BH Airlines: Waiting for new partners, or a new government

Two years ago, after “Turkish Airlines” terminated the partnership with “BH Airlines, a more-than-a-year long fight for survival of the company began. The main goal was finding a new strategic partner. Without it, this state-owned enterprise was condemned to failure.

In the last few days, the public was once again been informed on large losses in what once was the leading national airline. Ever since “Turkish Airlines” left BH Airlines, the Government of Federation of BiH, who held the majority ownership in their partnership, has been negotiating with several well-known international airlines, but after two years there are no results.

The Federal Government owns the controlling package of shares (51%) of “BH Airlines” and subsidizes the company with cca 7 million KM yearly. But, despite the subsidies, the losses continue. After the withdrawal of Airbus A319, the company was left owning only two small ATR planes. According to the Federation’s Minister of Transport and Communications Enver Bijedić, it was a way for the company to “stay alive” until the situation improves.

In June 2012, when the board of “Turkish Airlines” decided to terminate the partnership with “BH Airlines” established in 2008, at first they haven’t revealed the reasons for company’s withdrawal. Few months later, its Chairman Hamdi Topcu said that “BH Airlines” has never started to function properly, one of the reasons being that company’s management hasn’t been established for a few months after the change of government in FBiH. The new CEO of “BH Airlines” hasn’t been appointed until the end of that year. The decision on the appointment of the Board of Directors of “BH Airlines” was adopted in mid-June 2012, but only in December has the Government accepted the appointment of Amir Jažić for the position of CEO. With the new year and the newly arrived management, there were promises of recovery of the company, as well as the establishment of new routes that would be profitable. The Federal Government has announced they will be looking for a new strategic partner to take over the minority of company’s shares.

But even before the appointment of new management in October 2012, the ministry in charge announced there were possibilities of strategic partnership with few other companies. „Tarhan & Tower Airlines” from Istanbul, the Malaysian company “AirAsia”, Libyan “Buraq Air” and Turkish “Atlas Jet” were mentioned as potential partners. Negotiations with “Tarhan & Tower Airlines” were conducted in late October 2012, but they failed

In January 2013, it was not certain whether any of the aforementioned airlines would establish the partnership with “BH Airlines”. In March the same year, the Federal Government has started to panic because of unstable financial situation of the company. Minister Bijedić met with the CEO of Hypo Alpe Adria Bank to arrange the rescheduling of paying the debt this state-owned enterprise and to prevent account blockage. At the time, the airline canceled all flights due to a plane malfunction.

Under an agreement with the bank signed by the FBiH Government in March 2013, company’s obligations were set at 5,031,477 KM. By this time, the amount paid is 531,477 KM, reducing the total debt to 4.5 million KM by mid 2014.

In October 2013, after the the FBiH Government’s negotiations with the delegation from the UAE, Minister Bijedić said that two companies might take over “BH Airlines”, “Etihad” or “Fly Emirates”: “We still didn’t achieve anything specific, so the FBiH Government is still looking for partner for „BH Airlines” I believe that the only solution for this company is selling it. But we’ll see who will make an offer. We are ready for any negotiations.”

By the end of last year, it seems that the minister’s hopes were gone. In December, he stated that the financial maintenance of BH Airlines was nearly impossible, adding that the company, which is overstaffed and owns only two planes, has little chance for survival. He suggested that the only viable solution for both entities’ crumbling airlines, would be their merger into one national airline on the state level.

In 2014, FBiH auditors published a report on numerous irregularities in functioning of the company and gave negative opinion about company’s financial statements. As stated in the report, the assets of of this company were insignificant, and the business, with the ever-present insolvency, was burdened by large and overdue credit obligations in the amount of about 30 million KM, while operating loss for last year amounted to 4,485,667 KM. Auditors found that management did not pay social security contributions from April 2012 to December 2013 in the total of 1,197,748 KM. Also, it was not possible to confirm the state of liabilities to foreign suppliers in the amount of 2,757,475 KM. Total revenues in 2013 amount 17,386,038 KM and decreased by 38.39 percent in comparison to the previous year. As an additional burden, there are fourteen legal cases against the company in total amount of 4,064,582 KM.

All things considered, it is difficult to expect that any solutions for „BH Airlines” will be found before the upcoming elections. The problem of debts and operations “BH Airlines” will probably await the formation of new government.