Croatian Seaplane CEO on Grounding, Lawsuits, Refunds and 2017

By 18 October 2016

After a troubled summer, Europe's first scheduled seaplane operator European Coastal Airlines has postponed its operations in Croatia until 2017. TCN caught up with CEO Captain Klaus Dieter Martin on October 17, 2016, to talk lawsuits, customer refunds, maintenance, bureaucracy and plans for 2017. 

1. We have heard a lot from other parties in the Croatian media about the grounding of ECA planes, and I am sure that many people would like to hear your version. Why were the planes grounded?

Well, as I have already said, and I am even more of the opinion that the grounding of the planes was unjustified and the actions of the Croatian Civil Aviation Authority was wrong. This was our opinion from the beginning, Initially we were diplomatic in expressing this, but now more and more expert opinions are confirming what we said from day one. I now have ten expert opinions from the industry, from other civil aviation authorities abroad, and they have all looked at these findings and come to the same conclusions, independently of each other, that the inspection was wrong, the findings are classified wrong, the inspection did not follow international regulations, and therefore we say the grounding was unjustified. 

2. Can you be a bit more specific in what they said in the report?

Well, what you have in aviation are Level 1 and Level 2 findings. Most airlines will at some point have Level 2 irregularities, which are largely bureaucratic, a signature forgotten. Many airlines companies have a Level 2 finding. A Level 1 finding means imminent danger for the safety of the passengers, the crew and the aircraft. So for example, they would do an inspection and find a crack in the wing or something ery broken. That would be a Level 1 finding, and they would have to stop the aircraft flying. That aircraft, not the whole fleet. So in this inspection, the CCAA have classified as Level 1 flyings (the plane should be grounded immediately) findings that various experts under oath have not even classified as a Level 2 finding. They have classified some findings as a Level 1 finding which are not a finding at all. (At this point, Captain Martin shows me some documents, including the CCAA decision and various expert responses to that - read more here). It is both hilarious and outrageous that an airline in Europe can have 12 findings of which 9 are Level 1 findings - this is impossible.

3. So you think this was premeditated, and they came with an agenda to ground you?

I wouldn't go that far, and I don't have evidence to say that, but it was not an inspection which was done in the way it should be done. The whole attitude of the guys at CCAA - and I am not shy of saying names - the deputy director of the CCAA, Mr Sovagovic, the head of the airworthiness department, Mr Maradin, and Mr Barukcic, they were all very negative towards me and the company, and it even goes so far that we have brought seaplanes back to Europe, we have built 11 airports in Croatia, we have introduced electronic flight books into the cockpits of the seaplanes, which one normally has only in bigger planes like an Airbus 320. We have done all this, and in the middle of the audit, Mr. Maradi turns rounds and says: "We are tired of all these empty ECA promises." How arrogant and ignorant can you be to an investor who has invested 17 years of his life and more than 20 million euro in direct equity. If we include the aircraft financing, we are running at 34 million euro investment in this company. And then the man from the CCAA says he is tired of all these empty promises. 

4. So just to be clear on this Level 1 finding issue, if they found a Level 1, they would stop that one place, not the entire fleet? 

They stop that one plane, that is the rule. and then you have time to rectify the problem, and then you can fly again. But they just pulled the licence for the whole maintenance and maintenance management department. There was no objection to the flying, but objections to the maintenance and maintenance management department - the maintenance accounting department. 

5. So you are 100% confident all the aircraft were safe?

I let my kids fly in the planes. Would you let your kid fly in a plane which is unsafe? The planes are safe. Technical issues happen. No malfunctions we ever had happened in the air, they happened during ground checks. It could be, for example, that when starting up an engine, a fuel pump did not work so we had to cancel the flight, go back to maintenance and then come back again to fly. 

6. The grounding obviously hugely affected your season, coming in the middle of August. How much money did it cost the company?

Up to about 2 million euro right now. 

7. Some Croatian media reported that you are suing CCAA. Is this the case, and is so, on what grounds?

Obviously we are suing the CCAA, as we think the grounding is unjustified. First of all the lawsuit is going to the administrative court, to larify the wrongdoing, and then to the commercial court to get compensation from the CCAA. 

8. How long do you think that process will take?

Hopefully not too long. As you are aware, court cases in Croatia can take endlessly long, but I hope the new government with some political will can expedite the process and we do not spend the next 3-4 years in court. 

9. You have announced that you have stopped operations for 2016, but intend to start in 2017 again, which will be welcomed by many. What is the situation with the plane now, and when do you think flights will recommence?

I have heard the CCAA have said that we have not brought the planes back for service so there must be something wrong, which is just ridiculous. We have qualified inspectors who are licenced and approved who have signed off on the aircraft. The CCAA then decided that one was not qualified any more, so we now have to re-evaluate the entire maintenance of an aircraft for one year. We are not talking about half a day's work, but days and days and days, 100,000 items for one plane in one year. So to get that back in two weeks is unrealistic. They are talking nonsense. It is unfair, as well as irritating that they are talking about things like this to deflect from their wrongdoing. 

