File of MONTENEGRO AIRLINES – DOOMED FLIGHT brings forth a series of accounts which testify how the state-owned company was systematically destroyed while being funded form the state budget in order to artificially maintain the monopoly in the “Montenegrin skies”. The file reveals how politicization of the administration, absence of individual responsibility and attitudes towards company’s resources turned Montenegro Airlines into an expensive toy on the verge of collapse. The tomorrow’s sequel will provide the responses of the present and former management concerning MA operations.
In the last 25 years, members of the board of directors of the loser company Montenegro Airlines (MA) were mainly officials of the ruling Democratic Party of Socialists (DPS) and unitary Social Democratic Party (SDP) without any background in the airline industry. The fact that the board members have been doctors, historians, political scientists, sportsmen, shows that it was exactly what the government wanted.
According to official and publicly available data, in the period between 2002 until present day, the board of directors of the national airline has had 23 individuals. Seven of them are been lawyers, six engineers, two economists, two doctors, one political scientist, one historian from the Faculty of Philosophy, a former journalist and a pilot. Professions of two members are unknown to the public, but one of them is linked to tourism and the other to sports.
This is confirmed by the analysis of MANS Investigation Center and “Vijesti” based on the official founding documents and changes made in the register of the Central Registry of Business Entities (CRPS) and on the publicly available information. The data on time the individuals spent as board members relate to the period from their entering until leaving office which is registered in CRPS, in accordance with law.
Zoran Djurisic, a mechanical engineer by vocation, was the CEO of MA for years (PhD at the Faculty of Mechanical Engineering), and was in the company from its founding until June 2013. During this period, a husband of the DPS official and the current Minister of Defense, Milica Pejanovic, was also a chairman of the board of director, until Daliborka Pejovic, an official of the ruling DPS and a lawyer by vocation, the State Secretary in the Ministry of Sustainable Development and Tourism and one of the participants of the election affair “Snimak” (Recording), replaced him.
Miodrag Ivanovic (DPS), who has a degree from the Faculty of Sciences, stayed longer in the board of directors and was inquired in relation to the affair concerning the privatization of Telekom.
Saleta Djurovic, a lawyer and spouse of the former Deputy Prime Minister Gordana Djurovic, with a seven-year tenure in the managerial positions of the air carrier, was in MA from 2002 to 2009. Currently, he heads the Council of the Agency for Electronic Communications and Postal Services.
Long-term members were also two SDP officials – Rifat Rastoder and Dzavid Sabovic. Rastoder is an electrical engineer and Sabovic is a lawyer. A former official of the SDP, now the leader of the Social Democrats (SD) and the Minister of Transport and Maritime Affairs Ivan Brajovic was a member of the board of directors from 2005 to 2006. He graduated from the Faculty of Civil Engineering, department of transport.
The official data show that in the period from 2002 to 2005 part of MA were Predrag Nenezic, an economist and a former minister from the DPS, who was entitled to this position as a representative of tourism, a SD member, Jusuf Kalamperovic, a former deputy prime minister and minister of interior who is a lawyer in the SD at present, as well as a former president of the Parliament of Montenegro and the SDP leader Ranko Krivokapic, who is also a lawyer.
Two doctors of medicine, Izet Bralic, a member of the SDP, (from 2012 to 2013) and his party colleague Almir Rebronja (from 2014 to January 2016) “marched through” the board of directors. A former adviser to the prime minister, a historian Zivko Andrijasevic (Faculty of Philosophy), and a present adviser and former journalist Andrijana Vukotic, received payments for carrying out their duties as the board members.
A political scientist served as the board members – Tufik Bojadzic, who as a member of the SDP was engaged in the national airline from 2013 to January 2016. His party colleague Branislav Golubovic was a member from 2013 to 2014, whereas Dusko Lalicevic, a lawyer by vocation and the DPS cadre, occupied the same position concurrently.
From 2014 to 2016, Predrag Markovic, who is a son of the DPS deputy president Dusko Markovic, was a member of the board and commercial director of MA. Data on his profession are not publicly available, but he is believed to be linked to tourism.
Currently, two members of the DPS sit on the board of directors – lawyer Ivo Djokovic, who was a member of the Commission for Prevention of Conflict of Interest and secretary at the Faculty of Economics, and Miodrag Koljevic, engaged in sports – President of RK “Lovcen” and in Tourism Organization of Cetinje, whereas the data on his profession are not publicly available. Two SD officials – Nusret Eco, with a degree in electrical engineering, and Milan Avramovic, who graduated from the Faculty of Civil Engineering – are also on the board of directors.
According to the official data, a pilot Milovan Milic served on the board from 2009 to 2012, almost the only one with a background in the aircraft industry. Apart from Djurisic, who was a CEO, MA had six other CEOs form the end of 2012 to May this year. Since then, the CEO position has been filled by Zoran Kostic, a former secretary in the Ministry of Health.
