The Serbian government has approved a draft of the country’s state budget for 2022 which foresees subsidies for Air Serbia. Although the exact amount of funds has not been specified, the national carrier is one of over sixty companies “of special importance” which will share just over 170 million euros in subsidies among themselves. The airline was the beneficiary of 20.8 million euros "from premiums, subsidies, grants and donations" each year since 2017, with exception to the Covid-hit 2020, when the government recapitalised the carrier to the tune of 100 million euros. With exception to last year, the overall value of the subsidies has been significantly reduced from 41.8 million euros in 2016 and is in line with the transaction agreement between the Serbian government and Air Serbia’s minority shareholder Etihad Airways.
The Serbian government has maintained that these annual funds are being used to pay off old debt owed by Air Serbia's predecessor Jat Airways, however, the accuracy of these claims has been contested. The Serbian Prime Minister, Ana Brnabić, previously noted the payments would persist until 2023 to pay off Jat’s historic debt. Last year, Air Serbia repaid a 57.6-million-dollar Etihad Airways Partners loan it took out in 2015, followed by the repayment of a further 63 million dollars this year for a second loan from the special purpose funding vehicle. The airline maintains the loans were repaid independently “thanks to responsibly running its business before the coronavirus pandemic, as well as extensive austerity measures at all levels during the greatest crisis in the history of civil aviation, resulting from the pandemic”.
In 2020, the Serbian carrier registered a loss of 77 million euros, ending six consecutive years of profit. Since the pandemic took hold, the airline has undertaken a number of measures to reduce costs, including rationalising its fleet and renegotiating leasing terms for aircraft, as well as reducing airport fees and taxes at select destinations. The carrier has also launched its “Deliver” program, aimed at reducing unnecessary costs and non-vital services which has “strongly contributed to the company’s liquidity”. The airline has renegotiated more affordable pricing for utilised IT services and has used the slot suspension in Europe and the United States to its advantage. At the end of last year, Air Serbia hired independent experts in order to estimate the economic impact the national carrier has on the country’s GDP and the development of tourism in Serbia. “The company’s management continuously assesses the objective losses caused by the coronavirus pandemic in 2021 on a quarterly basis, as well as its ability to meet all obligations towards creditors and suppliers”, Air Serbia said.
What a surprise
ReplyDeleteDoes this include the 8 million for Nis/Kraljevo flights?
ReplyDeleteno. that's different subsidy, and for that one there needs to be a competition
DeleteOf course not.
DeleteNis/Kraljevo flights are somehow treated as PSO flights and the emount of money given for PSO flights is not recognies as Goverments help.
The bext example of it you can find in Croatia.
Good. JU seems to be on the right track to recovery.
ReplyDeleteLOL!
Delete20 million is peanuts in the aviation industry. It means they probably won't be renewing their fleet.
ReplyDeleteThat was pre-Covid years. We will see how much they actually get in 2022.
DeletePre-Covid was the time of regular business and now it is not.
DeleteAll these extra permissions, travel bans, tests etc are not regular and normal circumstances so therefore extraordinary times request extraordinary measures.
Agree that 20m is peanuts - but it hasn't been 20m, its been significantly more and how much exactly we will never know until there's a change in govt ... only then will we truly know the extent of how much money was put into this adventure.
DeleteYes, 20 million is not much but we can look diffrently.
DeleteFor instance, adria made 10 million loss per year (beffore last 4 years). And they were flying 25 destinations and operated 12 jets (3 for Lg group and 2 a319 were based outside slovenia, but that made them money to cover as much loses as they can).
Now gouverment gave 10 million for just fe flights for few airlines.
I hope you see where I am going.
Renewing fleet while subsidiesed, somebody said .Joke of the country joke airline.I don't fly this airline Co .Avoid
DeleteIt is nothing new.
ReplyDeleteEven EU companies are getting money from their Governments.
It is not the only company in the world to receive subsidies this way or another....but it one with tan old fleet. They have to replace many planes in the coming years. And not a single word about it.
ReplyDeleteNot the entire fleet is old. Just the ATRs.
DeleteAre the A319's that replaced the B733's also from the SFRY days? No.
DeleteHas the average age of the fleet reduced the past several years? Yes.
Does JU have money for brand new factory fresh aircraft? No.
Can it afford to replace all their aircraft at once? No.
Replacing all aircraft in their fleet with brand new, factory fresh aircraft will cost them over a billion euros. The best they can do with the limited finances is to lease aircraft. The rough age of aircraft they have lately been taking in is around 10 years old. That isn't old for an aircraft.
Interesting how the Jat debt will be paid off conveniently at the end of Etihad's second 5-year deal.
