Keep the Flag Flying for Montenegro Airlines – Part I

Montenegro Airlines has been struggling with financial difficulties for some time. Last year, before the COVID-19 crisis, the Montenegrin Government committed EUR 150 million to Montenegro Airlines over a six-year period, including EUR 66 million this year.

However, the situation took a turn for the worse. The predicted consequences of COVID-19 came true with travel restrictions across Europe and a dismal summer tourist season. Montenegro Airlines’ revenue slid 80% during the first seven months of 2020 compared to 2019. Namely, the airline generated EUR 30 million in revenue during the first half of 2019, but the figure fell to a paltry EUR 6 million in 2020. The carrier’s CEO, Mr. Vlastimir Ristić, said that the carrier is facing the biggest crisis in its history.

As expected, the Government responded. In a July rejig to the national budget, the Montenegrin Government stepped in with EUR 133 million to cover the airline’s losses and weather the crisis.

There is a catch…

Non-state competitors look on State aid for national airlines with great disdain. Namely, Ryanair has condemned the EUR 9 billion in German State aid granted to Lufthansa, by explaining that State aid “will further strengthen Lufthansa’s monopoly-like grip on the German air travel market”. Furthermore, Ryanair added that “Lufthansa is addicted to state aid. Whenever there is a crisis, Lufthansa’s first reflex is to put its hand in the German government’s pocket”.

Sound familiar?

The story heats up! Ryanair is stepping up its campaign against State aid for airlines. The low-cost carrier is challenging the European Commission’s decisions on State aid granted to SAS, Finnair, TAP, Air France, KLM and Lufthansa before the European Court of Justice.

Any significance for Montenegro Airlines?

Well…

On June 30, 2020 Montenegro opened the last negotiation chapter out of 35, Chapter 8 – Competition policy and “on the understanding that Montenegro has to continue to make progress in the alignment with and implementation of the acquis in this chapter, the EU noted that there are benchmarks that need to be met for the provisional closure of this chapter”, as stated at the EU-Montenegro Intergovernmental Conference in Brussels.

Any thoughts on benchmarks?

One of the key benchmarks for Chapter 8 was Montenegro Airlines and State aid granted since 2012, including the provisions of the Act on investment in consolidation and development of Montenegro Airlines adopted by the Parliament of Montenegro in December 2019.

We shall see…

We certainly haven’t heard the end of the COVID-19 aviation saga, and rest assured our team will keep you in the loop.