Interview: Zivko Banjevic, Executive Director of Montenegro Airlines

By , 07 Nov 2018, 12:24 PM Business
Interview: Zivko Banjevic, Executive Director of Montenegro Airlines Pixabay

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November 7, 2018 - The ten-month commercial indicators in 2018 are the best in the history of Montenegro Airlines' business. The most similar ten-month result in the previous years was for 23,519 passengers below this year, and it was achieved with a larger fleet and 2,141 flights more than was the case in the ten months of 2018. This result represents the best introduction to the year of the quarter-century celebration since the national airline was established, said the director of the national airline Živko Banjević in an interview with “Dnevne novine”.

Banjević emphasizes that Montenegro Airlines will mark its 24th birthday and entry into the 25th year of business as a socially responsible company with a donation to the Clinical Center of Montenegro for the procurement of missing medical equipment.

DN: Obviously, you are vastly satisfied with your business results.

BANJEVIC: Of course. For ten months this year, Montenegro Airlines has transported 576,000 passengers in all three categories of traffic, regular, charter and code-share. This result was achieved with 6,704 flights in regular and charter traffic, i.e. with a fleet of up to six aircraft. We've recorded 68,751 or 13.55% more passengers compared to the same period in the previous year, with one additional plane in the seasonal period, as well as 635 or 10.46% more flights in regular and charter traffic. By the end of the year we expect from 50,000 to 60,000 passengers, so the total number of passengers transported in 2018 will be greater than 620,000. 

Our 576,000 passengers represent 25.44% of the total number of passengers served at Montenegrin airports from the beginning of this year until the end of October, in competition with up to 45 other regular, charter and low-cost airlines. MA in the first six months of this year, with the increase in the number of passengers transported by 9.18% compared to the same period of the previous year, recorded the highest growth compared to airlines from the territory of the former Yugoslavia. The preliminary business result of MA for ten months in 2018 is 1.5 million euros higher compared to the same period of the previous year, and it has been the best in the last four years, regardless of some aggravating factors that could not be influenced, out of which I would, in particular, emphasize the extremely high fuel costs. 

DN: You are at the head of the MA for less than two years, and you, along with the Board of Directors, got the "hot potatoes". What is the best scenario, in your opinion, for the state and employees, i.e. for the company? It was recently announced that there is an interest in purchasing of MA ?

Banjević: At the beginning of 2017, Montenegro Airlines was in an extremely difficult position, from the aspect of the financial, commercial and operational business. With the support of the owners, the company's management, managerial and staff efforts, the business is mostly consolidated and optimized, as is shown by the results from the beginning of January last year to the present day. Deloitte's analysis from the end of last year has shown that the continuation of the business gives overall better results compared to alternative scenarios, i.e. programmed bankruptcy and liquidation. The Government of Montenegro, knowing the importance that the MA has for the Montenegrin economy, together with the management of the company, is looking for an adequate model of financial consolidation primarily from the aspect of the debts towards the Tax Administration, Flight Control and Airports of Montenegro, as well as the optimal long-term solution for the company's business. 

DN: The MA Board of Directors, at a regular session held last week, adopted the proposal regarding the Consolidation Plan

Banjević: That's right. The Board adopted the Proposal of the consolidation plan from the aspect of the debts incurred as well as the long-term stable business model, which was sent to the line ministry and the owner. For now, I can say that this is a project in phases, which optimizes the Company's business in a flexible manner, not excluding the option of finding a strategic partner and eventual privatization.

For Montenegro, the most important thing is that there is a functional airline in this region, which will work in the interest of its citizens and the entire Montenegrin economy, as well as represent a stable relationship with the Europe and the world. The interest in purchasing Montenegro Airlines shows us that it is also recognized by potential investors that the Company has achieved significant results on the way to recovery, and that this is done in the right way, the importance of the airline for this area and the market potential.

DN: What was the burden of MA's business over the past year and nine months since you are at its head?

Banjević: In addition to the known outstanding debt to the Tax Administration, Flight Control and Airports of Montenegro, the new management, after taking over the company’s business operations, had to deal with 16.5m EUR of outstanding debt to foreign suppliers, primarily to aircraft owners, airline parts, EUROCONTROL, as well as to domestic suppliers and commercial banks. Therefore, everything that could stop the further business of the company in one day. We succeeded in reaching agreements with everyone so that the continuity in MA operations was not interrupted. We have respected all these agreements and restored the trust of our partners and associates. The high growth rate in air traffic in the already congested European market, with one of the historically most unstable seasons in terms of weather conditions over Europe, has caused frequent shifting of slots for flights, leading to delays on which MA could not have affected, as well as any other airlines. This summer, for the first time in our fleet, we had a Boeing B737-500 aircraft, which was leased together with the provision of all operational services by the partners, due to which the deviations in terms of regularity of the traffic could not be influenced to its fullest extent.  

DN: Mostly for what?

Banjević: It is certainly an enormous increase in fuel prices by as much as 27% compared to last year, which was not predictable. Namely, the cost of air-fuel for these nine months in 2018 is 4.3 million euros higher compared to the same period last year, i.e. by 3.2 million euros higher than the plan for this year. Nevertheless, so far, we have managed to deal with all the difficulties.

