Struggling ex-Yugoslav airlines urged to join up

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By SLOBODAN LEKIC, Associated Press

BRUSSELS (AP) — A European aviation grouping is urging the financially troubled carriers of the former Yugoslavia to step up their cooperation to survive fierce competition from major airlines and low-cost carriers.

Ulrich Schulte Strathaus, head of the Association of European Airlines (AEA), said that Adria Airways, Croatia Airlines, Serbia's JAT Airways, and Montenegro Airlines need to "jointly create structures which help them become competitive together."

After the Yugoslav federation broke up in bloodshed in 1991, each of the six newly independent nations set up its own flag carrier. Some of these have already failed, and the others are struggling to cope with competitors.

Throughout Europe, airlines are drastically cutting costs — particularly labor costs — and looking to consolidate with other airlines through partnerships or mergers to counter losses.

That approach has been politically sensitive in the nations of the former Yugoslavia, whose flag carriers are seen as symbols of national sovereignty. Still, because of mounting financial losses, the four surviving airlines are due to hold their first-ever talks later this month on a unified market strategy.

Participants say they will mull opening up their national airspace to all four airlines, along with the possibility of sharing their fleets, exchanging aircraft and crews, and having joint maintenance and catering facilities.

Analysts have noted that all four airlines face similar problems because they are too small to be competitive, and they all have to reduce costs to remain in the market.

"The airlines of the region ... all have to compete against low-cost carriers and the larger network airlines," Schulte Strathaus told The Associated Press. "They are individually trying to do that, but I believe it is worthwhile for them all to discuss how they can jointly create structures which help them become competitive together."

Strathaus stopped short of calling on the four carriers — whose combined fleets operate about 48 airliners — from merging to form a single airline, but noted that "they should start to defragment the airspace."

He noted the failure of Hungary's national carrier Malev — which ceased operations three months ago due to an "unsustainable" financial situation, saying its plight reflected the difficulties facing smaller airlines in eastern Europe at a time of economic recession throughout the continent.

"The situation in Southeast Europe can equally apply to other parts of Europe," Strathaus said.

The AEA represents 35 European airlines, mostly national flag carriers, that carry about 380 million people a year.

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Associated Press correspondent Dusan Stojanovic in Belgrade contributed to this report.

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