Monday, December 30, 2013

Etihad gears up for Air Serbia takeover

Etihad to take 49% stake in Air Serbia on January 1

Etihad Ariways will take over its 49% stake in Air Serbia on Wednesday, including full ownership over Air Serbia Ground Services and Jat Catering. As a result, Etihad will turn the forty million dollars it has invested into Air Serbia since August into equity. A further 200 million dollars will be invested from January 1, 2014. Etihad has snapped up stakes in seven airlines from Australia to Ireland over the past two years. It is currently assessing whether to invest in Italy’s troubled Alitalia. Etihad’s goal is to quickly boost traffic and cut costs on its own network without buying hundreds of planes and expanding globally, company officials say. The airline’s CEO, James Hogan, admits its investment into Air Serbia was initiated by the Abu Dhabi government but denies the airline was forced into making the purchase, branding it instead as a commercial strategy. “If an opportunity like Seychelles or Serbia appears, and we’re asked to look at it, we look at it. Unless it makes sense commercially, we don’t step into it”, Mr. Hogan says.

After Etihad officially takes its minority stake in Air Serbia later this week, the airline is expected to deal with some outstanding issues. This includes resolving Yugoslav Airlines’ order for eight Airbus A319 aircraft from 1998 for which the Yugoslav carrier deposited millions but never received the jets. Furthermore, the cooperation will expand from basics to engines, planes and information technology systems. Hogan said one of the big benefits of Etihad’s approach is greater scale in joint purchasing of planes and spare parts, training and maintenance services. Air Serbia will acquire ten Airbus A320neos ordered by Etihad Airways, scheduled for delivery from 2018. In addition, the Serbian government has confirmed plans to award the national carrier of the United Arab Emirates a twenty year concession over Belgrade Airport. Etihad is also expected to make an aircraft order for its regional subsidiary Etihad Regional, with part of the order tipped to be transferred to Air Serbia in order for it to grow its regional fleet. In the codesharing department, Air Serbia has already placed its flight numbers on Etihad Airways, Air Berlin and Virgin Australia flights. In return, Etihad and Air Berlin have placed their own marketing codes on Air Serbia flights while Virgin Australia has begun codesharing on Etihad’s service in and out of Belgrade.

Etihad’s global ownership stakes

Through its minority stake in Air Serbia, Mr. Hogan describes the airline’s strategy as, “Working with likeminded carriers, covering countries and regions where we would never have the depth to cover their domestic network”. Thanks in part to its airline investments, Etihad carried 8.6 million passengers through September this year, up from 7.6 million in the same period last year. In the third quarter, partnerships provided 23% of passenger revenue, or 247 million dollars, Etihad said. Its revenue rose to 4.8 billion dollars last year, from 2.5 billion in 2008. The national carrier of the United Arab Emirates will hold a 49% stake in Air Serbia until January 1, 2019, with the possibility of extending the partnership.

71 comments:

  1. JU needs to expand it's ATR fleet.
    A few ATR-42s could feed BEG transfer passengers. Those little planes could fly daily to seasonal airports such as SPU and DBV. Those airports don't have many flights during the winter.

    During the summer those ATR42s could fly from INI, and the A320s could take over the seasonal routes out of BEG.

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    1. Talking about BEG-SPU flights (supposed to start earlier this year, March 31st) for some reason these disappeared from Amadeus, last week I found a good deal with Air Serbia for SPU-BEG-BRU with a good connection and I tried to book now via different booking engines and the flights (for April dates) are not there anymore. For DBV the same thing. Air Serbia website reports some kind of error/no results found. Could it be that they're changing the schedule and it's something temporary?

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    2. Probably some changes will occur because they have loaded just 3 flights per week to Dubrovnik, and last summer season on that route there were more than 8300 passengers* so they need at least 5 flights per week to meet demand on this route as it was last season. I hope they will add daily flights in peak season.

      * Dubrovnik Airport provided this information

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    3. The start of Air SERBIA flights to Dubrovnik and Split is postponed until May,15th.

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    4. One more change and postponed... that is 20th serious prolonge...

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    5. Estimated results of Air Serbia for december : passengers 110.000 (+27%), operations 870 (+43%), Load factor 56%.

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    6. Great news..... good luck.....

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  2. I like Hogan's optimism when it comes to Alitalia. Air France-KLM was as optimistic when they came with their own restructuring plan. The problem is that Italy has such laws the protect the unions in the country. Etihad will not be able to step forward, present its cost cutting/restructuring measures and then rely on the Italian government to silence the unions and force them to take the offer- as was the case with Jat Airways.
    The outcome of this would be that the unions would strike, ground the airline for God knows how long and nothing would be done in the end. On top of everything, as of recently, FCO has become far more competitive with airlines such as Vueling and Ryanair opening their bases there; Rome market is not a joke. I fear that Alitalia is beyond salvation.

