Air Serbia will shift towards a more "hybrid" business model later this year, which combines the cost-saving methodologies of pure low cost carriers with the flexibility and route structure of a full-service airline, in an attempt to increase cost effectiveness and adapt to the needs of the market in terms of pricing. The development marks the latest structural change at one of Etihad Airways' equity partners. The new model will bring with it a number of changes to the airline's product as it alters its strategy on short haul routes. As previously announced, from June, the carrier will begin charging a thirty euro check-in fee at Belgrade Airport for lower priced tickets (complimentary for online check-in), preferred seating and will begin rolling out new slimline seats across its Airbus A319 and A320 fleet. The carrier is expected to unveil further product modifications on its European network in the coming weeks, which may include pre-paid meals and luggage-free fares.
Air Serbia has announced it will be suspending operations to Abu Dhabi from October 29 in order to focus on its European network. It signals the airline putting a greater focus on attracting more point-to-point passengers, who bring in greater revenue per seat. These measures will not affect the airline's flagship service to New York, operated by the A330-200 jet, which will remain unchanged. Recently, Air Serbia's CEO, Dane Kondić, noted, "With our current business model, while still showing growth, it is growing at a decreasing rate. That means that we have to change something because we are not growing as fast as we need to grow with what we have. Meanwhile, if you look at the growth of low cost airlines, it is significant. So we can continue to do the same thing and grow at a slower rate, or we can look at the ideas that we are reviewing and see which of those we can apply to our business to ensure that we continue to accelerate our growth". He added, "Conceptually, we have to evolve our business model from what it is today, to a model that will allow us to continue to grow and continue to work to lower costs”.
Air Serbia's CEO said last year the airline is preparing for strong competition from low cost carriers on the Serbian market. Speaking to "Business Insider" in 2016, Mr Kondić noted that Air Serbia’s future is framed by the competitive environment of the broader market, which includes significant changes to the airline business in Serbia as well. “Serbia is not part of the European Union and so we don’t have the degree of openness and competitive environment that other countries who are part of the EU would have”, the CEO said. He added, “As a result, we don’t have as much low cost carrier penetration in the market”. However, Mr Kondić warned that the flood of low cost carriers that have waged war on traditional airlines across Europe is on its way to Serbia. “It definitely weighs heavily on our thoughts in terms of our future plans”.
The changes come as part-owner Etihad Airways deals with two fledgling equity partners - Alitalia and Air Berlin. While Etihad let Alitalia slide into bankruptcy after workers spurned a restructuring plan, the Persian Gulf carrier is showing more patience with Air Berlin and has agreed to provide the German company with financial support for at least another eighteen months. Air Serbia recorded a profit in 2014 and 2015, and although its financial results for 2016 are yet to be published, the carrier's Supervisory Board Chairman has said the previous year was also profitable. Saj Ahmed, Chief Analyst at the UK-based consultancy firm Strategic Aero, believes Etihad's unique business model has worked well for Air Serbia and Air Seychelles, unlike some of its other investments, and the duo will unlikely be affected in a future shake-up of Etihad's equity stakes. For its part, Etihad said it is "fully committed" to Air Serbia and that "speculation about a change to Etihad Aviation Group’s investment in and support for its equity partner, Air Serbia, is totally inaccurate and wholly unfounded".