Montenegro’s special state prosecution is reportedly probing the operations of flag carrier Montenegro Airlines, particularly a code sharing deal signed in November last year with UAE’s Etihad Airways.

Montenegro Airlines came under investigation in 2015 at the request of its chairperson Daliborka Pejovic, following the discovery of €16mn worth of revenues missing from the 2012 financial statements. The loss-making airline is receiving aid from the government, which had hoped to find a strategic investor in 2015.

Montenegro Airlines and Etihad signed a memorandum of understanding for strategic commercial cooperation, which included code sharing, coordination and joint flights with other partner airlines, in 2015. Under the deal, Etihad Airways also agreed to support Montenegro Airlines’ efforts to improve its organisational structure and management’s efficiency.

According to company sources, quoted by daily Pobjeda, the prosecutors have taken documents related to this agreement.

In September last year, news service CDM reported that economic crime inspectors would start investigating the operations of Montenegro Airlines. The investigation was requested by Pejovic, the chairman of the board of directors, who revealed the missing revenues from the 2012 financial statement. That year, the company reported a €19mn net loss. However, a second check of the financial situation of Montenegro Airlines in 2012 has shown that the actual loss amounted to €35.3mn.

The government is supporting the state-owned flag carrier, providing state aid and transferring debt in capital. In February, the government decided to provide €2.2mn state aid to Montenegro Airlines. The cabinet is also due to decide whether to provide the company with a €1.0mn guarantee so that it can purchase fuel from Jugopetrol.

In early March, the government decided to swap a €2.1mn debt from Montenegro Airlines for equity in the company. Montenegro Airlines will issue new shares, raising its capital to €34.7mn. In December, Montenegro Airlines did another debt-to-equity swap, raising its share capital by €1.6mn. The two swaps were part of the government’s plan to take over a debt, which was part of the loan provided to the flag carrier by Brazilian lender BNDES for the purchase of an Embraer E 195 aircraft.

Earlier this year, the European Commission asked Montenegro’s government for additional information on state aid provided to Montenegro Airlines in the past three years, Pobjeda reported. Most of the funding was provided for the repayment of a €45mn loan taken for the purchase of the Embraer E 195 aircraft.

In 2012, the government adopted a restructuring plan for the flag carrier, including €13.32mn of state aid to be provided over four years for the loan repayment.

The flag carrier was put in the 2015 privatisation plan, but no tender has been launched.