[ad_1]
Air Serbia will lack some 200 million euros to survive at the end of next year, and in the November rebalancing of this year’s budget and the draft budget for 2021, there are indications that the Government of Serbia will certainly help this company, although in an amount still unknown because the planned costs are not publicly disclosed.
The truth is that the estimated shortage of the national airline is not only a consequence of the current crisis, but also of poor commercial operations in the pre-crisis period.
This is supported by the fact that, although many European countries helped their airlines this year, it was generally less generous assistance (on average they cover 35% of revenue), while covering our airline’s deficit would be more than El 60 percent of the revenue of the company co-owned by the Serbian Government with 51 percent and “Etihad” from the United Arab Emirates.
This is the conclusion of the Fiscal Council, which was presented in the evaluation of the budget proposal for 2021, during which the business of “Air Serbia” was analyzed in detail. The Fiscal Council notes that of the total amount of aid that the State will pay to “Air Serbia”, it seems that only a small part (60-80 million euros in two years) refers to the economic problems caused by the pandemic.
– In the latest budget plans for 2020 and 2021, we noticed a part of inexplicable policies on the situation of net budget loans (in the order of about 200 million euros). These funds may be earmarked for “Air Serbia”, but that is not clearly stated anywhere in the budget and accompanying documentation. If a part of the budgetary funds is actually earmarked for this enterprise, the government must publicly specify as soon as possible what it is and explain exactly on what basis (and for what purposes) it is allocated. We estimate that you are obliged to present it clearly to the citizens of Serbia, since they (i.e. the Republic of Serbia) are the majority owner of the company (51 percent), and this state aid will apparently cost taxpayers hundreds of millions of euros.
Air Serbia should also start publishing annual and periodic financial reports, according to the Fiscal Council.
The profit (gross) was actually a consequence of large-scale state aid payments (on the order of 2.5 billion dinars to 6 billion dinars), most of which were used to pay off old JAT debts. And that are recorded in the income statement of this company as an operating income item.
– As according to accounting standards, the repayment of the principal of these debts is not recorded in expenses (but in the balance sheet as a reduction of long-term liabilities), it means that this type of accounting affected only the side of the revenue, so business and overall results were better than they actually are. If we exclude from the income a part of the money subsidized by the State, we conclude that in the entire period observed, this company recorded losses of about 20 million euros (2.5 billion dinars) – affirms the Fiscal Council.
The company made up for the lack of cash to cover past due liabilities through loans. Specifically, in the period from 2015 to 2018, the company obtained two loans from the entity “EA partners” (a total of 120 million dollars) in 2015 and 2016, a loan from the Development Fund (14 million euros). The total funds withdrawn from these loans (more than 18 billion dinars) exceeded the total needs to service commercial obligations and cover investments (of approximately 10 billion dinars). This is the main reason why the structural liquidity problem, the inability to generate enough cash from regular operations to cover past due liabilities, was not visible at first, and Air Serbia did not lack cash to carry out all its activities until 2020 .
– “Air Serbia” has had losses in excess of the amount of capital since its inception, which is mainly a characteristic of loss-making state-owned companies. In other words, the accumulated liabilities ate up capital. At the end of 2019, the total liabilities of “Air Serbia” amounted to 41 billion dinars and were 1.6 times higher than the total assets of the company (26 billion dinars), which means that the company recorded a higher loss to the amount of capital of up to 15,000 million dinars. According to the legislation in force in Serbia, the loss above the amount of capital is a sufficient condition to initiate bankruptcy proceedings – affirms the Fiscal Council.
However, if, even after the pandemic, business continues according to the pattern that was established before the crisis, “Air Serbia” will again be structurally short of € 30 million a year, assuming no additional loans.
– The only way that “Air Serbia” can finally operate independently and sustainably is to restructure the company and change the business model. Air Serbia would be in trouble in 2020 even if there was no pandemic – we estimate that the lack of cash would amount to about 60 million euros – concludes the Fiscal Council and points out that with the outbreak of the pandemic things will get worse, so the deficit of business as usual in 2020 is likely to be higher, by around € 40 million.
[ad_2]
