Etihad Airways has pulled the plug on its third European equity partner in less than six months after Germany's second largest carrier, Air Berlin, filed for bankruptcy yesterday, raising fresh concerns over the Emirati carrier's future involvement in Air Serbia, in which it holds a 49% stake. Etihad yesterday withdrew its financial support of Air Berlin, which will continue flying with the help of a government loan likely to last it until mid-November. Air Berlin has racked up more than 2.7 billion euros in losses in a little over six years and has net debt of 1.2 billion euros. Etihad bought a 29% stake in the company in 2012. Its two board representatives have resigned from the German airline. In May, Alitalia, in which Etihad holds a 49% stake, filed for bankruptcy. In addition, the Emirati airline recently sold its minority share in Swiss regional carrier Darwin Airline.
Serbia's Prime Minister, Ana Brnabić, said last week that Etihad remains committed to its partnership with Air Serbia despite a review of its investments in Europe. Ms Brnabić noted that recent talks between the government and Etihad Airways went smoothly and that "there is no need to fear for Air Serbia". Air Serbia's CEO, Dane Kondić, also noted last week, "We have a clear commercial mandate and are keenly focused on achieving our business targets as set out by both our shareholders, the Government of the Republic of Serbia and Etihad Airways”. The Serbian airline has stepped up internal consolidation measures in a bid to cut costs in what it says is a "changing competitive landscape". Late last year, the Serbian Minister for Transport, Construction and Infrastructure, Zorana Mihajlović, said, "Any sort of information we receive is discussed, be it positive or negative. It is important for us to always have a plan in place for the future. We have all possible strategies prepared concerning Air Serbia". The carrier currently has a wide-ranging codeshare agreement in place with Air Berlin, covering over fifty destinations.
The strategic partnership agreement between Etihad Airways and the Serbian government, unveiled in August 2013, saw the Emirati airline make available a forty million dollar loan facility which was converted into equity on January 1, 2014. This was matched by an equal funding injection by the Serbian government. The two sides each provided further funding through shareholder loans and other funding mechanisms of up to sixty million dollars to meet working capital requirements and support network development. As a result, Etihad was awarded a five-year management contract for Air Serbia. Bonds issued by an Etihad-related special purpose vehicle that has raised a total of 1.2 billion dollars on behalf of Etihad Airways and some of its key strategic partners, including Air Serbia, nosedived yesterday following developments at Air Berlin.
Etihad said it withdrew funding after Air Berlin’s operations deteriorated at an “unprecedented pace” in recent months. “This development is extremely disappointing for all parties, especially as Etihad has provided extensive support to Air Berlin for its previous liquidity challenges and restructuring efforts over the past six years", the company said. It added, in April this year, Etihad provided 250 million euros of additional funding to Air Berlin as well as supporting the airline to explore strategic options for the business. However, Air Berlin's business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions. Under these circumstances, as a minority shareholder, Etihad cannot offer funding that would further increase our financial exposure. We remain open to helping find a commercially viable solution for all parties.
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The only way for JU is to focus entirely on Europe and Middle East destinations instead of code sharing on absurd markets.
What a mess really, EY has driven chaos.
Alitalia - bankruptcy, to be sold
AirBerlin - Insolvent, falling apart
Nikki - failed to merge with TUI, god knows what happens next
Darwin - sold to 4K
Virgin Australia - posted 180+mil$ loss
AirSeychells - doing ok, i guess
Jet airways - apparently the only one making money
Etihad - posted multi-billion loss, with a lot of writeoffs and manipulations with amortization so the future years profits dont get dwarfed by amortization cost
AirSerbia - showing 1mil€ profit with 41mil subsidies, meaning it is 40mil in red, or losing about 15€ for every ticket it sells
https://www.nytimes.com/2017/05/02/business/italy-alitalia-airline-bankruptcy.html
Alitalia did file in for bankruptcy but will never go bust. This will be their 3rd or 4th bankruptcy and they always come back - even with the same brand. Only the legal name changes. Same will happen again, only without EY on board. As long as the largest Italian banks are afloat there will be money to burn in Alitalia.
