MIAMI – The Government of Montenegro has today ordered the closure of the indebted flag carrier Montenegro Airlines (YM), promising by the end of 2021 to form a new company. YM will cease operations “within a day or two.”
According to balkaninsight.com, the move comes despite opposition warnings of the economic ramifications, but the government cites debts run up under previous governments as the cause of the decision.
Mladen Bojanic, Minister of Capital Investments, stated that it would cost €50m to close the flag carrier and take up to nine months to build a new one. Bojanic said in a news conference that the new government was “reaping the fruits of trickery, in which the previous government and the company cheated each other for years and created a distorted picture for the public.”
The minister also said that there were plans to set up a new company with government start-up capital. For Montenegro’s tourist season, he said the state was well aware of what it meant to shut down a company as it would “take six to nine months to set up a new one.”
A Dependance on Tourism
According tot he Balkan Insight report, In early December, the government, a coalition of three blocs, took power with a majority of seats in the parliament, in effect ending three decades of uninterrupted rule by the Democratic Party of Socialists, DPS. A year ago, the DPS-led Government said it would invest €155m in YM over the next six years.
The reason for the investment was that, given Montenegro’s dependence on tourism, the collapse or closure of the airline would have a significant effect on the economy. But this year, the European Commission expressed concern about the government assistance, saying that the YM case would be a significant test of Montenegro’s control mechanism of state aid.
The president of the Council of the Agency for Protection of Competition, Miodrag Vujovic, said Ryanair (FR) had appealed to the European Commission to investigate whether YM had received more than €43m in state aid.
A Negative Financial History
The European Commission only approves aid for those airlines that had operated positively before the pandemic crisis took its toll, “which is not the case with Montenegro Airlines,” Vujovic said. Since its founding in 1994, successive DPS-led governments have been helping the airline remain afloat.
The government forgave YM €4m in debt repayments in April 2019. Additionally, a study conducted by the NGO MANS showed that by 2014, the government had donated €58.5m to the airline. Still, the announced closure provoked outrage from YM management and opposition parties, including Montenegrin President Milo Djukanovic, now the opposition leader of the DPS.
In addition, Social Democrats and Social Democratic Party opposed the move warn of the effect on the nation’s critical tourism industry. Nikola Vukicevic, chairman of the management board of the airline, challenged the government’s estimates, saying the closure would cost €100m and leave 360 people unemployed.
No Other Option Left
Bojanić clarified that even before being sworn into office at the beginning of the month, the government started searching for a solution for the airline, but concluded that there was “absolutely no way out,” according to exyuaviation.com.
The minister added, “Our hands were tied by the decisions made by Agency for the Protection of Competition, and Montenegro Airlines’ Board of Directors whose President told me today he could not address the media because of a toothache.”
The Montenegrin carrier was established in 1994. The first flight between Podgorica and Bari took place on May 7, 1997. The airline is still running services as of this morning, but it could be its last day of operations. Today, its timetable consists of two flights from Podgorica to Belgrade and one from Tivat to the capital of Serbia.
Featured image: Embraer 190-200LR, Montenegro Airlines. Photo: Wiki Commons