Saturday, August 9, 2014

Government to publish Etihad contract

Photo by Jost Gruchel
Serbia to publish Etihad deal next week following new revelations

The Serbian Prime Minister Aleksandar Vučić has announced that the secretive deal between the government and Etihad Airways for its 49% stake in Air Serbia will be made public next week. The publication of the agreement should outline investment commitments made by both the state and the national carrier of the United Arab Emirates, which has been a source of great speculation and interest. The announcement comes over a year after the takeover was signed and eight months since the government first promised it would make it public. However, facing increased pressure, the PM said all agreements made with foreign investors will be published next week. “There is nothing to hide. The contract with Etihad is clear as the sun because no one stuffed money in their own pockets or robbed the country”, the PM said yesterday. He added, “Everything will be shown in black and white”.

Opposition parties have voiced their concern over the agreement saying it is damaging to the state. On Thursday, the Balkan Investigative Reporting Network (BIRN) leaked parts of the contract signed with Etihad. According to BIRN, the country has invested more in the establishment of Air Serbia then its UAE partner. It states Serbia had to pay over 90 million dollars in 2013 alone while the UAE invested 40 million, in the form of a loan, for a 49% stake in the company. In addition to this, the state has yet to pay debts that were accumulated by the former national carrier Jat Airways, which are estimated at over 230 million dollars, according to the agreements published by BIRN. However, since most of the debt owed by Jat is to state-owned companies, it is unlikely these will ever be repaid. Jat Airways had no outstanding debts towards foreign entities.

Yesterday, opposition parties called on the government to resign over the deal, while the PM refuted BIRN’s claims. Earlier this year the Serbian Commission for Control of State Aid disclosed parts of the investment deal the Serbian government and Etihad Airways made in the restructuring of Jat Airways and its transition into Air Serbia. According to the Commission, plans drafted between the Serbian government and Etihad Airways will see the financial burden of transforming Jat into Air Serbia shared by both sides.


  1. In the end the Serbian Government invested less money in this deal then the Slovenian government did to save Adria just a few years ago.

    1. That is not true! Not even close!

  2. JAT was falling apart and would have gone bankrupt by the end of last year. The govt. would have had to pump money into them anyway, like they have done for so many years. If they got Etihad with that and gave their airline a chance to be part of that alliance than I am fine with that. As for the debt as the article says, its all to local public companies which would never have been repaid anyway

  3. I am sure the Serbian government will pump millions and millions into Air Serbia until 2018 and the Airport Belgrade (also tax payers money) pays also a heavy price tag, due to lack of taxes and services paid by AS. On the other hand Mr. Hogans "investment" is a handful of old A319 that are leased and a flock of international yuppies who are spending taxpayers money to "teach" an airline how to fly. Same strategy with Alitalia now, collected 300 million € quickly before "take over".....

  4. Will be interesting to read

    1. That is if they even publish it.

    2. It has been published.. .Lets hear it Air Serbia haters!

  5. If bankruptcy was not an option (that's a different story), this is by far the best deal anyone could get for a defunct airline.

    Sure taxpayers are going to pay the price for this deal. But they have been paying it for a long, long time - ever since JAT came into existence. This is actually one of rare opportunities to make the airline a profitable business, so they wouldn't take more taxpayers' money.

    As far as EY is concerned, just taking them into the "equity alliance" and providing services at better prices (leasing, service, etc.) would have been more than enough. Everything else is a cherry on top.

    So, if Serbia really has to have an airline, this is as good as it gets for now.

  6. I wonder why no one was concerned when millions were being poured into JAT and JatAirways*** The only way you can get rid of financially subsidizing an airline is by selling it 100%

  7. OT but still a Serbian topic

    LF for Norwegian Air Shuttle to BEG these day from Oslo

    THURSDAY -186/186
    TODAY- 143/186

    1. Also Belavia not doing so well on Minsk-Budapest-Belgrade-Budapest-Minsk flight as was to be expected. There numbers went down especially after JU introduced Budapest which is really doing well. That's why Belavia will be operating 1 flight per week to BEG this winter

    2. great numbers for DY

  8. Can anyone tell me where can we find the agreements for concession of Zagreb Airport, Macedonian airport and Pristina Airport? Why haven't they been published in full and made available to the public? Has the public put pressure on their governments for these agreements to be published and have opposition parties called these governments to publish these documents? Thank you.