Preperations need to be made for a future without Etihad on board.
just my 2cents.
from the text
Late last year, the Serbian Minister for Transport, Construction and Infrastructure, Zorana Mihajlović, said, "Any sort of information we receive is discussed, be it positive or negative. It is important for us to always have a plan in place for the future. We have all possible strategies prepared concerning Air Serbia".
You should better be looking for amount of money your country pays for other airlines to fly to ZAG or why so successful company as OU cannot find strategical partner despite having so many potentials in tourism.
Also it would be interesting to make bets what will be next property to be sold by OU in order to keep it "profitable".
Maybe you could repost how OU employees had to threaten with strike in order to get their rights.
So, look your own backyard.
This guy is in his own backyard when he is so happy about bad news for JU. That is the saddest part. You are wrong to blame the neighbors - it is Serbs who wish the worst to JU.
a line or two about possible development, future of ey, how much ju will be affected is of the table?
btw, about a month ago i was first to say that i am sorry about the jobs lost, but then i was called out for not understanding how modern market works
What 'skin' does Etihad actually have in JU ?
Eur 40m debt to equity conversion, ok. What other investments has Etihad made, and I mean actual cash out of the pocket ?
As long as they are not asked to cover losses, as in case of other partners, Etihad will stay.
my2cents
"...but it is just so damn good that i had to do repost"
Have a fun in your own backyard!
Thats what Etihad has been saying until last week for Air Berlin as well! They said two weeks ago in an interview that they are fully committed to Air Berlin. This is how the world lokks only a few weeky later. No single penny.
Etihad will only remain committed to Air Serbia, if they DO NOT have to give a single penny.
"...but it is just so damn good that i had to do repost"
Also, this doesn't necessarily mean AB will go bust. They have to undergo a restructuring and might still be around though I personally doubt it.
I don't see a good enough reason why EY would leave Air Serbia but the AB and AZ scenario should force the Serbian government to find ways in which to bring ASL closer to real profitability.
Its all about learn how to be profitable, and beneficial or else you will get the ax.
JU with EY: millions of losses.
JU after EY: 21 planes
JU with EY: putting makeup on a pig
Better to have younger A319 + A320 + A330 than old and used B733.
Let's not forget that, similar like OU, JU was offered couple of times, but it was not sold until Vucic negotiated it with decision makers in AUH.
I believe the alternative with HNA Group is more realistic, but in that case LH would again have competitor in south east Europe.
It seems to me that LH wants to kill competition in this region, but without taking them over / having any cost. They simply want it to dissapear in order they could step in once it happens.
Whether they are allowed to do so, will depend on the prevailing political will. Look what happened when they closed 3 of their retail shops outside of Belgrade - such a media storm !
Lease alone costs approx USD7M pa. Add to that another 4-5M in operating costs - so probably in the vicinity of USD11-12M.
Another decade of B737-300s?
Whatever these airline officials say can change completely within a few days/weeks and it is nothing but empty words.
So things change - quickly - as you said..
I don't see how JU and HG could possibly cooperate?
What we also don't know is how much are the costs in leasing the slots they currently have. They can't be USD8M, so my guess is that it is a maximum of USD15M all up.
Slovenian Government did not pay that 4K can buy Adria's Logo. That was made much after Slovenia got our of Adria.
Yes, Air Serbia was bigger than Adria. By number of passengers not more than double but some 30% bigger. Same with number of planes in fleet.
But still Slovenia pay 2 million EUR to 4K what is nothing to 430 million Serbian government pay to Etihad (245 million was for old debts, just like Slovenian 2 millions that were used for old debts).
JU without EY: 15 planes mostly JU owned
JU with EY: 21 planes but most of them not that JU owned
if you do this calculation with debt then don't forget the 50 mio $ that Slovenian government injected into Adria in 2011