Dane Kondic (left), CEO of the new Air Serbia company, Serbian deputy Prime Minister Aleksandar Vucic (C) and the CEO of Etihad Airways, James Hogan, join hands after the signing of a partnership deal, in Belgrade, Serbia, yesterday. Etihad Airways has signed a partnership with the Serbian government which will enable the country to launch their new national carrier. Media reports state that Etihad will take over a 49% stake of the new Air Serbia airline. Serbia will hold the the other 51% of the airline while the existing Jat airline is planned to be dissolved.
Reuters/Belgrade
The UAE’s Etihad Airways, which has stakes in Virgin Australia and Air Berlin, will acquire a 49% stake in Serbia’s loss-making Jat Airways.
Serbia is looking to offload loss-making state enterprises, including Jat, pharmaceuticals firm Galenika and the Zelezara Smederevo steel mill, to help contain its budget deficit.
The carriers said in a joint news conference that Abu Dhabi-based Etihad would provide a $40mn loan facility to Jat, which would be converted into equity on January 1, 2014.
The amount would be matched by an equal Serbian government capital injection. Jat would also be renamed Air Serbia.
Etihad, which launched in 2003, is on a buying spree to compete with regional rivals Emirates and Qatar Airways.
The Gulf airline and the Serbian government also would each provide further funding of $60mn through shareholder loans and other funding mechanisms to meet working capital requirements and expand the Air Serbia route network.
“The partnership will provide passengers with an extensive route network and smooth flight connections. It will also consolidate and enhance both airlines’ market competitiveness as the relationship deepens over the coming months,” Aleksandar Vucic, Serbian Deputy Prime Minister, said in a joint press release.
Etihad’s initial $40mn investment in the Serbian company will be converted into equity at the start of 2014, and followed by as much as $60mn in shareholder loans to help renew Jat’s fleet, Etihad chief executive officer James Hogan said yesterday in Belgrade. Serbia will match the total, Deputy Premier Aleksandar Vucic said.
“The Balkans, as a crossroads to the world, is a huge opportunity,” Hogan said. “We believe we’re going to be very well-positioned to take advantage of that.”
The Serbian company is Etihad’s sixth equity alliance member following those with Aer Lingus Group, Air Berlin, Virgin Australia Holdings, Air Seychelles and Jet Airways (India).
Serbia repeatedly tried to sell Jat in the past, including to Hava Yollari, the carrier known as Turkish Airlines. The company will in the future be called Air Serbia.
Etihad’s move is “another step to create a comprehensive network and a global footprint. Europe is a key market within this strategy and it should be to the benefit of JAT and Serbia,” Sebastian Hein, an analyst at Bankhaus Lampe, wrote in e-mailed comment. “The market entry is comparably cheap.”
The Serbian government agreed to assume the liabilities of its flag carrier, “so Air Serbia is a new company, a clean sheet of paper,” Hogan said.
Dane Kondic, former director at Sabre Airline Solutions and former Vice President Commercial at Abacus International, will manage the renamed and rebranded company, overseeing fleet renewal that will start with a lease of two Airbus A319s, under a five-year management contract, Hogan said.
“Over the next 24 months, we’ll negotiate with Airbus and Boeing” about buying 10 aircraft for Air Serbia, he said. The choice will be between Airbus A319 NEO and Boeing’s 737 Max models, he said.