Tim Ripley/PRISTINA
The country may be virtually bankrupt and its industry and economy in ruins but, if all goes to plan, the fall from power of Slobodan Milosevic in Belgrade should be the trigger for a revival in the fortunes of Serbia's battered "national" carrier, JAT Yugoslav Airlines.
Political stability, the lifting of sanctions and, importantly, the prospect of large aid payments by the West could ultimately result in a flood of businessmen and displaced families, broken up by the various Balkan conflicts, returning to Yugoslavia (defined as Serbia and Montenegro).
A resurgent JAT, controlling the major regional hub in Belgrade, could rise to challenge the fledgling airlines which have recently started to prosper in the neighbouring states that made up the former Yugoslavia.
Only last week a Kosovar carrier announced its intention to start operations, seemingly confirming investor confidence in the airline industry's long-term prospects in the Balkans. War and sanctions crippled air travel there during the early 1990s. But since the Dayton Peace Accords ended the Bosnian war in 1995, the region's civil aviation industry has boomed in terms of traffic (although not necessarily profits) - in great part because of the conflict.
Kosovo war fallout
Although the Kosovo war forced regional air traffic to an almost total halt in early 1999, the displacement of refugees and their return home over the past 12 months has created a surge in traffic to Macedonia, Kosovo and Montenegro.
Air travel in the old Yugoslavia was dominated by state-owned JAT. But the rapid secession of Slovenia, Croatia, Macedonia and Bosnia-Herzegovina and the subsequent imposition of United Nations trade sanctions against Serbia meant the Belgrade-based airline was effectively in limbo between 1992 and late 1995. Its fleet was largely grounded or wet-leased to other carriers, staff went unpaid and alternative methods had to be found to generate business, such as operating out of Skopje, in Macedonia, with the help of Macedonian Airlines (MAT).
Between 1995 and 1999, JAT rebuilt its route structure, sought a global ally and considered privatisation. The imposition of a flight ban by European Union countries in September 1998 was a heavy blow. The suspension of the flight ban this February gave some relief but the assassination of the airline's chief, Zika Petrovic, in April, inspired neither international confidence nor interest from potential partners. His linkage to alleged money laundering by the Milosevic regime did little to boost JAT's reputation.
The company claims to have re-established scheduled services to 44 destinations in Europe, the Mediterranean region and China. Its development plan anticipates carrying an average of about 1.5 million passengers and 13,000t of cargo annually. To achieve its goals, JAT will rely on 14 aircraft from its fleet of 30. The plan calls for the use of Boeing 737s on Euro-Mediterranean flights, ATR 72 aircraft on regional flights and wide-body McDonnell Douglas DC-10s for long-range flights. The remaining McDonnell Douglas DC-9s and Boeing 727s will be made available for leasing.
Northern airlines
The two big players of the former Yugoslavia are Slovenia's Adria Airways, of which the state is the majority owner, and its southern neighbour Croatia Airlines, of which the Croatian government owns 69%. The two companies have established their respective home bases at Ljubljana and Zagreb as important regional hubs transferring scheduled traffic daily from European capitals to locations further south.
Adria, which reported a $5.1 million operating profit with a net income of $100,000 in 1999, feeds to Sarajevo in Bosnia, Skopje and Ohrid in Macedonia; Dubrovnik and Split in Croatia; Pristina in Serbia (Kosovo) and Tirana in Albania. Croatia has scheduled connections to Bol Brac, Dubrovnik, Osijek, Pula, Split and Zadar (all in Croatia), plus Mostar in Bosnia, as well as Sarajevo and Skopje.
The last full year of figures for Croatia is for 1998, when it reported a $5.14 million operating profit resulting in a net $1.12 million loss.
The two airlines have recently revamped their fleets, with Croatia Airlines replacing its ex-Lufthansa Boeing 737s with new Airbus A319s and A320s. These join its ATR 42s. Meanwhile, Adria has traded in its DC-9s for Bombardier CRJ-200LRs.
Revived tourism in Slovenia and Croatia has done much to stimulate air travel to these countries from the European Union. Croatia Airlines had a particularly successful season with charter traffic from around Europe to Adriatic resorts, with Dubrovnik alone seeing a surge from just 6,000 international passengers in 1995 to 109,000 in 1999. Overall, its passenger numbers have gone up by a third since 1999, and Adria's passenger traffic has risen by 50%. Continuing international reconstruction and NATO military activity in Bosnia, Macedonia and Kosovo has meant a steady stream of scheduled traffic southwards from the Zagreb and Ljubljana hubs.
"We are expanding our range of services by means of codesharing flights with selected partners - Lufthansa and Air France," says Adria, which is in the process of privatisation.
Bosnia
Air Bosnia is new to the market and flies mainly to Austria, Germany, Hungary, Scandinavia and Turkey. Founded in 1994 by Bosnia's then-government, the present government now owns 51%. The airline flew its first passengers in 1996. Using mainly wet-leased aircraft, it flew 62,689 passengers last year but lost $317, 000 because Sarajevo airport, Bosnia's primary civil hub, was closed during the Kosovo war.
The carrier plans to purchase two Airbus A319s to expand its network, especially to North Africa (Cairo, Tripoli and Tunis), the Middle East (Amman, Dubai and Tehran) and various points in Europe, transporting large numbers of Bosnian refugees. Air Bosnia also entered into a codeshare/blocked space agreement with Malev-Hungarian Airlines in September 1999.
