Simunovic, director of Croatia Airlines, said.

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