    1. Seriously? Don't say something just because you want it to be that way!


  9. From what I hear (can't confirm anything) ASL is already negotiating for an A330 which won't come from Etihad after all. They are planning to bring forward flights to US to May 2015! Possible flights to China as well. Let's wait and see.

    1. You are not hearing anything, other than what is in your empty head .... stop making up this stuff ... there are no discussions on this topic whatsoever

  10. Two key points from BIRN article:

    „Jat Airways“ je dugo godina važio za velikog gubitaša koji je opterećivao javne finansije Republike Srbije, ali nikada do kraja i na transparentan način nijedna prethodna Vlada i uprave koje su Vlade imenovale nisu saopštile tačne podatke.”

    This explicitly identifies cause of financial mess Air Serbia inherited. However there is no journalistic interest in the article to further trace responsibility to those they identified.

    On the estimate of Jat’s debts article mentions:

    “nije bilo moguće proveriti kako je procenjena ukupna vrednost „Jat Airways“, nepokretne imovine i slotova”

    That is the key point for any discussion about Jat deal. Without publishing all the details of valuation process and/or verifying valuation by an independent body, labelling Jat deal as “good” or “bad” for the stakeholders remains purely a political tool.

    Outside of that article, couple of things of interest:

    Without looking into reasons why Jat/Etihad deal was not published so far, I’d like to point to other cases where others and even EU keep details of contracts under the wraps where needed. Just recently EU worked out the trade deal with Canada but details will remain secret for a while. Link with more info:

    While I will make separate comment on Alitalia-Etihad deal, please note full details on that deal are still secret, and deal is not likely to close before Jan 1 2015. Deal is described as worth 1.75 billion Euro, out of which Etihad invested only 387.5 million Euro (22%) or total Etihad investment of 560 million euro (combined with frequent flier and LHR slots, or 32% of the deal) for the 49% Etihad ownership of new Alitalia.

    1. Regarding the JAT's value they couldn't confirm imo something is worth just as much as somebody is willing to pay for it. In JAT's case the fact that nobady wanted to touch it with a 10 foot pole or buy it as is says it all about what was it's value was.

  11. OT: Alitalia-Etihad deal and impact on Air Serbia

    Alitalia-Etihad deal was announced yesterday. Without repeating details that are widely publicized, focus of this comment is on a few hints on how this deal might impact Air Serbia.

    While Alitalia will have to reduce its shorthaul fleet, there is no indication this will impact Air Serbia in a negative way or turn Air Serbia into “Alitalia feeder” as rumored. If anything, we might see more positive synergies between the two airlines.

    As negotiation rumors over the last few months pointed to Alitalia planning to expand Americas routes from FCO, some feared this would destroy Air Serbia aspirations to launch North America flights. However new plans for the next five years are mild and point to increasing some frequencies on existing routes and adding only one new route to the USA (San Francisco) and no new routes to Canada. This does not reflect negatively on Air Serbia plans for North American flights, as SFO was not on the radar of Air Serbia’s future destinations. If anything, this will allow Air Serbia to complement future offerings with Alitalia’s destinations.

    Overall, Etihad went after low hanging fruit in announcing changes for Alitalia. On the North America routes, Alitalia will continue to lag BA and LH Group significantly in capacity and number of destinations.

    It seems there was no political will and risk appetite from stakeholders to displace number of existing airports in Northern Italy in the MXP-VCE range with one brand new, (very) expensive hub airport that would position itself as one of top 5 in Europe, so they went after a quick win of minor improvements across the board. I am afraid Etihad strategy will work well only in the short run, but long term Alitalia (and Italy) absolutely needs this new airport in Brescia area.

