Why Croatia Has No “Public Service Obligation” Flights

It is turning out to be an ongoing blow for the smaller Croatian airports, and it is also a surprising disappointment for the aviation industry in a country that is so heavily oriented toward tourism.

For reasons unknown, the Government of Croatia has failed to run a PSO tender to replace the one that lapsed in March 2020, and it has instead issued four temporary six-month extensions to that PSO contract. One for summer 2020, one for winter 2020 / 2021, one for summer 2021, and one for winter 2021/2022.


These extensions have now ended, also for unknown reasons, and so many PSO routes in Croatia are no longer served. One PSO operator, Croatia Airlines, continues to fly some routes at its own expense. The other PSO operator, Trade Air, stopped flying. PSO routes on 30th April 2022 and has even ended the wet-lease agreement for the aircraft it had been using for its PSO flights since 2016.

Still no new PSO in Croatia – after more than two years

Like many other countries in the world, the Croatian Government subsidises loss-making domestic routes with taxpayer cash as part of what is known as the Public Service Obligation (PSO) programme. This is a method of state aid that is allowed under European Union rules , with some conditions.

Croatia is a country with a unique geographical shape resembling the letter C, and it is also split in half, with Dubrovnik and its surrounding region territorially separated from the rest of the country by land that belongs to Bosnia and Herzegovina. The country also has a very low population density, so air transport is unprofitable due to low demand outside of the summer holiday season, and it has over 1,000 islands.

To aid domestic air connectivity, the following routes are subsidised by the government:

  • Split (SPU) –Zagreb (ZAG) –Split (SPU)
  • Dubrovnik (DBV) –Zagreb (ZAG) –Dubrovnik (DBV)
  • Zagreb (ZAG) –Zadar (ZAD) –Pula (PUY) –Zadar (ZAD) –Zagreb (ZAG)
  • Zagreb (ZAG) –Brač (BWK) –Zagreb (ZAG)
  • Osijek (OSI) –Dubrovnik (DBV) –Osijek (OSI)
  • Osijek (OSI) –Split (SPU) –Osijek (OSI)
  • Osijek (OSI) –Zagreb (ZAG) –Osijek (OSI)
  • Osijek (OSI) –Pula (PUY) –Split (SPU) –Pula (PUY) –Osijek (OSI)
  • Rijeka (RJK) –Split (SPU) –Dubrovnik –Split (SPU) –Rijeka (RJK)
  • Osijek (OSI) –Zadar (ZAD) –Osijek (OSI)
  • Rijeka (RJK) –Zadar (ZAD) –Rijeka (RJK)

The first six are operated by Croatia Airlines, which uses aircraft as large as the Airbus A320 on the routes to Split and Dubrovnik to feed its Zagreb network and the Dash 8 on the other routes.

The remaining routes are operated by Trade Air.

Croatiia Airlines continues to fly its PSO routes despite being there being no PSO in place (yet). Photo: Getty Images

Trade Air has ended all PSO flights

Croatian ACMI airline Trade Air, which has been flying PSO flights in Croatia for a decade, is currently not operating any PSO flights in Croatia at all. It stopped doing so on 30th April, and it keeps putting off the start date of the new PSO contract by 15 days at a time every two weeks because the Croatian Government is yet to finalise the new PSO agreement.

Trade Air was last due to resume ticket sales on 20th July for flights to start on 1st August. However, as of yesterday, the new target date for the restart of PSO flights is now 15th August, and tickets are now due to go on sale on 1st August. This is the fourth time that the start date has been pushed back, as flights were originally due to restart in mid-June.

The rationale is unknown

It remains unclear what the Croatian Government is waiting for. It is the peak of the summer tourism season in Croatia, so the flights would most likely be sold out on a continuous basis, thus minimising the amount of taxpayer funding that would go to Trade Air and Croatia Airlines, which have been selected as the operators that will receive PSO funding.

In the winter months, there will be far fewer passengers on these PSO routes, thus increasing the need for the Government to fund loss-making operations and also having a more harmful impact on the environment. When demand is high between May and September, the environmental impact of subsidising flights is at least put to use.

Trade Air itself is probably not overly concerned. The airline does not use its own aircraft capacity for Croatian PSO flights: it always wet-leases aircraft specifically for its PSO operations, and it uses its own fleet of Airbus and Fokker aircraft for its own purposes ..

In the past, Trade Air has wet-leased a Jetstream 32 from Dutch airline AIS Airlines and a Let L-410 Turbolet from Czech airline Van Air Europe. Reports in Croatian media are suggesting that Trade Air will use a Saab 340 from Sprint Air for this new PSO contract.

The Saab would provide significantly more capacity: 34 seats against L-410’s 19.

Some are questioning whether the PSO contract should exist. Photo: Croatia Airlines

Major loss for some airports

The Croatian Government’s indecision on the new PSO contract is a particular blow for Osijek Airport (OSI) in continental Croatia, which has almost no passenger traffic at all and for whom these PSO services provide a link to the Adriatic coast for tourism purposes, and to the Croatian capital Zagreb for onward air travel.

The flights are also an opportunity for the airport to partially cover its ongoing losses from the revenue it can generate when Trade Air flies there. Its financial losses will now widen significantly.

Should the PSO exist?

For some critics of the PSO program, the Croatian Government’s inaction shows that the routes should not be subsidized at all. This is particularly the case for Croatia Airlines’ flights from Zagreb to Zadar, Pula, Brač, Split, and Dubrovnik, which have not been halted despite the lack of PSO funding.

Critics say that the Croatian Government is using the PSO contract as a means of legally subsidising the state airline, which it owns in full.

What do you think of the lack of a new PSO contract in Croatia? Should the Government have prolonged the old contract for the fifth time to ensure flights could take place this summer? Let us know what you think of this story in the comments below.

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