Montenegro Airlines, the flag carrier of Montenegro, might be forced to ground its whole fleet if the airline fails to receive the state aid to cover losses related to the ongoing COVID-19 pandemic.
Due to new COVID-19 related air travel restrictions imposed across Europe, Montenegro Airlines reportedly faces financial turmoil. While the airline deals with outstanding payments for aircraft leases and other costs, the staff of the air carrier is still waiting to receive their October salary, speaking to local media stated a spokesman of the airline.
A spokesman of Montenegro Airlines outlined that new strict limitations and lockdowns have further reduced the already decreased airline’s revenue. The financial results showed that the revenue of the air carrier slid 80% during the first nine months of 2020 compared to the same period in 2019.
“Since the start of the winter season, the crisis has accelerated and the little revenue we had has been further reduced. Up until today, we have been unable to pay for October’s wages. We also have outstanding payments for aircraft leases, engines, and debt towards suppliers. We are doing everything we can to decrease expenses, however, the reduction in revenue and expenses are not proportionate to each other”, a spokesman of Montenegro Airlines told the local media.
In July 2020, the government granted Montenegro Airlines state aid worth €10.4 million. A month later, in August 2020, the air carrier was granted an additional €25 million financial support. However, a spokesman of Montenegro Airlines claimed that the company did not receive any of the money committed since the day of the assignment. If the airline fails to receive any state aid to cover its pandemic-related losses, it might ground its fleet consisting of 3 Embraer ERJ-190 and 1 Fokker F100 aircraft, reportedly warned the air carrier’s representative.
“In these circumstances, and without state aid, we are unable to continue operations, even in the short-term. If a company such as Lufthansa (LHAB) (LHA) has requested and received state aid, then what can be said for us. Since August 31, we have not received any state funding,“ told the spokesman.
The flag carrier of the country has been facing financial issues way back before the COVID-19 pandemic hit the aviation industry. The financial reports showed that the airline was continuously making losses in the years since 2014. In 2019, the airline’s net loss increased to almost €8 million compared to a loss of €2 million in 2018, while the air carrier’s debt stood at €97.7 million a year prior to the pandemic.
In December 2019, with an aim to recapitalize Montenegro Airlines and help the struggling air carrier to cover its liabilities to creditors, the government committed to investing €155 million over a six-year period. However, in September 2020, the Montenegrin Competition Agency initiated a formal investigation over the compliance of a state aid provided to the air carrier with the European Union framework and the local state aid rules.
During the investigation process, Montenegro Airlines would be unable to receive any committed financial aid.