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  3. Belgrade airport will add smoking areas and sleeping cubicles for its transit passengers! Nice touch!

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    1. Great! How did you learn?!

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  4. Dear Air Serbia guys,
    God bless you with "efficient" Etihad gang well known with professional people and dark intentions...cheers !

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    1. Dark intentions?

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    2. Here is the newest post from my friend, a great read:

      http://aviationoverview.wordpress.com/2013/12/30/air-serbia-101/

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    3. Bright future with James Hogan and australian-indian experts...hahahaha

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  5. I wish good luck to Air Serbia in 2014! Best wishes from Croatia!

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  6. In my opinion, Etihad currently offers the best product up in the skies, along with Qatar and Saudi Arabian. Emirates has been slowing down a lot during the last years - their 3-4-3 configuration is just unacceptable. The strategy mister Hogan has been making use of to make its airline grow, has been of proven success so far: same will be with Air Serbia - no doubt about.

    Btw, here is a detailed trip report on Etihad product/service:
    http://www.aviazionecivile.org/vb/showthread.php/124774-TR-Milano-Abu-Dhabi-Milano

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    1. Well, Saudia is a dry airline so I don't really think it can compete with Qatar or Etihad. Naturally, Emirates' quality has gone down due to a fast fleet expansion. It's not easy keeping the quality on an all-time high when you have 90 A380 on order.

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    2. True thing, but I would def expect more from the 'World's Best Airline in 2013'. Flew Saudia only once, and was positively impressed: hey ok, they do not serve alcohol onboard, but overall a solid product ->

      http://www.aviazionecivile.org/vb/showthread.php/129489-TR-Cairo-Jeddah-Dubai-e-vv-con-SAUDIA

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    3. Have a look at EYs reviews on Skytrax...

      J/C class is OK in EY. The rest, actually below average and I don't think that mere mortals are invited to join.

      Going back to J/C class...how many of them are traveling to/from Serbia?

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  7. Not really related to aviation but I found this article very entertaining. Especially since someone mentioned on here that Slovenes and Croats do not visit Belgrade. :)

    http://www.blic.rs/Vesti/Beograd/430959/600-pijanih-Slovenaca-doputovalo-u-Beograd-zbog-niskih-cena-i-Cece

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    1. 600 Slovenians? So, much more travel with planes to Rome, Paris, Amsterdam, London, Barcelona, Prague, every year.

      I am totally disappointed that it is only 600. In this moment much more Japanese tourists are in Zagreb for New Year eve.

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    2. 600 already came and are drunk (according to article ;)), it will be 15000 people to come today and tomorrow... Welcome to Belgrade!

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    3. Well, 600 (drunk) Slovenians arrived on that one disco train.

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  8. "In addition, the Serbian government has confirmed plans to award the national carrier of the United Arab Emirates a twenty year concession over Belgrade Airport."

    Wait this is a done deal??? They're not even gonna put it out to tender??? Not even a predetermined, pretend one??? WOW

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    1. Why would they? What's the point of spending millions of tax payer's Dinars on a fake tender? Better to do it like this.

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    2. Isn't that against law that such a big deal is made without tender?

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    3. I suppose they will aslo >award< Arabs by letting them do all the conctruction work at the airport. Screw Serbian construction companies, right?!

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    4. NIS has been even bigger....but I can remember any.

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    5. Well they might want to because they (Etihad) will open themselves up to a lot of (justified) criticism and possible investigations. I don't think the EUropeans and a lot of the airlines will like the sweetheart/under the table nature of this agreement.

      It certainly gives Etihad a hell of a lot of power to engage in all sorts of anti-competitive behavior, price-fixing, dumping, that sort of stuff.

      A tender (even a rigged one) would have to some extent given both etihad and the government a cover.

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    6. What's the big deal, most large infrastructure projects in Serbia have been awarded to foreign companies. The Arabs would not be the first ones.

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  9. Why isn't the Belgrade Airport a story in its own right!? It's big news if it's true that Etihad has been given a 20 year concession on the airport - what are the details?

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    1. It was. Ex-yu wrote a whole article about it a month ago. Click the Belgrade link on the left and you will find it. It includes all the details

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    2. You have the entire article, outlining project details for the 20 year concession, here http://exyuaviation.blogspot.com/2013/12/etihad-tipped-to-take-over-belgrade.html

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  10. I'm especially interested in the chain of events leading up to this.

    For example we know that JAT was unprofitable and the government couldn't keep on covering the losses, so it was desperate to sell. It found a savior in the sheik who instructed Mr. Hogan to purchase a stake (purely on commercial merit ofcourse ;) )

    I wonder if the airport deal went completely in reverse? For example maybe Mr. Hogan knew that this amount of investment couldn't be justified in such a small market/region so asked for a sweetener from the sheik who then.... well you get it.