We got one aircraft back in operation. The difference with this one was that we only had it in operation for 3 months, so we 'only' had to go back and redo everything for 3 months. We had to re-evaluate and re-submit everything, and then Mr Barukcic was not even available on the phone for 3 days. 

Regarding when we will fly, we could fly tomorrow. All our licences are current. Having filed a lawsuit against the CCAA, I would not like to commit myself to a date at this point. Three planes which we lease in Switzerland will go there for the winter, and the fourth will stay here, and we will see how things develop. 

10. Are you 100% convinced you will fly next year?

We believe in Croatia, and I have convinced my investors to stay on board. It depends now on the Croatian government, very clearly. If they want the project, they have to support the project. I am cofident that the new government, new prime minister and transport minister will recognise the value of the project. We are still very committed to the project and to Croatia, and many people, especially from the islands, have said this is the best thing to happen to Croatia. 

11. ECA's operations were groundbreaking in Croatia, and things did not always go smoothly, which is to be expected. You have been criticised for cancelling numerous flights before the grounding, and the reliability of the timetable has been called into question. What comments do you have on that, and will ECA 2017 be different?

Obviously it will be different. We are developing and growing, and if anyone was following our project very closely, we had for instance in Split a fuelling concession downtown for one year, and the old (please not not the new director, Mr Mihanovic, who is very supportive) port authority director suddenly decided that we couldn't refuel because 'he said so', and there were all sorts of excuses. We had a timetable which needed us to refuel in Split, and now we had to fly to Resnik near Split Airport to refuel, which obviously affected the timetable, as one example. Everyone refuels in the harbour in Split, but we are not allowed to, despite having the best and safest equipment money can buy. 

12. Why do you think he refused?

I don't want to comment on that. This refusal caused havoc in the system. I then had a forced meeting, in which I said I would refuel, and if I was stopped, I would close the whole station down and fire all the staff. Eventually they gave in. 

Let's talk about the island of Rab, for example. We were given the absolute worst location, where no boat moors, so that the first hint of bad weather meant that flights would be cancelled. People get upset, but safety has to be first. There are so many better locations but they did not give us one. 

13. You have obviously taken a huge financial hit, 130 people have lost their jobs, and while many passengers have been refunded for their cancelled flights, some are still waiting, as are some suppliers. What reassurances (and timeframes?) can you give them?

We are fighting to fix everything after that 2 million euro loss. In pure cash terms, we had to return 700,000 euro in ticket refunds, more than 5,000 tickets alone frm the grounding on August 12 to the end of that month. First of all, we are short of money due to the severe financial impact for a small company in a start up phase. Secondly, it is a process of refunding ticket by ticket. We have had a massive reduction in staff, and so the adjustment will take some time, but we are working on it. We will reimburse all tickets, and regarding suppliers, we will pay all the bills we have, but it will take time. We are asking for patience, but all monies will be paid. 

14. The investors can't be happy, but are they still on board?

Most of the investors are still committed. One or two are not happy and want to get out, as they are tired of all the problems, getting concessions and not being able to use them, not being able to get electricity connected etc. We also have some new investors interested, but obviously this grounding did not help, but these expert opinions help a lot. 

15. Will your approach in 2017 be different, and if so, in what way?

Absolutely. Every time I have a visit or inspection from the CCAA, I will have a lawyer with me. I don't think we have done anything wrong. We will continue in good faith, and put trust in the new government. Obviously my trust in the CCAA is highly eroded to say the least, and we will see how this continues. We are extremely optimisic that the new government led by Mr Plenkovic, who has roots on Hvar of course, will be supportive of our project to develop tourism on the Adriatic and improve connectivity for daily life on the islands. 

16. It is now 16 years - are you still as determined to see this project succeed as when you started?

Obviously I am as determined as ever, even more so. I believe in what we are doing. 130 people have lost their jobs because of the wrongdoing of the CCAA, just think about that. 130 families each have one job less because of these guys. I am determined to go ahead and I hope my investors will follow me and continue to put money into a company which has been wrongly treated.

17. If everything goes well, and you start flying again next year, when will you and your investors see a profit?

According to the business model, we planned to move into profit by 2018, but all this, and the 2 million euro loss, has pushed that back to 2019 at least. This is a huge setback for our development plans in Croatia, but also in Italy, Greece and Montenegro.  

18. And finally, what message do you have for future passengers interested in using your service in 2017?

Firstly, I would like to thank the many people for their fantastic support through these difficult times. Some of course were angry, which I can completely understand. I apologise for that, but we did not do anything wrong. This came like a bolt out of the blue for us. In no way did I think that something like this could or would happen. I would like to apologise once again for what happened. We are highly committed to go ahead and build up ECA to the same size again, provide a nice, reliable and fast service, and continue with fast, attractive seaplane connections. We are grateful for all the positive feedback which has kept our spirits up after all the angry complaints, but I cna understand that anger. 

Read more - Croatian Seaplanes: Civil Aviation Authority Had No Reason to Ground ECA - 4 Experts