Etihad to Overhaul Serbia’s JatAirways

 - August 1, 2013, 4:49 PM

Etihad Airways will take a 49-percent stake in Serbian national airline JatAirways under the terms of a deal with the government of Serbia announced Thursday that includes the award of a five-year management contract to Etihad. The deal also calls for Abu Dhabi-based Etihad to match a $40 million capital injection in the airline by the Serbian government with a loan facility that would convert into equity on January 1 of next year. The parties also have agreed to provide further shareholder loans and other funding mechanisms worth as much as $60 million to meet working capital requirements and support network development for the newly created carrier, named Air Serbia.

The agreement follows the launch of Etihad Airways flights between Abu Dhabi and Belgrade in June and several “key” government contracts in the fields of agriculture, defense, technology and tourism.

Plans call for Air Serbia to launch flights between Belgrade and Abu Dhabi starting this September with a leased Airbus A319 as part of an expansion of Jat’s existing 33-city network to include Banja Luka, Beirut, Bucharest, Budapest, Cairo, Kiev, Ljubljana, Prague, Sofia, Varna and Warsaw. In the meantime, management plans to replace the carrier’s fleet of 10 Boeing 737-300s with other unnamed narrowbodies on short-term lease, then to place an order for 10 airplanes for permanent installation in the fleet.

“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,” said Etihad CEO James Hogan.

Once complete, the agreement will make Air Serbia Etihad Airways’ sixth equity partner. It already holds stakes in Airberlin (29.21 per cent), Air Seychelles (40 percent), Virgin Australia (10.5 per cent) and Aer Lingus (2.99 per cent). Etihad’s planned 24-percent stake in India’s Jet Airways remains subject to Indian regulatory approval.