The War for Survival in Macedonia's Skies
By declaring a single regular air carrier instead of bringing order to the national air transportation sector, the Macedonian government has created chaos, threatening both passengers and the country's reputation.
AIM Skopje, January 12, 2001
In a day or two, Macedonia could face an air transportation standstill because of a strike the Avioimpeks company has announced to prove its value and foil the intention of the government to promote its competitor, Makedonski Aviotransport (MAT), as the sole regular air carrier in the country. The government confirmed this decision, reached last July, at the end of last year, more precisely in November, thereby ending the 18-month long process of selecting a new national airliner. Instead of bringing order and reducing tensions in the sector, the government has, in fact, caused an all-out struggle for survival in Macedonian skies and created new uncertainties and dangers threatening both innocent passengers and the country's reputation.
Namely, the company that came away empty-handed, Avioimpeks, believes that the government's decision to select MAT as "the only and major actor" in this sector was "nonsense," a shocking, illogical and illegal move. It also expressed doubt that the decision was motivated by the partisan and personal interests of senior government officials, which would like to try their luck in this lucrative business as well. Air transportation annually yields between DM150-200 million in profit.
Avioimpeks manager Ilija Smilev quotes the following arguments: MAT has a fleet of four chartered planes (the property of Yugoslav Airtransport, JAT). Its crews are 90 percent foreign, only four pilots are Macedonian citizens, and it does not have a single mechanic. It hardly manages to service its eight destinations, and by the end of September it had 225,995 passengers. MAT's capital amounts to only DM5 million. As opposed to its rival, Avioimpeks, according to Smilev, owns four aircraft, and has invested US$19 million in the business -- US$14 million for paying off a loan and US$5 million to train its exclusively domestic staff. It rarely hires foreigners. There are 27 pilots working for the company, and 35 mechanics, and a total of 350 employees. Its capital amounts to DM40 million and it regularly meets all its financial obligations. Avioimpeks has regular flights to 15 destinations and by the end of September it had transported over 100,000 more than MAT. This is why in addition to the strike, it will also file suit with the Constitutional Court to salvage what can be salvaged, if there is any chance of that at all.
We will demand, says Smilev, that the government decision that selected MAT be annulled, in the hope that the court will take into account the fact that this company, according to data published in the Macedonian Official Gazette in August, 2000, at the time of the signing of the July agreement with the government, was 95.86 percent owned by a phantom off-shore company, Europe Aviation Financing (EAF), registered in the British Channel islands. It is interesting that this fact was revealed to the Macedonian government by Switzerland, which refused to accept the new national carrier, because it did not comply with conditions specified by a bilateral agreement on regular air traffic between the two countries. Switzerland obtained the data from the International Air Transportation Association (IATA), where MAT was registered in April last year. It is symptomatic that MAT manager Zivko Gruevski initially claimed he had never heard of Europe Aviation Financing. But confronted with strong evidence, he admitted that the EAF used to be a majority owner of the company he is heading, but that it was unimportant because "it is all over and done with." The company was re-registered, and it is now owned by Macedonian citizens.
The story of the disarray in Macedonian air transportation is long and complicated. The chaos started at about the time the country gained its independence, and only grew over the years. It is hard to forecast when it will end, because the conflict of interests has become an issue of survival for both MAT and Avioimpeks. Whereas the employees of the former are elated for being declared the government's favorites, people who work for the latter company are traumatized by the injustice they feel has been done to them, and are trying to protect themselves from being forcefully grounded, but with little chances of success.
The moves that are currently being made, analysts warn, are charged with high doses of adrenaline, which is extremely dangerous in this type of business. The public is being flooded with various announcements, information and misinformation, all creating uncertainty and confusion, and threatening to turn the entire "project" into a farce. To prevent this, they insist, the Directorate for Civilian Air Transportation should cease being a silent observer, and take a more active approach to resolving the crisis, while there is still time for that. And time keeps ticking away, quickly and mercilessly.
