Friday, August 15, 2014

Serbia unveils Etihad contract

Etihad’s takeover agreement of Jat made public

The Serbian government has published the majority of its secretive contract with Etihad Airways, for the latter’s takeover of a 49% stake in Jat Airways, which was subsequently relaunched as Air Serbia. At a press conference in Belgrade, the Serbian Prime Minister, Aleksandar Vučić, made public the Transaction Framework Agreement, leaked by the press earlier in the year, and the Investment Agreement signed between the Serbian government and Etihad Airways. However, the government did not publish parts of the contract related to Air Serbia’s business plan, saying it was a trade secret. “This is an internal document that contains information on what we wish to achieve”, Mr. Vučić said, adding that he hoped no one would mind.

The Prime Minister said he was thankful that a strategic partner was found for Jat Airways since the carrier was generating annual losses of some 35 million euros, although in reality those losses were far greater. “An aging fleet averaging 26 years, frequent technical issues... The government had major problems with Jat, as well as with outstanding debt and it was often misused by politics. Over the past few years, the government attempted to sell Jat three times but failed to find an investor. Etihad was a unique opportunity”, the PM said. He added, “Have we not taken these measures, Jat would have been shut down, which would have caused economic and social problems and a loss of respect for Serbia because a national carrier is the mirror of each country”.

According to the published contracts, Etihad will invest up to 100 million dollars into Air Serbia, forty million through recapitalisation and a further sixty million as a loan to the airline’s founder. However, Mr Vučić noted, “This loan has not been used, as we expect to operate with a profit by the end of the year”. For its part, the government will provide 42 million dollars in cash payments. A further forty million dollars will be paid in taxes to Belgrade Airport and the state has also taken on debt left over from Jat Airways, 80% of which is owed to the state itself. However, the agreement does not specify any limit on the government’s investments. “Those are our only obligations. No one could have dreamed of something like this”, the PM said. He added that due to Air Serbia’s partnership with Etihad Airways, the carrier was able to order ten brand new aircraft with a discount of fourteen million euros per piece. The agreement also shows that Air Serbia will be given a dedicated terminal at Belgrade Nikola Tesla Airport, which is to be overhauled and brought up to the airline’s standards. “Through all this work, we think we have achieved something positive for Serbia. Air Serbia will become a regional leader and we expect it to become even more successful by 2016. I hope no one will have a problem with that”, Mr. Vučić concluded.

The agreements signed between Etihad Airways and the Serbian government (in both Serbian and English) are now available for download on the Serbian government’s official website. They can also be found below.

35 comments:

  1. I think the cooperation with us is the only way to see JU return back to some of their North American key markets.

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  2. Thank you for sharing the documents

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  3. On which planet is $60m loan considered investment?

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    1. At this one. 'Loan' or lets be more accurate, its convertible bonds are usually in business world.
      http://en.wikipedia.org/wiki/Convertible_bond

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  4. Guys, I do not belong to any political party, but I ask admin to approve this comment, and I ask you to see how an expert, in this case Saša Radulović RIPPED OFF the whole thing. Take a look at this!!!

    link.brightcove.com/services/player/bcpid917389801001?bckey=AQ~~,AAAA1DWaSzk~,CZSkTksiPhQqITLsbi03E4KbEIFdh_zL&bctid=3730595999001

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    1. At 1:30 in the video, he mentions airport slots JAT owns in Europe and worldwide. What airport slots outside of Europe JAT owned in 2013?

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    2. At 3:30 in the video, he mentioned that JAT would be profitable if govt had invested $14M USD annually. What a nonsense, in the last years of operation JAT burned at least double without even considering capital investment like new airplanes.

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    3. Too many errors in his interview to list them all. He mentions debt/equity swap as a proper way to do this. Well after reading the agreement that was essentially done with JAT, but clearly not in 1:1 ratio, as no one would touch JAT that way and share the risk. For reference, he needs to take a look at Alitalia-Etihad deal, there are more similarities than differences with Air Serbia deal. In Alitalia case, Etihad also did not invest 49% of the deal to get 49% of ownership. I guess he needs to offer consulting skills to Italians as well.

      In the same interview, he claimed first that JAT's assets were almost $200M and later (around 4:30) that assets were not listed. Now it's his turn to show how he came up with $200M of JAT's assets, or is it just hot air again.

      Worst of all, he blamed previous governments for debt and political mismanagement but failed to recognize success of Air Serbia so far and failed give credit to new professional management. Unlike some other restructuring deals where new owners just wanted to sell land and drive the rest of the business into the ground, Air Serbia is clearly focused on building the value and should be recognized for doing so.

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    4. From what I see, he didn't mention about the Airbus order rumored to be worth 1 BILLION USD!!!!! Which Etihad ordered for us if I'm correct! 10 brand new A320 NEO!!! Hello! Pametnjaki thinking they know everything.