    On the plus side maybe Belgrade is about to get a massive new airport. Surely they aren't just going to renovate?

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  11. I have heard that they will build the second runway and new control tower, new parking space and totally new T1 with additional transit area...

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    1. This photo was made a few days ago - https://drive.google.com/file/d/0B5BQ5KlupgSRamkzdzJ3Qkx1WEE/edit?usp=sharing. It shows that 9 out of 10 air bridges on apron A were utilised at the moment. At the same time 7 of 10 parking positions were occupied on apron C. All in all, 16 out of 20 (80%) positions were used concurrently. And all these ariplanes operated regular, scheduled flights. This has become very common picture ate BEG arround 1 PM (and arround several other arr/ dep waves during a day). And it's winter now, it is hardly imaginable what will be happening nex summer when at least 30 - 40% more scheduled flights can be expected, + charter and some other non-scheduled flights. I think this clearly show how desperatly BEG needs big investments, the ones the airport itself obviously can't afford. So, a twenty year concession over Belgrade Airport to UAE would be very logical step in order that the airport can follw current traffic expansion.

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  12. Many bigger ariports use just one runway....I do not see any purpose to have second one even if BEG has 5 mio PAX

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    1. You have the entire article, outlining project details for the 20 year concession, here http://exyuaviation.blogspot.com/2013/12/etihad-tipped-to-take-over-belgrade.html

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    2. Imagine BEG in 2024....more than 10 mill pax for sure, so second runway should be built at the time and new terminal...if Arabs get concession they would know what and when to invest, they have plans already

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    3. For 10m pax by 2024 BEG would need (1/10)ln(10/3.5)X100 ~ 10.5% average yearly pax growth. It's possible this could be achieved. Also, Arabs have insider info on some of the huge projects planned since they're financing them, so I guess they can make a good judgement on whether a long term investment is viable or not.

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    4. BEG could handle 10+ millions easily with a single runway. Multiple runways are more often built due to varying wind direction at given airports. DOH has a single runway (21 million), SAW (14 million), Gatwick (35 million), old HKG (29 million)...

      What puzzles me is why BUD has got a second airport while the airport was handling half of Belgrade's traffic in the 1980's. Maybe to separate the civil and military operations.

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    5. When talking about Budapest, are you referring to the additional terminal or...?

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    6. Also don't forget that BEG has no night-curfew which means the capacity could easily double without any problem, the runway being mostly unused at night.

      The road 226 that links Surchin with the airport was meant to be a second runway in future. As you can see it is nearly the same lenght and parallel to the existing one 12/30.

      http://goo.gl/maps/juBkr

      - So do i see the general need for a second runway in BEG? No.

      - Would it be overly expensive? No, cause the ground is already levelled and ready so it would require minimum investments. If it could ease the A/B platform congestion, why not.

      - Do i see the need for a cargo center and a local railway station, probably yes.

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    7. @Nemjee - Second "runway", sorry.

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    8. Ah ok then. Yeah, I agree with you. I think Bucharest Otopeni has two runways as well. But I agree with you that Belgrade doesn't need a second runway yet. The example of LGW proves that.

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    9. Well, the main thing that goes in favor of that is that it could be made for relatively cheap money. The runway itself isn't an issue but the platform layout could definitely cause some congestion/gridlocks in the future at peak times. In the case it gets really bad, the second runway would be an option, but the costs would actually be much lower than what it actually takes to build one from scratch. It is already almost ready, as you can see it on the map.

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    10. Gvozdje se kuje dok je vruce, ako imaju lovu nek naprave drugu pistu, zatrebace kad-tad i naravno da je potrebna zeleznicka linija do centra grada

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    11. Those straight roads near airports are common in some parts of Europe and the former Yugo too. Not meant to be a future runway, I get your point that it could be upgraded but were built mainly for the military to use as an alternate runway. Some of these roads were bombed during the Nato campaign in 99.

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    12. I heard/read somewhere that that particular road was created as alternative landing strip - in case of emergency (not just for the army - like the new road to Obrenovac before reconstruction) a plane could land there (interesting regarding the road is that it has some sort of dirt hills parallel to it). Also, I think that BEG already owns the land to the west where expansion was planed in the 80s (there is a plan down the comments).
      Although not necessary, second runway is quite useful, I guess - for peak hours, in case of reconstruction, in case of emergency, but also for smaller private airplanes. In my opinion, they should build it as soon as they can.

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  13. I'm very much confused about the whole investment + management contract deal. Ex-Yu stated "The national carrier of the United Arab Emirates will hold a 49% stake in Air Serbia until January 1, 2019, with the possibility of extending the partnership". What does this mean. Can they extend their mgmt. contract or their investment is done in 2019. If the latter is the case how do they recoup their investment?

