Montenegro Airlines was "struggling to stay in the market" this summer as the state-owned carrier's new management sought to stabilise its operations in the face of low-cost competition and with debts owed to a variety of creditors, chief executive Zivko Banjevic has acknowledged.
Speaking to FlightGlobal in Podgorica on 6 September, Banjevic recalled that the airline had "big problems" when he took up his position in February this year. He says the carrier has been "fighting hard to stay in the market" since then.
Among the challenges was €44 million ($53 million) of debt, variously owed to Montenegro's government, the air traffic services agency of Serbia and Montenegro (SMATSA) and lessors, among others. He notes that "95% of our fuel and handling landing fees we are paying in advance".
Banjevic says his initial priority has been to stabilise the airline’s operations this summer and then formulate a business plan for "a year, three years, five years" hence in order to provide a "long-term solution" for the carrier's owner, the government of Montenegro.
In the year's first six months, Montenegro Airlines transported 230,000 passengers, a 1% reduction from the year before, but did so with the use of between three and five aircraft, rather than five to six aircraft as in the summer of 2016, bringing a saving of €2 million ($2.4 million), Banjevic says.
The airline is also intending to lease in a jet with "more than 140 seats" next summer as part of a short-term plan to provide more capacity while reducing ticket costs in order to be more competitive with budget rivals.
However, Banjevic notes that to fundamentally improve performance, the carrier needs to negotiate more competitive landing and take-off charges from Airports of Montenegro. He says competition is increasing, with a total of 81 airlines flying to the Balkan country this year. Many of them, he believes, can avail of discounts unavailable to the flag carrier.
Montenegro Airlines' loss last year was €10.4 million, up from €9.4 million in 2015. Banjevic expects a lower loss this year, thanks to cost-saving measures put in place so far, but not "significantly lower" unless a new commercial arrangement can be reached with the country's airports, which he says are "currently invoicing us for maximum prices".
Banjevic also reveals a number of cost-cutting measures he would like to initiate. He says the airline incurs "huge costs" from running branch offices in Paris, Moscow and Vienna, as well as a "daughter company in Belgrade", and is "considering the option of decreasing this cost".
With a total workforce of 396 employees, Banjevic says he is "optimistic" the carrier can reduce headcount by 50-100 staff. Another 50-100 people employed on special contracts during the summer season would also be "quite easy to cut out", he notes.
As for the airline's historic debts, Banjevic says previous restructuring plans that would have resolved them were not completed. He does not disclose the current plan for clearing the debts but does say that the government's role will be "huge".
He notes that, being "very careful of state aid", the government is seeking to "help Montenegro Airlines in a way that is acceptable to the European Union".
Banjevic adds: "This is the final phase of recovering, and [the] most important phase, while the government has to decide, let's say, which option for the destiny of Montenegro Airlines... We brought it to this point, it was very difficult, and I have no doubt they will decide to keep an airline, but we will see which of these options they will accept."