    1. "A union with Etihad will bring Alitalia money to invest in more profitable long-haul routes"

      "Etihad plans to turn Rome's Fiumicino Airport into an intercontinental hub and improve Alitalia's cargo business, as well as add long-haul connections from both Rome and Milan and new routes between Abu Dhabi and Italy, Hogan said."

    2. Closer look at what was announced for Alitalia Rome Airport intercontinental plans shows growth is planned mostly for Asia and Latin/South America.

      For Milan, growth is planned to total of 25 intercontinental weekly departures. Wait - weekly? Seriously?!? British Airways has 25 longhaul departures from LHR every couple of hours!

  12. (SKP i OHD) 144.783 +12%
    from Jan to Juli : +17%

  13. Dakle da rezimiramo:
    Etihad investira
    - 100 milijuna EUR i to kroz kredit koji će jednom morati vratiti Srbija

    Srbija mora investirati
    - 230 milijuna EUR u preuzimanje duga kompanije
    - dodatnih 20 milijuna EUR koje su pronašli tijekom skeniranja knjiga a po potpisivanju ugovora
    - 70 milijuna EUR duga u 2013.
    - 93 milijuna EUR ostalih troškova pretvorbe (plače, restrukturiranje, premoščivanje gubitka...)
    - 90 milijuna EUR početne investicije u 2013.
    - 326 milijuna EUR (najmanje) investicije tijekom 2014-16.
    = ukupno 829 milijuna EUR

    + odricanje svih prihoda od kerozina kod NIS-a (ovime se daje privilegirana cijena Air Serbiji spram ostalih prijevoznika u BEG, ali i država se odriče enormno visokog prihoda)
    + veliki popusti na BEG i ne plačanje dobrog dijela troškova na BEG (i opet će to netko morati snositi da bi BEG mogao funkcionirati)
    + besplatan hangar na BEG
    + Etihadu se plaćaju visoke plaće funkcionera koje su oni postavili i koje fakturiraju
    + Etihadu se plaćaju leasing aviona
    + Etihadu se plaća školovanje posada, i bog te pitaj što još i po kojoj cijeni

    Jesam li uspio sve dobro poloviti ili sam nešto krivo shvatio iz ovog BIRN-ovog izvještaja i onog što smo pročitali do sada na ovom blogu, a što BIRN nije znao?

    1. Krivo - pomesao si USD sa EUR, razne sume i procene. Brojke su bazirane na pocetnim (draft) procenama i predlozima ugovora i ukljucuju stare dugove JAT-a koji bi se morali resiti i da nije bilo Etihada i Air Serbia. Kad se sve to uzelo u obzir, deal i ne dejuje tako lose!

  14. A malo sam si pročitao i završne nacrte ugovora. I uz sve ovo napisano gore, eto još nekoliko sitnica:

    1. Air Serbija se obvezuje prilagoditi sve svoje letove Abu Dhabiu kao internacionalnom hubu Etihada (čl. 1.13 Transakcijskog ugovora)

    2. Katering će se pridodati Air Serbiji na trošak Vlade Srbija (čl. 1.15 Transakcijskog ugovora)

    3. Air Serbija će biti jedina kompanija kojoj će Vlada Srbije dozvoliti Bilateral Air Services Agreement between Serbia and 3rd countries. Vlada Srbije ne smije dozvoliti tako što nekoj drugoj kompaniji na području Republike Srbije (8.1. Transakcijskog ugovora)

    4. Aerodrom Beograd ne smije dati nikome veći popust nego Air Serbiji niti za jednu od usluga koje naplačuje. Air Serbija mora imati najniže cijene kako bi time imala privlegiran položaj spram konkurentskih kompanija. (čl. Transakcijskog ugovora)