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    5. Yes, JU assets were not listed prior to signing the agreement. Then Radulović listed them afterwards. His analisys showed those assets are worth 200 mil $

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    6. Where is his analysis of 200 mil $ assets available? I can't seem to find it anywhere.

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  5. SO it is signed less than month ago. And that's just a start all things wrong in it. What a joke air serbia is! :))))))

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  6. A bit out of topic. Just for curiosity, from today ETIHAD REGIONAL started flying from Zurich to Pristina (PRN). I saw this in the website of Zurich Airport (F7872 - Departed from Zurich at around 09:00).

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  7. Investmen agreement je od 01.08.2013. Postoje 4 Ugovora

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    1. Clearly stated on page 5, new agreement replaces 2013 TFA.

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  8. Mislio sam da je Sasa Radulovic ozbiljan covek... Jat vredeo 200 miliona dolara, hahahahahahaha

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  9. Ovo je Radulović:
    http://www.youtube.com/watch?v=YTzsRPuCvWI&feature=player_detailpage#t=76

    To isto sada može da se primeni i na njegovu priču oko JAT-a...njegova priča o dugovima od pola milijarde, onda o imovini od 200 miliona...koliko je onda vredeo takav JAT za vlasnika?

    Isto to je on pitao direktora ''14. oktobra''.
    Tu je konstatovao da je imovina 30, dugovi 100 i da onda ''14.oktobar'' vredi 0 dinara.
    Koliko je onda po Raduloviću vredeo JAT sa imovinom od 200 i dugom od 500???

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    1. 14 oktobar za državu ne vredi ništa, i on se prodaje. Ne vredi ni JAT, već oduzima. Dakle be daje vrednost nego oduzima. Ponavljam, za državu. Ali upravo zato i postoje investicije, gde investitor preuzima rizik, a ne gradjani koji su već i pre toga plaćali sve dugove. Lepo ako si investitor, uzmi deo dugova, ulozi bar 100 miliona ako hoćeš 49 %, a ne sve za badava. Valjda se nešto prodaje da bi se skinulo sa grbače a ne da bi se i dalje davao novac PLUS subvencije. Mogla je država da oprosti 500 miliona duga, opet bi problem bio rešen, a imali bismo 100% vlasništva. Jedino što vredi u čitavoj stvari su popusti za kupovinu aviona.

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    2. Ne moze drzava da oprosti dug ako nije jedini vlasnik duga, a nije. Vidi kako je Elliott bankrotirao Argentinu.
      Cak i da je drzava otpisala 100% duga, problem sa JAT-om ne bio bio resen jer bi JAT i dalje morao da prima godisnje infuzije od preko $30M samo da ostane na povrsini. A tek obnova flote, troskovi otpustanja i restruktuiranja, pa si tek onda na nuli. A tek onda ocistiti politizovano rukovodstvo pa novi brending, itd. Ovo je najbolji dil koji se mogao dobiti, ne zaboravite JAT je nekoliko puta neuspesno nudjen na prodaju...

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  10. Deo od 82 milona dolara Republike Srbije je pola u novcu u naredne tri godine a pola u subvencijama (aerodrom, gorivo)
    Stvorena je nova kompanija, Jat ne postoji. Koji deo nije jasan?

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    1. Svaka nam čast. Alal nam vera. Em firma gubi, em mora da dobija razne povlastice.

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    2. I na kraju, čak ni ta silna upumpavanja nisu dovoljna garancija da će Tesla biti "regionalni lider" tako da i on mora kasnije pod koncesiju.

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  11. I expected agreement to be razor sharp in a lot of areas, but there is still lack of clarity in some areas. While I still cringe when going over some parts of the agreement (for example related to Terminal 1 or Terminal 2 Air Serbia exclusive use), it is now clear there is nothing essentially preventing it from being cleared by EC. There might be some minor objections but there is nothing to imply effective control of Air Serbia by Etihad.

    Now there are still some (esp with AB or AZ deals) who imply Etihad as a company is an arm of UAE government but that is really far fetched and likely to be found baseless.

    In essence, publishing of the deal is helping de-risk EC investigation and should help Air Serbia in the long run.

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    1. So you think that EC (or European carriers) won't or can't find another way to protect themselves? Really?

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    2. In case of airberlin and Alitalia? Well both of them are already in EU - European carriers, there is no reason to believe Commission would prefer grants made to LO or OS over AB and AZ, now would they?

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    3. Of course they wouldn't, they always play fair!

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    4. The answer for EU lies in the Sharholders Agreement, which is not publiched, in whic a voting rights and actual control of the company is agreed.

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    5. Did you even look at the published documents?

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    6. You found Shareholders Agreement ?

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  12. What's up with all the departure delays at Zagreb tonight?

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    1. http://exyuaviation.blogspot.com/p/wednesday-august-13-2014-baggage.html

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    2. Zagreb is still recovering from it.

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