Croatian Bus Companies Continue to Flounder Amid Pandemic

Lauren Simmonds

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As Poslovni Dnevnik/Darko Bicak writes, although the Road Transport Act, which is known to the public for its current regulation of the taxi market, also regulated the market of Croatian bus companies operating along public intercity transport lines, but only a recent Government Decree has revived this regulation in real practice.

With its regulations, Croatia has taken on the European Union (EU) practice of determining communal regular transport, which Croatia has defined at the county level and referred to as a public service (PSO).

Croatian counties were thus given the right and obligation to prescribe their county network of Croatian bus companies, more specifically their lines, and the carriers operating along those lines would need to be paid.

Contracts for this sort of public service are typically signed for a very long period, from 7 to 10 years to more precise, and the estimated value of these contracts at the level of all counties stands at around one billion euros. However, the current text of the law has introduced nothing but confusion among county leaders, on two levels: how can those carriers be chosen and how can such a service be paid for at all?

This law, least in part, mentions that when concluding a public service contract they are obliged to respect the acquired rights of those Croatian bus companies and carriers who performed transport on the basis of permits or concessions on the day the law came into force. Despite that, the counties didn’t know how to choose such carriers, nor did they realise that there are a number of carriers that have “acquired” rights in their territories – meaning that they may run the same or similar lines at certain intervals. They were also unsure of what way they might sign such valuable contracts without the need for a public tender process and potentially expose themselves to risks, lawsuits and even criminal charges.

There is also the issue of financing, ie co-financing by the state. These are the key reasons as to why this form of public service hasn’t yet been contracted in any Croatian county.

The recent regulation on the procedure for concluding public service contracts, on the other hand, has allowed counties to enter into contracts either through direct negotiation or public tenders. There is a conflict between traditional Croatian bus companies and carriers that have maintained concrete lines for decades and new players who, perhaps with a lower price, would like to enter the market and take over.

Those traditional carriers complain that existing Croatian bus companies and their lines in county transport are unprofitable, that they have been knowingly accumulating losses for years, operating at the margin of profitability and actually “maintaining their infrastructure” in the public interest. Although the details of these concessions for PSO are yet to be seen, the price mentioned so far is 11.20 kuna/km without VAT and higher.

On the other hand, newer and smaller Croatian bus companies and their carriers who either have limited access to public service contracts or have never had the opportunity to run along those services in that domain are protesting and demanding for open and transparent access to public tenders for that service.

Carriers estimate that the total cost of this type of transport is around 690 million kuna, and as this regards mostly unprofitable lines that are more important for the regional development of the country than for actual earnings, subsidies of an estimated 427 million kuna per year are necessary.

The Croatian Employers’ Association (HUP) emphasises that concluding the first contracts by direct settlement for all bus carriers according to this model is a transitional solution and necessary from the context of maintaining business continuity and providing the basic public service of public regular bus transport to citizens.

”The preparation of public tenders for these needs is a long process and by that time, the financing of unprofitable lines should be ensured in order to prevent the collapse of lines and carriers that have been maintaining these lines for years.

Croatian bus companies who run regular public transport lines have been investing in their tangible assets for years with the intention of making a reasonable profit in the future based on their rights to intangible assets, and these are our markets and our lines,” HUP stated, adding that carriers on local lines have incurred large losses in previous years and care should be taken to have large assets engaged for public needs and to ensure their transition in the future.

They also emphasised that after the expiration of these “first” contracts, public tenders will be announced, with the exceptions defined by EU Regulation 1370/2007 where public bidding isn’t mandatory for internal operators, or in the Croatian case for those owned by local government units.

“It should be understood that these contracts, according to the EU Regulation, aren’t contracted on the principle of a fixed price, but instead they include the separate management of all costs and proof of each cost by the operator, increased by a reasonable profit. The public administration covers the difference between these amounts and the realised revenues from ticket sales. Consequently, these tenders are much more complex and must include a lot of elements that must be built into them. The implementation of these contracts allows existing carriers to adapt to the new way of doing business and the transparent control over the spending of public funds. 

All European Union countries and their respective private carriers, which won the first contracts without a public tender, did it this way. All these carriers can apply for the tender in Croatia, and it’s necessary for Croatian carriers to have the same starting positions, ie that they have experience in performing public service contracts in order to be able to compete in the EU tomorrow,” they concluded from HUP.

One of the transport companies that is potentially interested in the PSO service is the wildly popular FlixBus platform. Ante Grbesa, the director of FlixBus CEE South region, pointed out that the process of concluding public service contracts, which enables counties to conclude contracts through tenders, is certainly one of the positive steps in market transparency.

“Here, first of all, the basic task of all counties is to communicate their needs for a network of lines for which carriers can then offer their service. Transparency and clarity of the use of public money of Croatia’s taxpayers that will be achieved in this way, this is important not only in terms of consumption, but also in terms of choosing the highest quality and the safest organised local transport,” stated Grbesa.

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