Etihad Airways to Acquire 49% of Jat Airways / Air Serbia

Etihad Airways has unveiled plans to acquire 49% of Jat Airways.

The Abu Dhabi-based carrier has also been awarded a five-year management contract for the Serbian national airline.

These are two of the key components of a wide-ranging strategic partnership agreement, signed by Etihad Airways and the Government of Serbia, which includes a fleet of new aircraft and a new integrated network of international destinations enabling greater access for business and leisure travellers to Serbia.

The agreement follows the launch of Etihad Airways’ flights between Abu Dhabi and Belgrade in June.

Economic ties between the two countries, valued at EUR 23.3 million in 2012 – three times greater than in 2011 – continue to expand with a number of key government agreements signed in recent months which will see investments in agriculture, defence, technology, and tourism.

Within the agreement Etihad Airways will make available a US$ 40 million loan facility which will be converted into equity on 1 January 2014, subject to regulatory approval. This will be matched by an equal funding injection by the Government of Serbia.

Etihad Airways and the Government of Serbia will also each provide further funding through shareholder loans and other funding mechanisms of up to USD 60 million to meet working capital requirements and support network development for the newly created Air Serbia.

James Hogan, President and Chief Executive Officer of Etihad Airways, said, “We are delighted to welcome Air Serbia to our equity alliance and look forward to working constructively with them and their stakeholders to build a sustainable, competitive, and profitable airline. In addition to creating scale, our renowned business model provides a unique common platform to drive synergies and cost savings which will be of considerable benefit to Air Serbia as the new airline evolves. We will have tough decisions to make but the financial investment by Etihad Airways and the Government of Serbia, together with the positive impact of our joint management expertise and experience, will help ensure this airline, with its proud history, now has an even brighter future.”

Aleksandar Vučić, Deputy Prime Minister of the Serbian Government, said, “Etihad Airways’ reputation, financial strength and stability will be of significant benefit to Air Serbia and we are delighted to launch this strategic partnership. Air travellers to and from Serbia will soon benefit from an incredible range of new products and services. 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.”

The rebranding and renaming of Jat Airways to Air Serbia is a significant moment in the history of the Serbian carrier which is more than 80-years-old. Tail fins on Air Serbia aircraft will feature the Serbian coat of arms and the country's state colours on both sides.

The new livery was designed by a team in Serbia and the United Arab Emirates and provides a new look and feel for the national airline.

Among other planned developments will be an enhanced flight network, codesharing with Etihad Airways and airberlin, adding another 12 destinations in Africa, Europe and the Middle East to Air Serbia’s current network of 33 cities.

The new destinations are Abu Dhabi (complementing Etihad Airways’ daily service), as well as Banja Luka, Beirut, Bucharest, Budapest, Cairo, Kiev, Ljubljana, Prague, Sofia, Varna, and Warsaw.

Among the first new destinations to be launched by Air Serbia will be a four flights a week service between Belgrade and Abu Dhabi.

Complementing Etihad Airways' current daily flights, the new Air Serbia service will start in October 2013 and will move to daily when the new fleet grows to facilitate an increased service.

The new A319 aircraft will be in Air Serbia livery.

The current Jat Airways fleet of 10 Boeing 737-300 aircraft will be retired from scheduled operations, and in the short term will be replaced by leased narrow body aircraft. In the longer term, an Air Serbia order will be made for 10 new narrow body aircraft.

Air Serbia will become Etihad Airways’ sixth equity partner following investments in airberlin (29.21%), Air Seychelles (40%), Virgin Australia (10.5%), Aer Lingus (2.99%) and most recently Jet Airways (24% – subject to regulatory approval).