Regulatory authorities of the United States of America refused the request of the Serbian airline Air Serbia to fly from Belgrade to USA via Abu Dhabi (where passengers would be transferred to Etihad planes) and to land on Chicago, Washington and New York airports.
This news, published one week late (from the day of reception to public announcement it set in the Directorate of civil aviation of the Republic of Serbia), was a new slap in the face of Serbian national pride – strategic partnership between Serbia and Etihad (which created Air Serbia) and, because of that, went almost unnoticed in the national media.
So, Air Serbia asked the American aviation authorities to allow it to land on these three airports through code-share contracts with Etihad airways and Air Berlin last year, even before it was formally established. Airline company Delta Airlines filed a complaint to that request, which was granted by American aviation authorities after careful consideration.
This decision caused disappointment and odium of freshly-arrived-after-one-month-vacation Dane Kondic, general manager of Air Serbia. “We feel that the decision to prohibit the suggested code-share arrangement is against global trends of aviation liberalization”, said Kondic in the official statement. He especially stressed (which particularly annoyed the Americans) that “Serbia has a crucial position in future development of South-Eastern Europe and Balkan markets”. He went on to announce that “Air Serbia is considering addressing a formal response to the US Ministry of transport”.
Kondic’s attempted manipulation forces us to revisit the accusation of Air Serbia’s manager that the decision of American authorities is “against the global trends of aviation liberalization”. Such accusation is almost comical coming from the manager of the airline which was accused (and proved) by Delta Airlines of non-transparent ownership, receiving government subsidies and that its strategic partner Etihad uses direct infusion of state capital through tax exemptions, fuel and airport fares subsidies and that the government invested in the company’s infrastructure. “These subsidies distort the market and are against international and American aviation policies”, said Delta Airlines in a complaint against Air Serbia, quoting the former head of Association of European airlines, Ulrich Schulte-Strathaus, who said that “Etihad and other Emirates airlines are owned by their government and function as instruments of national strategy…to vertically integrate trade, tourism and foreign policy”.
The fact that the ownership of Air Serbia is still unclear and un-transparent even after six months of operation, worked in favor of Delta Airlines in the dispute before the American authorities.
For example, on January 24th, 2014, the Business Register Agency (BRA) website doesn’t say who members/co-owners of the joint-stock company Air Serbia are, and what is their nationality. It only says that the capital of RSD 16,864,350,000 was subscribed and paid and that on December 19th, 2013 non-cash capital of RSD 606,805,000 was subscribed and recorded. Cash capital (RSD 16,864,350,000) is the money invested in Air Serbia by the Republic of Serbia.
The website of Central securities depository on January 27th, 2014 also says that the only share holder with 100% ownership is the Republic of Serbia (its share value is RSD 17,471,155,000).
When the agreement between the Government of Serbia and Etihad was signed last summer, it was clearly said and broadcasted by literally every media outlet that “Etihad will secure a credit line of 40 million dollars for the Serbian national airline, which will become core capital of the company on January 1st, 2014, based on the appropriate formal approvals”. The BRA shows that this hasn’t happened. It also remains unclear how a “credit line” can be anyone’s share in core capital of any company.
But, this is only one of the curveballs in Air Serbia’s founding contract, which could be further explained by (for example) the now former minister of economy Sasa Radulovic.
The reaction to the decision of the American aviation authorities was only one of fist-poundings of Air Serbia’s general manager Dane Kondic. It was followed by another which established Kondic as a Serbian “diplomatic spearhead”. After lecturing the Americans, Kondic moved on to – Turkey. Kondic became very popular in both heavenly (airline Air Serbia) and earthly (state) Serbia by saying that “the Turks had screwed us for 500 years, now it is time to screw them back”. Translated from diplomatic to business language, Dane Kondic suggested that Serbia should cancel inter-state air-traffic agreement with Turkey.
What made the benevolent Australian Serb start “doing business the Serbian way” after only six months in his homeland?
Briefly, the story (according to several independent sources) goes like this: Kondic, intoxicated with sudden fame of being the first “heavenly Serb”, probably forgot (or overlooked) to plan and include charter traffic for this year in Air Serbia’s business plan. However, that didn’t stop Serbian tourist agencies from arranging summer holidays for 2014 and from hiring Turkish airlines to transport Serbian tourist and paying them in advance. During the previous years, Turkey was one of the favorite summer destinations of Serbian vacationers who spent millions of euros in Antalya, Bodrum, Alanya, Cushadasi and Marmaris. Even the deceased JAT managed to make a profit out of charter flights to these tourist destinations until last year.
In the ecstasy of grand ambitions Kondic forgot this little thing – charter flights, losing a significant amount of money which could “patch” this year’s planned loss of Air Serbia of 56 million euros!!!
Since he couldn’t blame himself for this failure, he decided to punish the Turks and asked the government to cancel the inter-state agreement on air-traffic with Turkey.
