State-owned Montenegro Airlines has been operating for ten years. It currently owns four Fokker 100 planes, flying to nine, mostly neighbouring countries.

"Capital increase is the privatization model that will make it possible to restructure the Montenegro Airlines fleet by buying new Embraer aircraft so we can open new lines," Minister Andrija Lompar said.

He said the European Bank for Reconstruction and Development (EBRD) had expressed interest in buying 20 percent of the carrier, but the government expected other airlines and consortiums to be interested too.

Lompar said the tender would likely be announced in the first half of 2008.

Montenegro, which voted to leave its union with Serbia last year, is moving to sell off all remnants of the "socially owned" model of public ownership prevalent in the time of socialist Yugoslavia.

It wants to sell a tobacco factory, a shipyard, two holding companies running hotels in the coastal resorts of Budva and Ulcinj, and the management rights to the port of Bar on the Adriatic coast, as well as Montenegrin Railways.

The nation of some 650,000 has attracted great investor interest, especially in tourism and real estate, since declaring independence. It has been using the euro currency since 2002 and posted estimated 8.0 percent growth last year.