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Montenegro Airlines can’t survive with €15 million financial aid

Vlastimir Ristić, foto: Dan

The law on consolidation of Montenegro Airlines (MA), which envisages €155 million aid for MA, will not be enough to save the national airline carrier. Covid assistance will be required, said in the interview for Dan the CEO of that company, Mr Vlastimir Ristić. He announced that by the end of the year, MA would carry out systematization of jobs and said that the introduction of bankruptcy in the implementation of the Law on Consolidation and Investment in MA would cause great damage to the company and society in general.

What will you suggest to the new government regarding MA?

Mr Ristić:  I would like to be given an opportunity from the new government to present a vision of the situation in MA and the future of the company. It is true that €155 million has been earmarked for MA through the law, but that has not been sufficiently clarified. First, the law itself was passed before any knowledge of the pandemic. There is a part of the law, which has allocated funds for the maintenance of business this year, without any knowledge that it will be further complicated. Using only a part of the funds from this part of the law, we saved the business for nine months. Of the total €11 million allocated by law in 2020 for current liquidity, we received €7.185 million. Yet MA has been operating without assistance for Covid for nine months and pays salaries regularly.

Since I was appointed this function, we have been paying regular contributions on salaries, we don’t owe a single euro to the Airports of Montenegro. We estimated that we must first do everything we can on our own, rationalize our business and maintain traffic at the level of meeting social needs, and only after all our own options have been exhausted, will we have to turn to the founder for help. After the first six months I can say that we have succeeded, and in nine months I hope that the trend will not deviate much. It will be clearer after the analyzes we are currently doing for the third quarter, but we have the right to mild optimism and hope that we have managed to reduce the effects of Covid on MA’s business as much as possible.

85 percent revenue loss is a challenge for much larger and more stable companies than MA. When airports need help, flight controls, then it is clear in what situation the company is. But we will not despair. We have the right to fight to the end with the conviction that we will still protect the social interest that the MA business brings with it.

So, we need to show measurable business parameters to the new government. MA is not a company whose meaning of existence is seen only through balance sheets and income statements. MA, like any other company, was not established to make a profit, but it has social significance and performs a social function, which was especially visible in the pandemic and it is visible even now, when MA flies to Montenegro and from Montenegro almost by itself. And this situation will last. We must be aware that the law will not be enough to preserve MA, that Covid assistance will be required. We will quantify it, respecting social solidarity and business modesty, to try to save the company with a minimum of help. The law is a condition of survival, but it is not enough in the long run.

So, you propose to the Government to continue to provide assistance for MA?

Mr Ristić: The country needs MA, but it remains to be seen how much it will cost in addition to domestic business. It should not be expected to be profitable. If we only flew profitable lines, we would have two or three lines. There will always be traffic in July and August, but then what? Montenegro is so far from the emitting markets of the EU, so much that we can only count on air passengers from that part of the world. It is the same with the eastern markets, if we don’t have an airline, I am afraid that we will put ourselves in traffic isolation, which will cost the economy and the citizens a lot. MA is needed at least until the completion of the highway, when we will have some acceptable alternative. We don’t have it now, and things won’t improve much soon.

If there were no debts and the number of employees was cut, could MA be sustainable?

Mf Ristić: MA is a state-owned company, but unlike other state-owned companies, it doesn’t have state property. If the law is successfully implemented and if we buy second-hand planes similar” to “embraers” and we from the fleet of four or maybe even five planes, the company will be very close to self-sustainability.

How many employees are there?

Mr Ristić: We managed to reduce the number of employees for 35 in five months, which means MA now counts 360 employees. We must change systematization quickly and adapt to the market.

What is the impact of MA on the Airports concession?

Mr Ristić: It is disputable whether the concessionaire would call at all if there was no MA, because half of the transferred Airport is made up of the MA. This year, we settled all invoices to Airports, and €15 million of the old debt was paid. Concession should be of high-quality and to bring benefit to the state. The state should create conditions for the development of entrepreneurship, but not to be an entrepreneur itself. Therefore, a concession under reasonable, good conditions for the state, might be a good solution. And to be clear, sano concession. Sale and privatization, of course, are out of the question. This national good is cleverly used at various stages of social development, but is never sold.

What would bankruptcy mean for MA?

Mr Ristić: The adoption of the law is the decision not to go bankrupt. To introduce bankruptcy now, when we are halfway there, would be double damage. The aviation industry is estimated to return in three years, but it should last until then. We have to “put it on the table” to decision-makers.To repay the plane, we need to settle four installments in the next two years. If bankruptcy was introduced now, the plane would remain owned by a Brazilian bank, even though the loan repayment is over. MA has no capital in the balance sheets, but has capital in employees, in technical and flight operations, licensed personnel, in capacity sales. All the countries of the region that do not have airlines, have modern roads and / or railways, but we don’t. Don’t look at MA only through the balance sheet. It’s a measure for other economic entities, but we are not building highway because we will make money on it. The case is similar with MA.

 

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