Croatia launches tender to subsidise domestic routes
The Croatian government has issued a much-delayed tender call for twelve Public Service Obligation (PSO) flight contracts for a period of four years, which will come into effect on May 1, 2022 and run until March 28, 2026. PSOs make European funds available for unprofitable, primarily domestic routes which are considered vital for the economic development of the region they serve. The previous four-year contracts expired back in March of last year but have been extended ever since due to the coronavirus pandemic. No further terms and conditions have been outlined in the latest tender call, which runs until December 24, 2021. The previous contracts were awarded to Croatia Airlines and Trade Air.
The routes which will be compensated and maintained as PSO are: Dubrovnik - Zagreb – Dubrovnik, Split - Zagreb - Split, Zagreb - Zadar - Pula - Zadar - Zagreb, Zagreb - Brač - Zagreb, Osijek - Dubrovnik - Osijek, Osijek - Split - Osijek, Osijek - Zagreb - Osijek, Rijeka - Split - Dubrovnik - Split - Rijeka, Osijek - Pula - Split - Pula - Osijek, Rijeka - Zadar - Rijeka and Osijek - Zadar - Osijek. Compared to the previous four-year period, new additions include flights from Osijek and Rijeka to Zadar. Rijeka Airport had previously urged the Croatian government to do more to include the city in its PSO contracts, but only gained one additional route.
Pre-pandemic average annual load factor on PSO routes in Croatia
Ryanair, which will have three aircraft stationed in Zagreb by the end of the year, has said it will seriously consider applying once tendering for the new PSO agreement begins. Commenting on the potential of operating domestic flights in Croatia, Ryanair recently said, “We are waiting for a tender call for the PSO routes to be published. We will undertake a serious analysis of the terms and conditions. At this point, we can’t say definitively if we will take part in the procedure or not. Our decision will primarily depend on the proposed requirements. However, we would have to look into whether our aircraft, which have almost 200 seats, would be cost-effective on domestic flights within Croatia”. In 2019, the former Slovenian national carrier, Adria Airways, was preparing to take part in Croatia’s 2020 PSO tender process. However, the airline went bankrupt in late September that year. PSO routes are restricted to a single operating carrier.
The value of the new PSO contracts has not been disclosed. Under the previous deal, Croatia Airlines received roughly 11.4 million euros in annual compensation for the domestic services. The largest amount, 4.2 million euros per year, went towards maintaining flights between Split and Zagreb, where the airline was remunerated some 22 euros per passenger carried, although the largest compensation per traveller was on the Zagreb - Pula - Zadar service, totalling 177 euros. The value of Trade Air's PSO contracts amounted to roughly 2.5 million euros per year according to the European Commission. The largest share of the subsidies went towards the upkeep of the Osijek - Zagreb service (1.3 million euros per year), where the airline was compensated approximately 599 euros per passenger.
Existing PSO compensation per passenger
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