DN: And you were often present in the media ... How much has it affected the company's business?

Banjević: Frequent captions in the media, the departure of the MA into bankruptcy, insolvency, etc. have directly affected the decline in sales in certain periods. Almost all foreign partners, primarily fuel suppliers at airports, as well as airport companies, have requested payment of complete services in advance, in order to protect their business from "Bankruptcy and Liquidation of MA". There was also frequent blocking of accounts by Flight Control and domestic commercial banks. After all, we are still here, stronger and more stable. That's how it will remain.

DN: We are witnessing that countries greatly assist the national airlines in covering losses. In our country, the help of the state to MA is not welcomed from part of the public and the media. How would you comment on that?

Banjević: You are right when you say that part of the public and the media did not positively support what the Government and Parliament provided to the Company in the past period. I think that this is primarily due to insufficient information about the importance of MA for the Montenegrin economy. You see, MA in its history transported 8.9 million passengers up until today. Only in the period from January last year to present, when the Government of Montenegro intervened with the change of management and with later support, the Company transported more than 1.1 million passengers. So, more than one and a half times the size of Montenegro. MA is the second largest state-owned company, which has an annual income of about 70 million euros, and whose indirect effects on tourism revenue range from 150-180 million euro per year. Direct effects related to the payment of gross salaries, payment of services to Montenegrin airports, engagement of domestic economy outside tourism, etc., which also remain in Montenegro, are going up to 15 million euros a year. Bearing all this in mind, those actions that the government took in 2017 and later in order to rescue the national airline company, we can call politically accountable and economically wise. 

DN: What was the alternative?

Banjević: The alternative was closing the Company, which would mean that tens of millions of obligations on various bases would be borne by the state, with a direct impact on tourism revenues last year, as well as in 2018 and later, i.e. all the positive effects I mentioned earlier would be lost. All in all, they would pay incomparably more from the country's cash register and lose their airline with a negative effect on the tourism economy. Also, we are really witnessing that countries in the region and in Europe are helping their national airlines, managing economic principles and recognizing their importance for the entire state economy. It has recently been reported in the media that a European state has helped its airlines with a fuel subsidy of about $ 350m, due to the enormous growth in fuel prices in 2018. Taking into account the achieved results, as well as the aforementioned facts about the importance of MA for the Montenegrin economy, we believe that MA justified the support provided by the Government of Montenegro.

DN: How did this year's tourist season go? What are the results?

Banjević: During the high season, from June 1st to September 30th, MA transported 350.677 passengers in all three categories of traffic, regular, charter and code-share, which is 17.86% more than in the same period of the previous year. This result is a record in the history of the company's business, in line with the business plan for 2018, and was achieved with one additional airplane and 492 flights more than in the previous year.

Renting the sixth airplane with bigger capacity has proven to be a good business move for many reasons. We transported more passengers in comparison to the previous year and with six planes, achieved record results. We have returned a part of the market that we could not cover with the situation in the previous year or with five aircraft. We have transported more passengers than ever before with six or more aircraft, which means that we did not stagnate in the period when there is a trend of an increase in the passenger traffic in the airline business at the Montenegrin market, but on the contrary, we contributed to this and took an additional part of the market for ourselves, making additional income. In the end, we also protected our future operations as we showed that we have the capacity for six aircraft and more than 600,000 passengers per year.

During this year's summer season, MA traveled to 27 destinations in 15 countries.

Banjević: MA has become a looked-for partner for cooperation. Now, the complete picture of the company in the world is completely different. Information on the results we achieve, the potential of MA and the Montenegrin tourism industry, as well as the plans for the future, have found their way to existing foreign partners and to representatives of various branches of the aviation industry or commercial aviation. MA is now seen as a desirable partner for cooperation, to these people and companies. 

MA flies to 30 destinations in 16 countries 

DN: Where do MA planes fly? Are all the routes you maintain cost-effective? 

Banjevic: In 2018, MA flies to 30 destinations in 16 countries. Eight destinations are all year long, and they are Belgrade-Serbia, Ljubljana-Slovenia, Rome-Italy, Vienna-Austria, Zurich-Switzerland, Frankfurt-Germany, Paris-France and Moscow-Russia. Seasonal regular destinations are Dusseldorf, Munich and Leipzig in Germany, Lyon-France, London-United Kingdom, Copenhagen-Denmark, and St. Petersburg-Russia. The charter destinations are Tel Aviv-Israel, Naples, Bari, Palermo in Italy, Oslo-Norway, Helsinki-Finland, Bratislava, Košice, Poprad-Tatry in Slovakia, Ostrava-Czech Republic, Brive and Marseille in France, Salzburg and Linz in Austria, Tehran-Iran.  The revenues from charter and co-transport services fully cover all costs, with adequate income. Revenues from all regular lines of MA, year-round and seasonal, fully cover the so-called direct operating costs, such as aviation fuel, airport services, EUROCONTROL and flyovers, aircraft maintenance, etc. However, these revenues cannot fully cover the fixed and additional costs at each destination, and these are all others except the direct flights. That is exactly what makes the minus in the business, which we will try to solve within a long-term business model.

Text by Dnevne novine, on November 5th, 2018

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