The turmoil and fierce exchanges between the government, MAT and Avioimpeks have been going on for a full six months. The controversial agreement announced last July by Bobi Sprikovski, transportation minister in the Ljupco Georgievski cabinet, and later accepted by his successor, Ljupco Balkovski, says that at the recommendation of Pricewater House-Coopers Consultants, MAT was declared a regular air carrier, and not national, as was logically expected based on the terms of the tender. Avioimpeks was declared a charter air company, and both were advised to start merger negotiations as soon as possible, because Macedonia does not need more than one airliner!
True, the negotiations began, but ended quite soon. The two rivals are now far more apart than they have ever been before. Courtesy of the news media, they have exchanged tons of "dirty laundry." Thus MAT blasted Avioimpeks for alleged tax evasion involving DM8-10 million, said that government bodies had to discuss the unsafety of its planes, and that the Avioimpeks general manager was sued for slander. On its part, Avioimpeks made public allegations that MAT owed the state and various partners some DM21 million, that it has dishonorable business practices, and that, in fact, it had purchased its nomination by giving to the ruling VMRO-DPMNE its shares in a Macedonian bank in exchange for being selected as No. 1. It also said that JAT would reclaim its aircraft because of an outstanding DM6 million debt, that MAT did not meet legal regulations and was incapable of independently running the flights it had been granted. Both companies, of course, energetically denied all the allegations, but it is highly uncertain whether they should be trusted at all.
According to the agreement it signed with the government, MAT, say sources knowledgeable on conditions in Macedonia's air transportation business, was given the task of regularly flying to destinations of interest to the state. At the same time it was given the freedom not to do that, if it decides so. The government obliged itself in such a case to engage another company, without specifying its name. It also accepted to cover any future losses, but only after it had purchased 25 percent of the company, under very favorable conditions, that is, with a price tag of DM100 per share at the most. Allegedly it was also agreed that the current owners of MAT would have to sell another 26 percent share over the next three years, without specifying the buyer, and that they could retain a maximum of 49 percent of the shares. Experts warn, quoting past events, that the government should not be the buyer of these shares and openly suspect that if that still happens, it will ultimately create a new public company over which the government would again haggle with foreigners, in search for a strategic investor.
All this, in addition to other vague provisions of the agreement on naming a "national" air carrier in Macedonia -- which itself can be interpreted depending on the interests of the parties involved -- supports widespread suspicion of yet another "shady deal," of a "big political scheme" in which the interests of the state, passengers and air traffic security in the country are being completely disregarded.
Macedonia will in April, 2001, mark the tenth anniversary of the forming of its first airline, Palair Macedonian, which according to cynics destroyed its foundations as soon as they were laid. Given the disorder that currently reigns in Macedonia's skies, the big question is whether they are ever going to be rebuilt. Almost nowhere in the world have so many flaws, scandals and problems marred this rigorously controlled and regulated sector as has been the case in the past decade in Macedonia. Those in charge of the sector, analysts warn, should be aware of this, and in their attempts to restore order should be much less guided by personal or political interests. The events of the recent past are a sign that caution should not be avoided -- no one, for instance, would like to see a rerun of the two serious accidents that happened in 1993.
The latest developments have shown that the year 2001 began with Avioimpeks' refusal to accept conditions dictated by the "encouraged" MAT. MAT had asked it to give up voluntarily and immediately its slots, that is, its fixed flight schedule for regular winter destinations, valid until end of March, 2001. Convinced that this was a violation of international regulations, Avioimpeks strongly opposed aviation authorities, and demanded that it be paid DM40,000 for each flight it was not going to run. MAT responded by rejecting its rival's proposal for a merger, based on available capital invested in a joint venture. Because of their "exchange," Macedonia's aviation authorities had to reschedule the start of the national carrier from Nov. 1, 2000, to Jan. 15, 2001. In an official announcement issued at the end of last year, the Ministry of Transportation and the Civilian Aviation Administration said that they had ensured consent for MAT's nomination from the governments of Germany, Sweden and Denmark. This is to say that despite all of Avioimpeks' protests, only MAT will fly to destinations in these countries, which is fully in line with the popular saying: he who has the gold makes the rules.
Branka NANEVSKA
(AIM)