Wednesday, July 22, 2009

Fleet renewal needed

Easier said than done
Milan Jovanović, the president of the Jat Airways Pilots Trade Union has said that a new fleet is necessary so that the airline can adequately recover. He believes that extending the lifeline of the current fleet will cost the carrier more than investing into new aircraft. The pilots union welcomed news from the management that the carrier will be leasing 2 Boeing B737-700 next generation aircraft which are expected to enter the airline’s fleet during September. He also stated that the Serbian Government has neglected the national carrier for many years and that it must make a decision whether it wants the airline to survive.

After last year’s privatisation fiasco, Jovanović said that the airline should not be sold in the near future because many issues within the airline still need to be settled before the carrier can look for a partner. He also commented that the situation within the union is stable and that Jat’s pilots are currently happy with their conditions however he noted that many pilots are leaving the airline because they receive better offers from East European and Asian carriers. Despite the fact that Jat has too many employees, the only area it does not have too many employed is the pilot sector. He says that new pilots have been recently employed at Jat. The airline pays its pilots 3.000 Euros per month, which according to Jovanović is quite low when compared with other airlines in the region.

Jat Airways currently has 1.200 employees. The airlines downsized its workforce in the last 12 months by 600. Just before the collapse of Yugoslavia, the airline had nearly 9.000 employees.


  1. What's the realisation for JAT:
    - 10 ageing 737-300s that can't be replaced overnight
    - 5 ageing AT7s that could be replaced, but won't solve the airline's problems
    - 2 leased aircraft coming in (when really, 5 are needed)
    - a tough economic outlook
    - competition from neighbouring airlines
    - high management turnover (7 CEOs since Petrovic murder 10 years ago) resulting in lack of consistency and long-term vision
    - good (though stand-alone) maintenance department

    If you are in charge of that list, you need to make some tough decisions.

    The worst-case scenario is that the government dumps the airline saying the value of the fleet etc has got to so low that it's not worth keeping. You also have to consider the need to keep people employed, and the catastrophic events if this legacy flag carrier goes under. Who will pick up the pieces?

    The airline needs to make some quick decisions about what it needs to do to survive. They've done all the internal cost slashing possible one would assume by this stage, it's time serious investments came through, and a proper plan for a new fleet.

    Assuming around 17-18 aircraft remains what is needed for the future, a year (say 2012, 3 years away) needs to be the deadline that a proposed list is in place:
    6 x AT7s (new)
    4 x 737-700 (1st 2 already leased)
    4 x 737-800
    4 x Sukhoi 100/E-190

    If that above fleet would last at least the next 15 years (like the last fleet has done for JAT for well over 20 years) then the airline will survive.

  2. You've addressed a few points here:

    1) There is still a HUGE amount of cost savings that can be realised, Jet have barely addressed any of those issues, apart from the new maintenance contract

    2) It's completely outrageous to think an airline with such a small fleet would need 3 fleet types - this makes the already out of control cost situation worse

    3)The article mentioned the 'privatization fiasco':

    The government of Serbia only has itself to blame - trying to sell a 51% stake for a price of EUR 51m is just totally on another planet -

    Jat (like almost all small flag carriers in ex-YU) is actually worth less than zero (if you can't believe this, than reference the sale of BA's subsidiary BA Connect to FLyBe back in 2007 where they actually paid several tens of millions to FlyBe to take BA Connect).

    4) As for 2 737-700s, they won't be arriving anytime soon as the sign off has yet to come from the Serbian gov't...

  3. Jat will not be leasing the B737-700 planes (surprise, surprise), as the new CEO has canceled the previously made decision according to an article in today's Politika newspaper:

  4. There is no room for optimism in JAT after publishing of very poor business result in 2008. /BDO BC Excel, july 2009./ If they could survive only solution is small regional airline, maybe feeder, with 5-6 ATR-72/42 and no more than 500 employees.


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