    5. Aerodrom Beograd mora dati popust od najmanje 50% na svoje redovne cijene Air Serbiji. (čl. Transakcijskog ugovora)

    6. Vlada Srbije će osigurati Air Serbiji cijenu goriva nižu za 50% od redovne cijene NIS-a iako obje stranke razumiju da Vlada Srbije nije jedini vlasnik NIS-a. Dakle ako dadžbine koje ima Srbija u cijeni nafte, a kojih se odriče nisu više od 50%, Vlada Srbije će plačati razliku u cijeni kerozina da bi ona bila niža od polovice redovne cijene. Posebno se istiće da je cilj ove mjere imati privilegiran položaj u Srbiji spram svih ostalih prijevoznika. (čl. 8.4.2. Transakcijskog ugovora)

    7. U slučaju jednostranog ili obostanog raskida ugovora Vlada Srbije ima obvezu otkupiti dionice Etihada (vratiti pozajmicu + platiti uvečanu cijenu dionica za uvečanu vrijednost kompanije, koja, uzgled, barem prema dostupnim dokumentima, nije procjenjena prilikom kupnje) (poglavlje 7. Ugovora o uslugama podrške)

    8. Etihad, niti jedan od dirktora koje je postavio Etihad, agenti, djelatnici ili ugovorni obveznici Etihada, niti ikoja privatna ili pravna osoba koju je angažirao Etihad nemaju odgovornosti prema Vladi Srbije ili Air Serbiji zbog štete ili lošeg poslovanja ili loših rezultata koji bi mogli nastati. (čl. 9.2. i 9.3. Ugovora o uslugama podrške)

    9. Etihad naplačuje Air Serbiji fakturu za plače CEO, CFO, COO i senior managementa kojeg postavlja Etihad (ovime zapravo drži ove osobe u svojm zavisnom položaju, jer ih Etihad plača, pa su i vjerni Etihadu, a ne Air Serbiji), pri čemu cijena nije unaprijed definirana, već je deinirana kao "poštena cijena" (čl. 2.2.4. Ugovora o uslugama podrške i čl. 5. Ugovora o konzultantskim uslugama)

    Naravno, postoji mogućnost da su neke od ovih stavki izmjenjene, ali ne vjerujem, jer su ovo bili dokumenti u završnoj fazi, uz neke manje bitne nomotehničke preinake. Ako se ugovori stvarno i objave, i to bez zacrnjenih dijelova biti će interesantno vidjeti jesu li stvarno ovoliko štetni po Srbiju kao što su bili završni nacrti ugovora objavljeni od strane BIRN-e

  15. Bravo Purger +!!! Od pocetka sam govorio da je Air Serbia svojevrsna prevara i da ce gradjane Srbije u sumi skuplje doci nego stari JAT. Etihad posluje kao klasicni Hedge Fund i to je to. Ide tamo kao lesinar, gde su aviokompanije pred stecajem i gde drzava iz politickih (Alitalia) ili strateskih ( Air Seychelles) razloga ne sme dozvoliti bankrot. Onda se za velike drzavne pare presminkavaju mrtvaci a jedini korisnik je Etihad i aerodrom Abu Dhabi. Sto je jos gore, Air Serbia je krenula takvim dumping cenama ne bili "osvojila" trziste, pri tome zaboravlja da jedan "hub-and-spoke" mora funkcionasati kao svajcarski sat. Od toga ni traga, kasnjenja su svakodnevna a najgora su za BEY, ATH, SKG, ZRH i CDG tako da redovno zbog velikog broja tranzitnih putnika dolazi do raspada sistema a putnici( sa bagatelnim kartama ) preusmeravaju na strane aviokompanije.

  16. Was expecting to see many more comments in regards to this, but if people were discussing load factors, there would be probably between 50 to 100 comments. How everyone keeps quiet when the truth is starting to open up. Thank you Purger for your informative piece.

    1. Probably because he made so many errors in the first place that no one wanted to bother. He messed up USD/EUR numbers, then failed to differentiate between old Jat debt and net new investments in Air Serbia. He failed to recognize those discounts and waived fees were alternate financial vehicle for GoS to meet its financial obligations for the new venture, etc.

  17. ceo slucaj je crna beda. zemljom upravljaju seljaci.


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