State eliminates direct Air Serbia subsidies from budget in 2023

The Serbian government has not listed Air Serbia as a recipient of direct state subsidies in its draft of the 2023 budget for the first time in nine years. Although the exact amount of funds the airline has received on an annual basis from the budget over the past years has never been specified, the national carrier was always one of over sixty companies “of special importance”, which would divide a lump sum among themselves. In the 2022 budget, these amounted to a total of eighty million euros to be shared between them. According to the company's financial reports, the airline was the beneficiary of 20.8 million euros "from premiums, subsidies, grants and donations" on an annual basis over the past few years. The figure has been significantly decreased from 41.8 million euros in 2016 and is in line with the transaction agreement between the Serbian government and Air Serbia’s minority shareholder Etihad Airways.

The Serbian government has maintained that the funds destined for Air Serbia from the state budget were to pay off old debt owed by the carrier’s predecessor Jat Airways, however, the accuracy of these claims have been contested. Last year, the Serbian Prime Minister, Ana Brnabić, noted, "The Government of the Republic of Serbia did not give a single dinar, euro, dollar or any other currency to subsidise Air Serbia. What you see as income from premiums is to pay off the debt accumulated by Jat, which we have taken upon ourselves. Their [Air Serbia's] financial reports will display these payments until 2023 because this is debt owed by Jat".

The Prime Minister has vowed the government would stand by the carrier in the years to come. "The government of Serbia will maintain its strong support for Air Serbia. This support will be in line with European Union regulations, as it has been so far, however, no one can prevent us or limit our support for Air Serbia", Ms Brnabić said. She added, "Air Serbia plays an important role in the development of tourism, improves our economic ties with numerous countries and strengthens our country's brand. It has been an important driver of economic growth and I am certain that we will see even better results ahead since there are good prospects for further growth". The government has forecast that Air Serbia will post a profit of seven million euros at the end of the year. In September, the state purchased 1.82 million newly issued shares by Air Serbia valued at a total of 15.5 million euros, increasing its ownership stake in the flag carrier by 1.6 points to 83.58%.

Commenting on state subsidies last month, Air Serbia’s CEO, Jiri Marek, said, “In no case do we want to rely on the state. Our job is to be profitable and build long-term sustainability. We may be owned by the state, but we really operate as a commercial company”. In its 2022 progress report on Serbia, the European Commission noted that in the field of air transportation, “Serbia still needs to further align its secondary legislation on state aid with the acquis and provide a solid track record in the implementation of laws on protection of competition and state aid control”.

EX-YU Aviation News

Share this post