Croatia Airlines (OU, Zagreb) has issued an open letter to the operator of Zagreb airport, demanding fee reductions and incentives on par with or exceeding those granted to Ryanair (FR, Dublin Int'l), which is set to open a base in the Croatian capital in September 2021.

"Passengers and the Croatian public have the right to competitive prices and complete and objective information. It is unacceptable for the national airline to finance the entry of new competitors into the Croatian market," Croatia Airlines wrote, alluding to its position that incentives for Ryanair would be financed from fees paid by Croatia Airlines.

The flag carrier said that while it welcomed competition, it demanded a level playing field. It alleged that incentives publicly offered to Ryanair under the recently adopted Growth Incentive Model at the airport were distorting the market and would have an adverse effect on Croatia Airlines.

Croatia Airlines currently accounts for more than 50% of revenues of Međunarodna zračna luka Zagreb (MZLZ), the concessionaire of the airport. MZLZ itself is a consortium of six companies, including international airport operators Groupe ADP and TAV Airports, as well as Marguerite, International Finance Corporation, Bouygues Bâtiment, and Viadukt.

The carrier indicated that if it had access to the same terms as granted to Ryanair as a new entrant to the airport, it would have reduced its fees paid to MZLZ in 2019 by HRK135.4 million kunas (USD21.4 million), an amount significantly exceeding the airline's net loss for that year.

In particular, Croatia Airlines took issue with the narrow definition of "existing routes", which are enumerated in an appendix to the list of the new fees on an airport basis, rather than city or agglomeration. Because of this, even though Croatia Airlines connects Zagreb with Frankfurt Int'l, London Heathrow, Paris CDG, or Rome Fiumicino, Ryanair will be awarded new route incentives for its proposed services to Frankfurt Hahn, London Stansted, Paris Beauvais, and Rome Ciampino.

"We appreciate the efforts of MZLZ to ensure new traffic but only on the basis of impartiality, the same conditions for all companies, and without concessions. The denial of similar or even greater discounts to Croatia Airlines, taking into account the volume of traffic and the number of destinations, endangers fair competition and inflicts direct damage to the national airline which is majority-owned by the Republic of Croatia," the carrier said.

Ryanair is set to begin operations to Zagreb in early June, initially serving the city from existing bases. It will open a base at the Croatian airport on September 1, 2021 with two A320-200s operated by Lauda Europe.

Ryanair did not respond to ch-aviation's request for comment, while MZLZ said it would discuss the issue privately with Croatia Airlines.