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.

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.