B&H Airlines faces challenging future

Tough times at B&H Airlines

Two years after Turkish Airlines relinquished its 49% stake in B&H Airlines, the Bosnian carrier faces a difficult future with two leased aircraft, four destinations and no strategic parent in sight. While the Federation government has been adamant it would find a new part-owner for B&H, interest has been scarce. The airline’s CEO, Amir Jažić, has described the situation at the carrier as “alarming” and “distressing”, while the government has said B&H is “in a critical state”. One of the greatest obstacles facing the airline at the moment is debt owed to the Hypo Group for the financial lease of its fleet of two ATR72 aircraft. The leasing arrangement will expire in late 2015 and Hypo has already warned it is unlikely to extend the deal. As a result, the Bosnian carrier could be left without any aircraft in its fleet in just over a year. The government has said it will try and renegotiate the leasing arrangement, which it believes is damaging for the carrier.

Several months ago B&H Airlines suspended its signature route to Istanbul, facing unprecedented competition from its one-time partner Turkish Airlines and budget carrier Pegasus. Mr. Jažić says B&H cannot compete against the likes of Turkish Airlines on their route to Istanbul. However, the CEO notes that the bilateral aviation agreement between Bosnia and Turkey, drafted more than a decade ago, gives Turkey an unfair advantage in commercial operations. The Federation government has been reluctant to renegotiate the terms of the agreement with their Turkish counterparts. Following its acquisition by Turkish Airlines in 2008, the Bosnian carrier launched a handful of new routes and became the busiest airline operating out of Sarajevo with a market share of 26%. Today, that share has dwindled to only 4%. In 2012, B&H Airlines ended the year with a profit of almost half a million euros. Last year, the airline recorded a loss of two million euros. In addition, over the past year, seven pilots have left the carrier, creating a major operational headache for the small airline which counts only 104 employees.

With competition on the rise at its Sarajevo hub, B&H’s battle for passengers is likely to become even more difficult. Last week, the Federal Minister for Transport and Communication, Enver Bijedić, said Wizz Air is considering launching flights to Sarajevo. Talks between the budget airline and Sarajevo Airport are in progress, with the carrier’s CEO indicating services from three different cities could be launched to the Bosnian capital during the 2015 summer season. Late last year Mr. Bijedić said, “We cannot get rid of our only national carrier. We will do everything for the company to survive and function properly”. However, the government’s response and support has been minimal so far. This summer the Bosnian carrier, faced with a surplus of aircraft, tapped into the lucrative charter market with flights from Mostar and Sarajevo to Foggia, Bari and Pescara in Italy, Bodrum in Turkey, as well as seasonal services from Banja Luka to Tivat, in an attempt to sure up revenue. Without any clear direction or support from its owner, B&H is facing an uncertain future with few prospects.