Montenegro and Kosovo
Montenegro Airlines was established five years ago, and began operations in May 1997 when it received its air operators certificate. "We started with one Fokker 28 and then bought another," says Danilo Mijac, Montenegro Airlines' technical director. In June it bought a Fokker 100 from KLM uk and sold a Fokker 28 and leased it back until December. It also has a six-month wet-lease of a Ukrainian Yak 42.
The airline wants to expand its operations with the purchase of a 100-seat class aircraft by the end of the year and another in 2001. "In the next five years we will have a Boeing," says Milovan Milic, chief of flight operations.
Montenegro now flies to Belgrade, Budapest, Ljubljana, Rome and Zurich . "We want to fly to London, Moscow and Scandinavia when we have a third aircraft, probably next summer," Milic says. "The London route could be established by December. We think London is a good transit point for US-bound passengers and there are many Montenegrin nationals in London. Our target is ultimately a Boeing 737-500 or 600. We plan to have three Fokker 100s for the next three years, two for the coming winter season and three for next summer."
Mijac said the company was happy with the Fokker 100's performance. "We would like to buy a sister-ship for it from KLM uk. We have started negotiations and we've had some kind of offer and conditions. The problem is financing. Montenegro is not in the World Bank system. We have to buy everything for cash. Everyone else buys with credit."
TransAer International Airlines is to help set up Air Kosova with an Airbus A320 aircraft under a $15 million ancillary services contract.
Scheduled services will begin at the end of October, with routes between the Kosovan capital, Pristina, and Geneva, Rome, Vienna and Zurich. The Foundation for the Reconstruction of Kosovo, a US-based group of Kosovar exiles, is funding the carrier's start-up.
Passenger traffic to the United Nations-administered Yugoslav province has boomed since NATO forces opened Pristina airport for civil traffic. Up to 30 April this year, around 2,808 civil and military flights, carrying 123,800 passengers, landed at the airport.
Macedonia
Air traffic has surged in the southernmost of the former Yugoslav republics since the 1999 Kosovo war. Returning Albanian Kosovar refugees and a huge international aid and military presence almost swamped the country's two small airports - Skopje and Ohrid - during the middle of 1999. More than 800,000 international passengers used Skopje in that year.
MAT and Avioimpex Macedonian experienced unprecedented traffic during 1999 that is only just levelling off. State-owned Avioimpex says it carried 429,575 passengers last year, compared to just over 11,000 in 1992, its first year of operation. Most of the airline's aircraft are wet-leased and it is trying to lease more. MAT is smaller with less than half of Avioimpex's passenger business claiming$24 million in operating profits for 1999.
Skopje is also home to Air Service of Macedonia, a start-up carrier which is leasing four British Aerospace Jetstream 32EP turboprops to operate services to destinations such as Athens, Bucharest, Belgrade, Pristina, Sarajevo and Tirana. All four of the 19-seaters are due to be delivered by April.
Problems of Growth
Former Yugoslav airlines have many unique characteristics and problems. With large exile communities in Europe, 15,000 international workers and 60,000 NATO peacekeepers based in the region, there is constant international traffic. And the typical Balkan air traveller comes with a significantly larger than average quantity of hand and hold baggage.
The small hold capacity of their aircraft means that many airlines cannot cope, and luggage is simply left behind. Not surprisingly, lost luggage complaints run far higher than the European average, according to travel experts.
Except for Adria and Croatia Airlines, few of the airlines have a fully-fledged global ticket sales network or codesharing agreements with major players. Overselling by as much as 40% is rife on airlines in the southern republics, leading some desperate travellers to resort to bribery to secure a seat, according to airline professionals working in the region.
One veteran pilot says he has seen aircraft taking off in the southern Balkans with passengers seated in the lavatories. Such problems are symptomatic of the cash-based economies in the region and the airlines' tight operating margins. Apart from Adria and Croatia Airlines few former Yugoslav airlines are able to operate profitable business-class services, further reducing operating margins.
The two northern airlines have refreshed their fleets on the back of good tourist business and executive travel revenue. The rest of the region's airlines have made do with 1980s-vintage aircraft, in many cases wet-leased. Foreign investment in the region is perhaps the only way many of these airlines will acquire new aircraft.
Most of the region's airlines are wholly or partly owned by their national governments, so financing new aircraft purchases is dependent on International Monetary Fund or European Union credits flowing into the Balkans.
While the airport operations infrastructure around the region survived the wars or have been re-built, passenger-handing facilities still leave much to be desired. Dubrovnik, Ljubljana, Split and Zagreb airports are on a par with any Western European regional airport, but others offer few creature comforts.
Airport passenger taxes required to be paid in cash are common, although in some cases no receipts are issued and charges change randomly. Check-in, customs and border control facilities are also limited, leading to log-jams in processing passengers at certain times.
Since the Kosovo war ended in June 1999, the region's airlines have made great strides in meeting the demands of travellers wanting to move around the now independent republics of the former Yugoslavia, but as a regional analyst observes: "It is difficult for them to afford new aircraft because of what is a very competitive environment. Ticket prices have to be as low as possible, and government-owned airlines are overmanned. Economic growth is closely related to the growth of airlines. There will be no improvement in national carriers unless there is foreign investment in the region."
Source: Flight International
