Montenegro Shuts Down Its Flag Carrier

A Dependance on Tourism

According tot he Balkan Insight report, In early December, the government, a coalition of three blocs, took power with a majority of seats in the parliament, in effect ending three decades of uninterrupted rule by the Democratic Party of Socialists, DPS. A year ago, the DPS-led Government said it would invest €155m in YM over the next six years.

The reason for the investment was that, given Montenegro’s dependence on tourism, the collapse or closure of the airline would have a significant effect on the economy. But this year, the European Commission expressed concern about the government assistance, saying that the YM case would be a significant test of Montenegro’s control mechanism of state aid.

The president of the Council of the Agency for Protection of Competition, Miodrag Vujovic, said Ryanair (FR) had appealed to the European Commission to investigate whether YM had received more than €43m in state aid.

A Negative Financial History

The European Commission only approves aid for those airlines that had operated positively before the pandemic crisis took its toll, “which is not the case with Montenegro Airlines,” Vujovic said. Since its founding in 1994, successive DPS-led governments have been helping the airline remain afloat.

The government forgave YM €4m in debt repayments in April 2019. Additionally, a study conducted by the NGO MANS showed that by 2014, the government had donated €58.5m to the airline. Still, the announced closure provoked outrage from YM management and opposition parties, including Montenegrin President Milo Djukanovic, now the opposition leader of the DPS.

In addition, Social Democrats and Social Democratic Party opposed the move warn of the effect on the nation’s critical tourism industry. Nikola Vukicevic, chairman of the management board of the airline, challenged the government’s estimates, saying the closure would cost €100m and leave 360 people unemployed.