Turkey took Kondic’s threat seriously and sent a state delegation to Belgrade to negotiate. On the meeting held the other day, the Government and Directorate of civil aviation managed to soothe the radical Dane Kondic and “the ball was landed softly”, although no agreement was reached, so it was decided that the talks should continue. The problem is that Air Serbia doesn’t have a charter traffic program and there is room for “a deal” since the interest of Turkish Airlines is to fly from Istanbul to Belgrade twice a day (they are even interested in 3 flights on some days).
However, the Istanbul delegation brought another trump to negotiations in Belgrade. A serious threat was also part of the Turkish negotiation package. And that threat could significantly influence the position of Serbia on the European sky.
Right around the time when Kondic diplomatically let loose and prepared to impose sanctions on Turkey, that state turned out to be an unavoidable business factor on the Serbian sky.
This is the part of the story when we introduce a third heavenly player, alongside the national airline (Air Serbia) and the air traffic regulator (Directorate of civil aviation) – Air traffic control of Serbia and Montenegro (ATCSM): those are the ones thrown out of the office by the first vice-president of the Government when they came to ask for 13th salary just before the New Year (this affair was thoroughly described in the Serbian media in late December).
Anyway, new policies are created in the European air traffic control agency (Eurocontrol – in charge of safe, efficient and eco friendly traffic in Europe), so the newest policy divided the European sky into blocks – the English are in charge of the entrance from North America, the Spanish–Portuguese “hold” Central and South America, the Italians “hold” the Mediterranean and North Africa, the Germans and the French have Central Europe, and Austria is in charge of South-Eastern Europe and the entrance from the Near East.
Where does this leave Serbia?
Before the previous management was replaced (last spring) ATCSM managed to become a strong and reputable factor-controller of the sky (thanks to the efforts of the previous management), so they didn’t have to “keep their head down” and enter the Austrian block or defer to Rumania-Bulgaria coalition. The management of Air traffic control replaced in March 2013, managed to develop an idea of 3,000 miles long “heavenly” Corridor 10 (air-route) from the Bosporus to Frankfurt and Munich airports, based on the fact that Turkish airlines make 35% of flights over Serbia. And to convince Turkey and its aviation authorities that ATCSM managed to reduce the delays in its airspace to – zero and that this makes it a desirable business partner.
That heavenly corridor, according to the idea of former management, should secure 10 years of peaceful business for Air traffic control of Serbia and Montenegro, under the condition that an agreement with Turkey (as a growing tourist destination) is reached that all take-offs from Istanbul to Europe don’t go north (Bulgaria, Rumania, Hungary), but south and via the shortest route (partly) over Bulgaria and then over Serbia. That corridor was “officially opened” in May 2013 (after the “green light” from Germany), but not in its full capacity, because several important details were yet to be agreed with Turkey. However, those details were not agreed. And this is why ATCSM had a 7 percent increase in flights in the last year when it could have had an increase of 14% or 15%. By the way, the standard increase of annual traffic on the Serbian sky during the previous years was 10-15%, while that increase in Europe was 4-6%.
In the spring of 2013, the management of ATCSM was filled with party human resources who knew little about air-traffic and air-traffic control and didn’t understand that Eurocontrol is a serious competition of 39 states that all fight for greater profits from their airspace. For example, there is a group RNDSG (Route Network Development Sub-Group) within Eurocontrol, which deals with network of air-routes. Its current manager is a Rumanian who actively advocates that Turkey directs its air traffic to Central Europe (Frankfurt and Munich airports) not over Serbia, but over Bulgaria, Rumania and Hungary. “ATCSM now doesn’t have managers who could cover three or four crucial meetings in Eurocontrol when you should fight for your position. We lost out advantage there”, says one well-informed source from Air traffic control.
“It is of crucial importance for Serbia not to upset Turkey and to reach an agreement with it that flights from Istanbul’s Ataturk International Airport to Central Europe fly partly over Bulgaria and over Serbia and flights from the future airport that is currently being built in North Turkey fly over Bulgaria, Rumania and Hungary. This means that ATCSM management should go to Turkey together with colleagues from Bulgaria and agree the details of flights within Turkey, i.e. before the planes reach the border with Bulgaria. I don’t understand how anyone could even think of “tempering” with inter-state agreement with Turkey and ask for its cancelation”, says an expert close to Serbian aviation authorities.
The income of Air traffic control of Serbia and Montenegro was about 33 million euro in 2002 and 100 million euro in 2012. Turkish airlines account for very high percentage of this income (35%) and any direction of flights of those airlines to the corridor over Bulgaria, Rumania and Hungary (by, for example, cancelation of an inter-state agreement between Serbia and Turkey) will significantly decrease the income of Air traffic control, but also of Serbia and Montenegro.
Translated by Marijana Simic