The Croatian government is preparing a new tender for services of general economic interest (Public Service Obligation, PSO) to secure funding for domestic air routes after the current contracts expire on March 28, 2026. The so-called PSO regulations allow for the provision of European funds for unprofitable, mostly domestic routes that are nevertheless considered essential for the economic development of the respective region. The previous award in November 2021 awarded the multi-million euro contracts for twelve domestic routes to Croatia Airlines and Trade Air, which have historically been the only recipients of state subsidies for domestic flights. A new tender process is expected in late 2025 or early 2026.
Routes currently maintained and compensated as PSO services include Dubrovnik-Zagreb, Split-Zagreb, and various routes connecting cities such as Zadar, Pula, Brač, Osijek, and Rijeka. However, there are efforts to revise the list of PSO routes. For example, Rijeka Airport argues that its limited inclusion in the current system undermines regional connectivity and limits its potential for developing year-round air services. At the same time, questions are being raised as to whether flights from Zagreb to Split and Dubrovnik are truly unprofitable and thus compliant with PSO guidelines. The discussion surrounding the adjustment of the route network reflects efforts to optimize efficiency and the benefits of subsidies.
The Irish airline Ryanair, which already operates bases in Zagreb, Dubrovnik, and Zadar, has expressed interest in participating in the Croatian PSO tender and potentially launching domestic flights in the country. Ryanair announced a thorough analysis of the tender conditions and stated that the decision will primarily depend on the proposed requirements. This will also examine whether the use of its own aircraft, which have almost 200 seats, on Croatian domestic flights would be cost-effective. The Croatian government had already noted "significant" interest from foreign airlines during the last PSO tender in 2022, indicating a potential increase in competition in Croatian domestic air traffic.
Croatia Airlines, which is undergoing a comprehensive fleet conversion to an all-Airbus A220 fleet, is expected to conclude wet-lease agreements for turboprop aircraft next year. A portion of these aircraft are expected to be deployed on PSO routes. The development of Croatian domestic air traffic and the awarding of these important state-supported routes will therefore be closely followed in the coming months, as they significantly impact the country's future connectivity.