    Can somebody please shed some light for me. Thank you.

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    1. It means extending the timeframe of their 49% stake beyond 2019. Seeing as they will operate BEG for 20 years I'm assuming it's in their interest.

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    2. Anonymous 3:20PM: I don't think you understood my question.

      If, for example you invest money into a company that investment doesn't usually expire. With the financial investment you are given an equity share in return (in this case 49%) and unless you (or in this case Etihad) decide to sell it is your forever. Now, contractually you could set up an agreement where you say that you can’t sell your share before 2019 or you can leave the partnership at that time based on certain principles (other partner has first choice to buy you out for X amount of $$ or at a market rate at that time etc.).

      I guess there is a lot we don’t know here. The only way of finding out would be to see the actual contract. However that might be wishful thinking. The other question is how much Air Serbia is paying Etihad for managing the company?

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    3. You can't see the contract. It's a "state secret" under Etihad's request. Mentioned here many times.

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    4. Stake will stay forever but 5 years of managing company would be extended if both partners had benefits

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    5. We will know more in 5 years if Etihad sticks around. It all depends on the success Etihad has with Air Serbia. This article also states that Hogan was told to invest in Air Serbia, his job was to find a workable solution. Within 5 years we will know if this is or looks to be a success along with Etihad's continued involvement.

      This is probably why the Serbian government is so keen to give Abu Dhabi control of the airport for 20 years, to force a 20 year commitment to Air Serbia too.

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  14. This comment has been removed by the author.

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    1. This is what was reported: the talks between Etihad and airBaltic are advancing and that an official announcement could be presented to the public soon.

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  15. Don't understand all this fuss about "mysterious" etihad deal... All I care , as a passenger, is to have reliable, safe, modern airline that can take me to a wide range of cities. The same applies to Belgrade airport. Its totally outdated and needs a huge investment which Arabs can provide...So let them! Would always rather see a dollar from Russians, Asians and Arabs than a thousand from slimy EU countries. Go Serbia!

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    1. +1 as well. Air Serbia is doing great, an airport to match it could do wonders for Serbia.

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  16. We really need a good daily connection to Zagreb as well as activation of Nis airport in 2014.

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  17. I flew BEG - FCO yesterday; B733 YU-AOV seat 8A. Flight on time but legroom is non existant. Mr Hogan or Mr Kondic I invite bot of you to just walk through that cabin and try to sit in that seat!!..... it is a disgrace to any human to try to get someone seated there...what quality and superior service are you talking about??????? this is worst legroom that I have experienced over my many years of flying various airlines. Thnaks God the flight was only about 60-70% full so I managed to sit in row 12. Crew ok but could be less plastic and have a smile every so often. Overall 5 out of 10

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    1. YU-AOU is the Bulgarian aircraft that was leased by the previous management. I am sure that one will be one of the first ones to leave the fleet once the A319s are delivered.

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    2. they are leased for a period of 1 year ...unbelievable but true so they are staying until July / Aug 2014!

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    3. Flew that airliner as well. The worst pitch I've ever experienced on any airline, and I really fly a lot. The crew was ok, still needs some polishing, but overall pleasant.

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    4. @6:29pm, both YU-AOV and YU-AOU are terrible birds, probably the worst that you can get from 733. However, they are leased by previous management in the time when it was already obvious that they will leave. Therefor it might even be that it was deliberately done to undermine efforts.
      Lets not comment those 733's it can't be changed overnight, it will be changed in matter of months. Which is unbelievable anyway.

      @7:05pm, they will stay as one of those 4 for charters, they are getting out from regular traffic in March when A320's arrive.

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  18. I have heard that Jat wants to return them as soon as possible. Terrible contract costing too much...I think as soon as ND returns to service returning process will start.... Prior march. ON is in service after long time but also planed to be returned until the march

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  19. Here you can see some old plan for the second BEG runway. I think it's from the 80's. It looks nice.

    http://img51.imageshack.us/img51/4094/abvisionww4.jpg

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  20. On youtube video was posted 29dec of JU504 BEGJFK flt in the 80s
    Lenght of video 37 min

    If any other videos avbl of JAT in 70,80s, pls share. Tx

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  21. Can somebody give us exact numbers for todays transfer pax at Beg.

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  22. God blessing, prosper New Year with advance and rapid grow to AIR SERBIA. From Mr. D.Kondic and Mr.
    S. Sipka, to all staff. Corse including ETIHAD AIRWAYS, from midnight tonigh taking managerial roll of proud AIR SERBIA . God bless. Again on the way to Sydney my hope is to be flying with our wings.
    Rodney Marinkovic,AME(ret) Kraljevo / Griffith Aus.

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