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(E) Croatia Airlines will be the main benefactors
By Nenad N. Bach | Published  09/11/2003 | Business | Unrated
(E) Croatia Airlines will be the main benefactors


Air Bosna Faces Grounding

8 September 2003

"If Air Bosna is grounded, it is expected that national airlines from neighboring countries, Croatia Airlines in particular, will be the main benefactors, taking over most of Air Bosna’s flights and customers. "

SARAJEVO, Bosnia and Herzegovina--After spending the past two weeks making desperate appeals for funding and warning customers that their flights may be cancelled with no refund, the managers of Bosnia’s state-run airline company, Air Bosna, say collapse is imminent.

The company’s total debts are estimated between $6 million and $7 million--$2.5 million of which must be paid immediately.

Air Bosna’s insolvency is not a result of the downward trends that have plagued the industry following the 11 September terrorist attacks. Experts and officials across the board say that Air Bosna is being grounded because of poor management that has changed hands at least five times since the airline’s inception in 1994.

“So far we are still flying, but we can’t say until when,” said Air Bosna Director Mustafa Eminefendic on 6 September. The airline’s debts are sizable and rapidly growing and the company has no interest in continuing operations, he said.

Air Bosna owes large sums of money to Elmo Aviation--from which it rents planes--various insurance companies and fuel distributors, and Eurocontrol, the European Organization for the Safety of Air Navigation. The airline also owes some $250,000 to the Cedar catering company.

To keep its planes in the air for the next month alone, Air Bosna would need a financial injection of at least $1 million.

“[The debtors] are willing to wait for total payment, but we have to give them something,” said Eminefendic, who has appealed to the founders of Air Bosna--the government of the Federation entity of Bosnia and Herzegovina and the Energoinvest company--for funds to keep the airline operational.

According to statements from government officials and Energoinvest representatives, however, further funding is out of the question.

Energoinvest General Manager Dzemail Vlahovljak told the Sarajevo daily Oslobodjenje on 5 September that the company has no interest in investing in Air Bosna.

“Air Bosna is like a dead baby. Its managers failed to increase the capital we gave them. The management of Air Bosna must explain how it spent $1.5 million of the money we invested,” Vlahovljak said.


In the worst-case scenario, should Air Bosna continue flying, Eurocontrol will likely forbid its planes to fly over European Union countries, and unpaid debts to insurance companies will likely keep the planes from leaving the runway.

“I would like to shut down the company right now to put an end to this agony. But that decision is not mine,” Eminefendic said. “The founders [of Air Bosna] have to make that decision, but they are purposely delaying the process, as if they want to completely disgrace us so that in the end, all the blame falls on the managers. Since they founded the airline, they haven’t invested any money in it,” he said.

Eminefendic said that the situation in which Air Bosna now finds itself is the result of many things, but the gravest problem has been the debts the airline inherited from the former management.

“It’s a shame that we have to shut down the company in a year in which we made the most profits,” Eminefendic said. “We succeeded in cutting debts by $2.5 million and we had three times more passengers than in the past. We still have $2.5 million to pay back. Bills are constantly coming in, and we can’t get control over them,” he said.

Air Bosna management is also expecting severe problems with regard to the tickets they have already sold for flights that are likely to be grounded.

Senka Piric, the manager of Air Bosna’s ticketing agency, told TOL that telephones have been ringing off the hook with concerned customers, most from the United States and Scandinavia, asking about refunds.

“All we can do is to ask them to be patient,” Piric said.

The airline has sold some 3,500 tickets for those future flights, but says that money for those tickets won’t be refunded. “Because of our commitment to pay old debts, we are unable to refund ticket money or even to transfer the tickets to other airline companies,” Eminefendic said.

The Air Bosna director said that the responsibility for covering ticket payments should lie with the company’s founders, the Federation government and Energoinvest.


If Air Bosna is grounded, 110 workers will lose their jobs. Air Bosna employees haven’t been paid for six months, and the company owes them a total of $300,000.

Since its founding, Air Bosna has had serious problems with staffing, equipment, and maintenance. During the nine years of its operation, the airline has managed to train just four pilots at a cost of $150,000. Those pilots were trained to fly only two planes--both of them leased. When those planes broke down and the company could not afford to have them serviced, the pilots were laid off indefinitely or transferred to desk jobs.

Air Bosna has only hired foreign pilots and flight attendants on temporary contracts, as it can ill afford to train Bosnians to fly the new, rented planes that replaced the older ones. As such, all of the airline’s crew has come from Macedonia and Serbia and Montenegro.

“According to the politics of the former management, it was easier to rent planes than to buy them,” Eminefendic said. “But the amount of money spent on renting planes and constant repairs and other expenses could have been used to buy two new planes.”

This year Air Bosna has flown two planes, one rented and one finally belonging to the airline. In addition, the airline managed to expand its flights to include three times as many destinations than last year, mostly in Western Europe and Turkey.

If Air Bosna is grounded, it is expected that national airlines from neighboring countries, Croatia Airlines in particular, will be the main benefactors, taking over most of Air Bosna’s flights and customers.

--by Anes Alic

Copyright © 2003 Transitions Online. All rights reserved.

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