ReplyDeleteWhat is your point? That this money goes to UAE?
Delete@9.06 there is no conspiracy here. In 2013 they set ten year period to pay off all of Jat's debt.
DeleteWill etihad fly to beg anytime again?
DeleteThis company is not profitable.
ReplyDeleteDefinitely more profitable and with some kind of a growth plan compared to the rest in the region.
DeleteThey are obviously lying about Jat debt which was actually never indebted.
ReplyDeleteAre you for real?? It ended its run with EUR380 million in debt!
DeleteNot a single word can be trusted from the current administration.
DeleteEven with the subsidies they waste much less money than Jat and at least they have a decent network, frequent flyer program, crew, online check in...
DeleteAnonymous09:09
DeleteIt's often better to be silent and pretend to be smart than to open your mouth and forever remove all doubt regarding your intellectual level.
Is Jat's debt still on Air Serbia's books? If not, then government's response doesn't make sense.
DeleteI wanted to ask similar question. I don't remember there being any trace in JU's financial report of paying old Jat debts to somebody.
DeleteI am very interested to see what their financial performance has been like this year.
ReplyDeleteIt surely can't be good.
DeleteJust have a look on EU travel ban for regular citizens which are not vaccinated or which are vaccinated with Sinopharm or Sputnik V.
And EU is far the biggest market where JU flies.
^ Their passenger number indicate otherwise since their passenger decrease is significantly under the EU average.
DeleteIsn't it the case with almost all non-EU airlines flying from Europe?
DeleteIt will probably be a loss but at a smaller rate than last year.
DeleteEven the airline says there will be losses.
DeleteFrom the text
“The company’s management continuously assesses the objective losses caused by the coronavirus pandemic in 2021 on a quarterly basis, as well as its ability to meet all obligations towards creditors and suppliers”, Air Serbia said.
@9.13 the good news is on 15 November the European Commission will recognize the Serbian Green Certificate across the entire EU. Up until now only a few EU countries did through bilateral agreements. This is really important because it will automatically end travel restriction to several countries, Sweden being one of them.
DeleteSince they are receiving so much money from the state budget it would be nice if they became more transparent on their future plans. Or at least for the CEO to give one interview to any media outlet. It seems he has been in hiding since he assumed his position.
ReplyDeleteDelta plus variant is around the block and you’re asking what are their future plans!?
DeleteIt would be great if the next year was the same as this one with numerous charters, summer routes and frequencies etc.
Yes, their Covid recovery plans, what is their strategy, how they plan to save money, how they expect to keep going on with renewed variants. Everything other CEOs have discussed publicly.
DeleteWell that's because other CEOs run their companies. You have the man who runs our state-owned companies on the news every day, he talks about JU too...
DeleteSo we should expect BEG-INI very soon.
ReplyDeleteI wonder how will they organize domestic departures??
A bus gate on the ground floor will be used.
DeleteSeems to me the Serbian government learned to give subsidies in a way not offend EU regulators and have a cover story. The same thing many EU governments are doing.
ReplyDeleteI do not mind state aid at all, on the contrary, I support it since when looking at the greater picture Air Serbia is indeed contributing a lot to Serbian economy. Those 20 millions are really nothing compared to what Serbia is getting in return.
ReplyDeleteFully agree.
DeleteI would like to see if the return on investment is enough to cover the investment.
DeleteWith subsidies, the airline is making a profit. Profit minus subsidies is around 9-10 million euros of loss for 2018 and 2019.
DeleteThe 3 million pax in 2019 have surely spent more than 10 million euros in local businesses. Then we have staff salaries spent in the local economy, products and services purchased in Serbia by pax, foreign currencies spent in Serbia, and this is the start of the list.
I find it interesting that in Serbia people get upset about JU subsidies, media write about it all the time, but they are not upset the millions upon millions being given to other state owned company, to a much larger extent than Air Serbia. And this was the same case during Jat.
ReplyDeleteThey always find the excuses why some other companies should get it but no Air Serbia
DeleteYes, we can start for example from how much money is pored into Zvezda and Partizan sports clubs. And then you realize JU subsidies are peanuts.
DeleteThe 20 million is still nothing when you compare how much was given for example to GSP, the Belgrade public transport company.
DeleteWell you are all just forgetting that Air Serbia is not getting just 20 million. First we are not sure how much it will be this year but these are shown subsidies. There are numerous hidden subsidies Air Serbia gets like it is getting money for flying free of charge weekly charters to Dubai at the moment, or the subsidy "for the development of tourism", or the subsidy for PSO flights and etc.
