Government Proposes Legal Changes to Allow Subsidies for Flights

By , 04 Oct 2019, 09:27 AM Business
Government Proposes Legal Changes to Allow Subsidies for Flights Wikimedia - Rob Hodgkins CC-by-0

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STA, 3 October 2019 - The government has endorsed changes to the aviation act that create a legal basis for the state to subsidise crucial air links with the country following the collapse of flag carrier Adria Airways, if this proves necessary.

In line with the proposed changes, the state could subsidise flight connections with Ljubljana if other airlines did not set up commercial flights.

The changes had been drawn up by the Infrastructure Ministry as Adria was heading for receivership.

This is one of the two possible steps the state can take in the aftermath of Adria's collapse. The other is to found a new air carrier.

Finance Minister Andrej Bertoncelj said after Thursday's session that Slovenian Sovereign Holding and the Bank Asset Management Company had been tasked with calculating the potential costs of each solution.

The option of setting up a new company was not discussed by the cabinet today.

In line with the proposed changes, subsidies would be possible for connections that are of vital importance for the country in terms of economic and social development. State intervention in such cases is also allowed under the EU legislation.

But Betroncelj added the legislative proposal was yet to be coordinated with the European Commission. A decree will need to be passed and a call for applications published to create equal opportunities for all, he noted.

The Infrastructure Ministry would be able to launch a procedure to set up an "obligatory public service" if no air carrier with a licence of an EU member state offered connections that are important for Slovenia for economic reasons.

The necessary funds would be provided by the government. The ministry could not provide an estimation of potential costs of this service yet. "We have no way of knowing which routes will not be covered by the market itself," Infrastructure Minister Alenka Bratušek told the press.

She would like the legislative motion to be pushed through parliament, so that the state can act if necessary. Bratušek said she had also proposed to coalition partners to consider supporting connections with Maribor, Slovenia's second largest city.

For now it seems that the Ljubljana airport operator, Fraport Slovenija, will manage to restore some of the crucial connections with Ljubljana.

The German Lufthansa and its subsidiary Swiss International Airlines, both of which are members of the Star Alliance, will be offering flights connecting Ljubljana to Frankfurt, Munich and Zurich, in the winter season.

The Belgian air carrier Brussels Airlines, also part of Lufthansa Group, is introducing six Brussels-Ljubljana flights a week.

Bratušek welcomed these solutions, saying she would be particularly pleased if the ticket prices will indeed be lower than Adria's.

Receivership proceedings for Adria Airways was officially launched yesterday, with unofficial information indicating the company's debt amounts to EUR 90 million.

Adria has not published its 2018 business report yet, but a document obtained by the newspaper Finance suggests that at the end of last year its long- and short-term liabilities reached EUR 21.5 million and EUR 54.6 million, respectively.

In the nine months of this year, the liabilities allegedly rose by another EUR 20 million to EUR 90 million.

Receiver Janez Pustatičnik said today that contracts for Adria's hired planes had already been cancelled. "If any real opportunity arose for continuing any potentially profitable segment, so that this would increase bankruptcy estate, we will look into it and act in line with the law."

He expects the situation to be assessed in the coming weeks. The amount of claims, which creditors can file within the next three months, will be revealed in the opening report, he said.

All our stories on Adria are here

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