According to the Statute of MA, the board of directors is responsible for decision-making process at the company’s level – it manages and gives guidelines for company’s business activities, proposes decisions to the shareholders’ assembly and executes its decisions, adopts annual financial reports and the business plan. Furthermore, it makes investment decisions, proposes distribution of profits and cover of losses, makes final decisions on procurement procedures, decides on business cooperation and collaboration with other companies, appoints and dismisses management members and oversees their work. The government, which owns MA, has never challenged the work of the board of directors in the examined period from 2002 to 2016, nor did the Parliament, within its competences, tackle the poor financial state of this valuable national company through its boards.
Losses grew, board members lined their pockets with at least half a million
The official data show that the members of the MA board of directors received €508,000 in total, during the ten-year period, i.e. from 2005 to the end of 2014.
In 2005, they received €34,300, in 2006 €43,600, in 2007 the sum was €62,900, while in 2008, they were paid as much as €103,000. In 2009, the total compensation for members of the board of directors was officially €68,800, in 2010 it was €53,900 and in 2011 the sum amounted to €36,900. In 2012, the sum of €34,200 was paid, in 2013 it was €29,100 and in 2014 the board members received €41,100.
At the close of 2014, the airline showed uncovered loss of €40.5 million, whereas the loss for the current year stood at €9.5 million, which made the total loss reach €50 million. The report for 2015 has not been published, but the company’s unofficial estimate says that for the year in question the company’s loss was around €10.2 million.
In 2009, the accumulated loss stood at €700,000, in 2010 it rose to €4.6 million, a year later it was €8.3 million, in 2012 it reached €14.8 million (this year ended with a loss of €4.2 million) in 2013 it was €35.3 million (annual loss of €5.2 million), and in 2014 the loss totaled €40.5 million (loss of €9.5 million).
Can MA escape bankruptcy?
When asked about the privatization issues and if bankruptcy was an option, since the conditions for it had long been met, the official response from the Tender Commission for Privatization, submitted by the Public Relations Bureau, was that Montenegro Airlines was a company of great value to Montenegro, so the solution would be sought carefully, not by throwing it into bankruptcy, but by selecting a strategic investor (partner) which would ensure successful business of the company.
It is acknowledge that several companies have shown interest in purchasing MA, but ”not such interest that would make us invite tender”, stating that it is envisaged in the plan for 2016 providing that the conditions are met.
“Depending on the investors’ interest, the Privatization Strategy should be tailored, if we want it to be successful. Certainly, some of the models stipulated by the Law on Privatization of Economy will be used”, the Commission stated. They were asked if the procedure would remain secret to which they responded that it “will be public and transparent as before”. In early 2015, the privatization of MA was one out of 13 privatizations which the Privatization and Capital Investment Council declared secret.
February this year, the representatives of MA and the Ministry of Transport had talks with leaders of Etihad, the national airline from the United Arab Emirates, in Abu Dhabi over “a plan of changes in business that should increase MA profitability.” It was acknowledged that the cooperation ”does not include Etihad as a shareholder for the time being”, but the company remains state-owned. The MA management has failed to provide a response concerning the steps taken in order to escape the potential bankruptcy for which conditions have been met since the company has a debt of over €70 million, based on the Information for the government. The former management claims that the debt is not that big, that it has not been realistically presented and that “there was no talk of bankruptcy” while they were in charge of MA, until June 2013.
Foreigners gave up purchasing company – Former management against privatization
When asked if foreign companies were giving up purchasing MA due to the state of affairs in the national airline, they said that financial circumstances were not critical for that, and “just as three years ago they remained against privatization of the company”
“Privatization was not a business of the company’s management, we did not define conditions under which the company was to be sold, the owner was to decide. It is true that the Israeli, Russians and Turks were interested in the company. We do not know why they changed their mind. A recent privatization of JAT, which had 10 times bigger accumulated debt than MA at the time, supports the fact that financial situation is not crucial for privatization. Despite the restructuring process of Croatia Airlines, it is not interested for buyers. Taking into consideration that the state should be a majority shareholder in an airline company in order for it to be called “national”, it is a matter of common sense to see that privatization of such companies is not easily carried out”, the former management replied.
The present management has failed to respond if the crisis in MA has deepened since their arrival, of which overdue salaries are indicative. Parties interested in purchasing MA, such as EBRD, Air France, Lufthansa, British Airways and Virgin Airways, appeared in 2007. A tender invited in 2010 for selling 30 percent of MA did not include the offer, and the tender documents were purchased by two Israeli companies- El-Al and Arkia Israeli Airlines, then Etihad Airways from the United Arab Emirates and Cyprus-based company Innuendo Limited.
Ines Mrdovic
Ivana Gudovic
This text is created with the support of the European Union within the project “Zero Tolerance to Corruption”. Network for Affirmation of Non-Governmental Sector – MANS is solely responsible for the contents of this article, and the views taken herein shall not in any case be considered as those of the European Union.
