Montenegro’s government decided to close indebted flag carrier Montenegro Airlines at the end of December and set up a new air carrier, named 2 Montenegro, which should become operational by the end of 2021, Capital Investment Minister Mladen Bojanic said on December 24.

The decision, which caused controversy with opposition MPs warning it would have a strong negative impact on the economy, came as no surprise as the government of Prime Minister Zdravko Krivokapic announced earlier in December closure might be the only solution for the troubled flag carrier.

The company had accumulated debt of €12mn from unpaid taxes as of December 2019.

“We cannot make any decision that would be in favour of Montenegro Airlines. We plan to set up a new company with capital from the government. And also to make this company operational by the next tourist season,” Bojanic wrote on Twitter.

He added that the government had no legal options that could save Montenegro Airlines, which would not have been able to receive further state aid before 2023.

Following the government’s decision, Montenegro Airlines ceased operations later in December.

“The government is shutting down the second largest company with 350 employees (among them a significant number of licenced aviation personnel), with annual revenue of around €70mn, which is transporting more than 650,000 passengers and is making a direct contribution to the state revenue from tourism of €180mn,” Damir Sehovic, an MP from the opposition Social Democrats of Montenegro, wrote on Twitter.

He added that the company was operating around 30 routes to 15 countries and generated €13mn in revenue to its suppliers, while the local airports were making profit of around €33mn per year from Montenegro Airlines.

However, Bojanic also said that Montenegro Airlines had not paid social contributions for its employees since 2016, wages were paid with delays and the closure of the company would cost around €50mn to the state due to the accumulated debt.

Following the government’s decision, Montenegrin company Savana announced it was interested in acquiring the indebted flag carrier, public broadcaster RTCG reported. The company was willing to acquire the flag carrier for €1 should the government agree to write off all outstanding debt to the state. Savana was willing to repay all other debts to the company’s creditors. The government turned down this proposal.

On January 1, Montenegro’s Finance Minister Milojko Spajic announced that the government is starting work to launch the new flag carrier, 2 Montenegro, which will employ most of Montenegro Airlines' personnel. Its initial capital would be €30mn.

The Democratic Front (DF), which is a member of the ruling coalition, called on the government to arrest those responsible for the collapse of the flag carrier, including the company’s managers and former ministers and prime ministers.

“Someone must be criminally responsible for the theft of the company and the state. The managerial structures of Montenegro Airlines were appointed and controlled by the government,” Nebojsa Medojevic, one of the leaders of the DF, said as quoted by RTCG.