FBiH to sell 49% share in BH Airlines

17/07/2008

In addition to Turkish Airlines, the main contenders for the partial acquisition of BH Airlines are Croatia Airlines and airline companies from Malaysia and Italy.

By Jusuf Ramadanovic for Southeast European Times in Sarajevo -- 17/07/08

[BH Airlines]

At the end of June, the government of the Federation of Bosnia and Herzegovina (FBiH) issued a formal privatisation tender for the state-owned BH Airlines. The deadline for submission of bids is July 30th.

The tender documents require that the prospective investor acquire a 49% share in the company, while the government would retain 51%. Croatian Airlines and Turkish Airlines, as well as airlines from Malaysia and Italy, have expressed interest in this partial acquisition. Media reports suggest Turkish Airlines has not yet submitted a formal letter of interest, however.

BH Airlines currently leases two ATR 72 airliners, with scheduled service to Switzerland, Turkey and Macedonia from Sarajevo, Banja Luka and Mostar. It expects the prospective strategic partner to purchase one more airplane, possibly a jet airliner.

"An increase in the fleet, a strategic partnership and investments in modernisation are keys to continued development of" BH Airlines, Nudzeim Recica, the airline's CEO, told the ONASA news agency. He pointed out that even much-larger carriers like Serbian JAT or Croatian Airlines currently operate at a loss.

Company officials say that during 2007, the company handled about 70,000 travelers, in comparison to 60,000 the year before, a 14.1% increase. It grossed 7.4m euros, which is 9.5% more than in 2006. Still, it reportedly posted a 2007 loss of about 51,000 euros.

The Agency for Privatisation in FBiH considers the partial privatisation an exceptional bargain for investors, because BH Airlines is the only BiH air carrier that has the potential to open new routes and markets and increase its rider load significantly.

However, the airline's market share in BiH is only 15%. Several years ago, it became evident that BH Airlines would not survive in its own domestic market without help.

On the other hand, skeptics consider the arrangement a "catastrophic" move for the government of FBiH, which will have to keep patching airline losses with taxpayer money. They argue that selling off the company completely would be a better option.

As for post-privatisation plans, once the fleet increases, the carrier has announced its intention to introduce flights to London, Amsterdam and Scandinavian cities. It is also negotiating with Montenegro to introduce a Sarajevo-Podgorica flight.