Delete+1
DeleteBeacuse majority of population doesn't use Air Serbia services nor know someone who does, unlike those of Srbijagas, Srbijavoz, EPS or whoever is still getting state money.
Delete@9.38
DeleteThat is what all airlines across Europe are doing. Getting hidden incentives from their governments, airports, tourist boards, regions etc.
Anonymous @09.19
DeleteBecause Air Serbia was not supposed to be a continuation of Jat and business as usual.
Oh and also because they were made to believe that after Etihad takes over there would be no more need for state assistance.
DeleteSerbian mentality is based on two key cornerstones. One is spitting on everything that is related to government and their own country and its development, with strong belief that everything is Serbia is the worst than anywhere else in the world, and, secondly, believing strongly in conspiracy theories as being 100% the truth and nothing but the truth. To get the best objective opinion of what's happening in the country is to speak to those Serbs who are not in it, because from the locals you will 99% of the time get negativity and very sad stories of where their tax money is going, even when the news is good.
DeleteYet some people here constantly accuse others, mostly from Croatia, to be the "haters" when something negative is written about JU. And I kindly ask those people to stop with such praxis because mostly such negative comments come from within Serbia, the same as I for example criticise OU and their missed chances and wrong deeds. People come here to talk aviation, not ethnicity, at least it should be so...
DeleteLike someone said above. Subsidies are nothing new for airlines, they are an issue of national interest. The haters that like to point out that JU "is losing money" have no clue about the importance of a national airline; It's an important resource that needs to be relied upon for tourism, foreign investment, diplomacy, security, mail and even some exports.
ReplyDeleteAll that alone is reason enough for financial support from the government (i.e. "my tax money"). Those that say otherwise either have an agenda or are just looking through a narrow prism.
They should use money to renew fleet.
ReplyDeleteThey have to renew the ATRs. The rest of the fleet is fine.
DeleteYou do realise that over USD$1 billion will be needed for new aircraft? This is 1 on 1 replacements without additional aircraft for expansion.
DeleteIf it's leases you are talking about, JU has leased 16 newer aircraft in it's fleet the past 8 years. 1 x AT7, 2 x A320, 2 x A330, 11 x A319.
What matters is what the airline does with the money it gets. JU is growing organically and that's what matters the most.
ReplyDeleteExactly.
DeleteI agree. Everywhere in the world governments are finding ways to subsidise, finance and help their flag carriers. Serbia and JU are no exception. But unlike Croatia and OU where even more money was pumped in, and which had 30 years and better potentials to grow and develop, in Serbia and JU the results are visible and decent - in very short time much bigger network, transfer traffic, better marketing, long-haul service, newer fleet, ok service, and so on and so on
DeleteCall it what you want, this company is not profitable at all.
ReplyDeleteIf you take out the subsidies it isn't but it's result has been improving year on year until corona started. It probably would have hit real profitability this year had it not been for the virus.
DeleteSo they find a way to pump money into the airline by claiming its Jat debt. Genious.
ReplyDeleteNo
DeleteNo what?
DeleteThey are not pumping money, they are really paying Jat's debt.
DeleteThere is simply no evidence of that.
DeleteWhy cant they just run the airline without subsidies, run the airline properly and you wont need subsidies.
ReplyDeleteBecause there is not a single European airline with less than 50 aircraft that made a real profit in 2016-2020
DeleteJU 30 years ago was a profitable airline that was growing, had a network spanning 5 continents and intentions to go into South America. The domestic market was 23 million people. 1990's saw years of sanctions, wars and the distruction. This lead to a number of airlines and airports surrounding the ex-Yugoslav republics to expand such as MA, OS, LZ. 20 years ago, the smaller Yugoslavia started the transition its transition into a capitalist economy while the airline was mismanaged. There is an old article here that will give you a run down of the scandals of former Jat CEO's.
DeleteNo other European airline has experienced what JU has in recent history.
Instead of a clear government strategy to set it back up for success, we get ideas with no thought put into them, that the airline has to undertake, such as JFK, INI/KVO flights - which isn't cheap. The EY 'investment' in JU also was expensive seeing as half of the fleet will soon be replaced with leases under more favourable rates. ARB alone on a rough guesstimate is $3 million in savings annually, 1/3 of the losses JU made in 2019. This is why JU needs subsidies.
Completely agree with JATBEGMEL. Well said.
DeleteI still don't understand where they found the money to off the Etihad partners debt.
ReplyDeleteEspecially in Covid years...
DeleteProbably from the recapitalization.
DeleteAnon@9.51 - this is a question which seems to have flown completely under the radar. You have a company which was receiving state subsidies to the tune of 20m - without which, it would have made a loss. Clearly, the business is not generating enough cash and here, I am talking about pre-covid times. Then out of nowhere, the company pays off more than 100m in Etihad PArtners bond debt, saying it is from internal cash reserves, but it has been receiving state subsidies every year since its inception because it hasn't been able to generate enough cash from its operations and still requires state subsidies to ensure it doesn't go under.
Deleteif it is so well managed, why then does it require ongoing state subsidies and how the hell did it manage to pull 100m out of some supposed reserves to pay off the Etihad Partners debt ?
This is a question which remains murky at best and something far more sinister at worst
US$23. 5 million was returned to JU from the 10 A320neo order that started as 8 x A319's during the Milosevic regime.
DeleteSerbian Government also pumped in cash into JU last year reducing EY's stake in the airline.
Like with many things in Serbia, the problem is structural. They are throwing money at JU while its management is still clueless. With the money they got so far they could have completely renewed their fleet and gotten smaller regional jets.
ReplyDeleteIn a poor country like Serbia.
DeleteSure.
^ What does that have to do with better spending the money they receive?
DeleteManagement can only do so much. JFK and EY leases for example had a large impact on the companies finances. This is government interference. We all can see what happens with other enterprises in Serbia that are government run.
DeleteWhat would be the alternative?
ReplyDeleteI don't know why are people so upset by the government's aid. It's ok when it's given to Wizz or other LCC, but it's wrong when it's given to a national carrier.
ReplyDelete+1
DeleteWhat should Air Serbia's priorities be next year? Some of you saying fleet renewal, some long haul expansion?
ReplyDeleteNavigating another potentially Covid ridden year.
DeleteIt should be partial fleet renewal and focus on quality of service. Quality of service is rapidly falling in numerous sectors and all indicators are pointing that there is a negative trend from the time when the brand was re-launched.
DeleteThey should hire BCG to tell them LOL
Deletehope that Ryanair decide to set up a base in BG which will finally add some much needed pressure on keeping the Govt in check with its endless aid
Delete@14,27
DeleteWizz Air has been in BEG for over 10 years. Sure, FR is a bigger threat, but competition is competition.
@16:51 - you don't understand my point. I was not talking about Wizz Air, I was talking about Ryanair and not as a competitive threat either. JU has plenty of that already. What separates Ryanair from any other carrier in Europe, is that it watches like a hawk what state aid and subsidies that national and state owned carriers receive from their govts. They hold them to account and whenever Ryanair turns up, it is a gamechanger in that it no longer gives generous govts such a free hand and ensures much greater accountability in what is invested to ensure that competition is not distorted. Just look at what their actions have meant for TAP ... Closer to home, their recent entry into ZAG has put the spotlight on OU. These examples only serve to highlight how Ryanair's entry into certain markets puts recipients of endless state aid on notice
Delete@ 20,51
DeleteI know exactly what you mean. Both FR and W6 operate the same ULCC model. As I said above, same form of competition, FR is more vocal. However that doesn't mean that Wizz hasn't been vocal about JU either. Remember their rant in BEG back in 2014?FR has in the past complained about JU, on more than 1 occasion. Nothing came of it. There have been complaints on FR as well, where the subsidies they had recieved were illegal and money had to be returned. Not to mention blackmailing staff to sign contracts for lower salaries, refusal or delaying to pay people compensation. It goes both ways.
As for OU, they have for years sat by and watch time go by. Year after year, its been pretty much copy paste with their schedules, with an exception for 2 summers with the leased CRJ's and new seasonal routes, as if seasonality of their operations wasn't bad enough. For years they were the largest ex-YU carrier in terms of pax traffic, and at a stage with operational aircraft. Yet Air Serbia almost immediately upon rebranding quickly overtook them, established a regional network that has worked well for them and has been fairly dominant. JU has also been very proactive with whats happening around them, immediately increasing regional flights when JP went bankrupt, launched IST when KK also went bankrupt, launched OSL the moment W6 announced it. This isn't the case with OU, which has left alot of room in ZAG for FR. The situation isn't the same and the 2 cannot be compared.
Not too bad given the circumstances. Air Serbia had fantastic charter season, it is de facto already running a nonstop cargo service to China and had smaller percentage drop compared to 2019 than many other airlines. Next year will continue to see passenger growth towards 2019 numbers, additional destinations and likely more changes to the fleet.
ReplyDeleteTheir BEG hub is also looking forward to great 2022. With opening of a new ATC tower and new C concourse, separation of arriving/departing passengers and construction of new terminal area things are also looking good for Air Serbia passenger experience.
Just another proof Air Serbia is doing really bad.
ReplyDeleteSure lol
Delete@anon 21:04 Nema leka (ali ne za Er Srbiju).
Delete