Air Serbia facing strong LCC challenge


Air Serbia is facing headwinds and intense competition from low cost carriers (LCCs) that are increasingly moving in on routes which were previously solely operated by the Serbian airline. The latest such development came this week when easyJet announced the introduction of flights between Berlin and Belgrade, directly rivalling the Serbian carrier after losing an important codeshare partner on the service - Air Berlin. In addition, Ryanair, which maintains operations from the German capital to Niš Constantine the Great Airport, has put further pressure on Air Serbia. In 2017 the airline faced no competition on 21 scheduled routes, down from 26 the year before. Similarly, its market share in Belgrade has been eroding over the past few years, standing at just over 50% in 2017. Lately, it has been directly challenged on a number of its services including Amsterdam, Prague, Malta, Larnaca and Tel Aviv.

Air Serbia recently warned that a "flood of low cost carriers" would enter its home market in the near future. “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. As a result, we don’t have as much low cost carrier penetration in the market. However, 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 airline noted. It has since transitioned into a hybrid full fare - low cost carrier. On the other hand, Europe's largest low cost airline, which maintains operations from Niš Airport, has said the Serbian airline would be unable to effectively compete against LCCs in free market conditions, which would include equal fees and charges at its home base. "What we certainly will soon see, for example, in Serbia, if there is the political will, is a requirement for Air Serbia to be on a level playing field at Belgrade Airport, which it will be unable to do, in our opinion", the budget carrier's Chief Commercial Officer, David O'Brien, said.

The future operator of Belgrade Airport, VINCI, has vowed to cooperate with Air Serbia and support its future development. However, the French concession and construction company will also bring in a number of new customers. It anticipates for Air Serbia to hold a passenger share of between 40% - 46%, which is down on its current figures. In addition, the airline is also facing growing indirect competition from low cost carriers at Niš Airport in the country's south-east. Last year, just over 7% of all passengers departing Constantine the Great Airport hailed either from Belgrade or the northern province of Vojvodina. Meanwhile, Wizz Air will commence operations from Vienna to Niš this November with its 220-seat Airbus A321 aircraft, further challenging both the Serbian and Austrian national carriers which maintain services between Belgrade and Vienna. Air Serbia's former CEO, Dane Kondić, said during his tenure, "The aviation business is evolving and changing. What's relevant today can become irrelevant tomorrow. You have to look what's happening around you and adapt or die". The carrier will be hoping for the former at a time its part-owner, Etihad Airways, is dealing with issues of its own, a new operator is about to take over the running of its home base and low cost carriers see growing opportunities on the market.

Comments

  1. They would be in a better position to compete if their original model was the current one they just introduced. Now it's too late.

    ReplyDelete
    Replies
    1. Anon at 9:03
      +1000!

      Posters were saying that exactly that for years but they were labeled "haters" by trolls.
      They thought that metal cutlery, new lounge and 10€ for WiFly would make Balkan passengers pay more for the privilege of flying "the new wings of Europe".

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    2. I agree. They should have started out like this in the beginning. Offering cheaper fares with limited service would probably be welcomed by the general flying public (not us enthusiasts I assume). BUT the issue that the standards were set too high and people now just view this as a major downgrade and trouble brewing behind the scenes. Or if they anticipated this sort of competition and development they should have introduced these changes at a slower pace since 2016.

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    3. It comes down to the fact that the management was clueless on how to sell their product.

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    4. The real question is why, but why, they didn't from the beginning place their focus on the markets which are 'LCC immune'?

      Those are Tukey (Izmir, Ankara, Istanbul...), Iran (Tabriz, Tehran), Jordan, Kuwait, North Africa to name a few. A330 should be doing flights to Israel.

      Instead of, they choose to focus on some phantom 'Ex-Yu' by either laziness or nostalgia which brought them head to head with the low-cost carriers.

      A battle they can't win.

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    5. Now they are destroying their product while increasing their fares.

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    6. Everyone is right about what should they’ve done at the begining except the fact that politics took center stage and megalomaniac Vučić wanted to show his and his party strength pushing them to be what they could never be, competitors to major carriers. I absolutly agree that steps they are taking now looks like degrading services not adjusting to life reality, which makes customers very unhappy and abandoning them to real LLC.

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  2. Proves that low cost build up in INI has an effect on the after all.

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  3. No wonder they are switching to hybrid, which is definitely a good thing. Hearing that everyone in Serbia prefers to fly cheaper rather than have a full service, it is understandable that they are lowering fares and downgrading service. Those who have money fly business anyway ... and those who dont, and that is 90% of Serbian population only want to fly cheap, including me ...

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    1. Exactly. That is the type of market, and it is very gaterbaiter oriented. But they should have known that before they relaunched as Air Serbia not years after their expensive experiment.

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    2. If they directly switched from JAT to hybrid they would get a huge backlash from the society ... while now that we see LCC's are taking over I guess people will have more understanding for this new strategy.

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    3. I don't think there would be a backlash. Service would have still been improved compared to their predecessor. Now they just tarnished their image.

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    4. just to add, the customer preference are such not to overwhelming number of gastarbeiters.
      it is rather to the fact that most of the flights are very short in duration, so you do not need the full service.

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  4. Wizz Air is the second busiest airline in BEG and surely them basing a second plane in BEG did not help JU.

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    Replies
    1. It probably did have an affect on some of their Germany flights.

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    2. Also something that could impact Germany flights is Air Berlin collapse. Remember they had a huge codeshare with them, to the US too.

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  5. Poor ASL ... they will be eating the dust in a couple of months. NOT!!!

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    Replies
    1. Them joining up Zagreb and Ljubljana flights because of fleet (and passenger) shortage shows that they are already eating the dust. They have been operating Belgrade-Zagreb-Ljubljana-Belgrade numerous times in January.

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    2. What an innovative way of thinking. Doubt they will ever see any passenger which booked a ticket on a nonstop flight from Zagreb fly with them again.

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    3. JatAirways used to fly like that to Brussels if I remember correctly Belgrade-Brussels-Amsterdam-Belgrade.

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    4. They did during the winter but that was a planned and scheduled triangle route. People knew that when they booked their ticket.

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    5. distance, and everything connected with it, between BEG, and BRU/AMS, or LJU/ZAG is incomparable, speaking of course in favour of ex-Jat (and I was not ex-Jat's big fan)

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    6. Indeed, the old Jat used to fly Belgrade-Brussels-Amsterdam-Belgrade, Belgrade-Malta-Tripoli-Belgrade, Belgrade-Damascus-Cairo-Belgrade.

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    7. Belgrade-Kuwait-Dubai
      Belgrade-Beirut-Dubai
      Belgrade-Larnaca-Dubai
      Belgrade-Athens-Tripoli
      Belgrade-Larnaca-Tel Aviv

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  6. Has W6 opened Vienna-Belgrade it would have crushed the Austrian/Air Serbia duopoly.

    ReplyDelete
    Replies
    1. Niki opened it and crushed itself on the route.

      Wizz also crushed itself on Belgrade-Rome.

      Contrary to popular belief, LCC is not a universal magic solution and not everyone is so desperate to fly them.

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    2. Niki's mistake was that it tried to get transfer passengers so they flew at odd times. If they had morning and evening flight they would have had more success.

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  7. If Ryanair came to BEG and opened as many lines as in SOF, it would be the end of JU's short-haul profitability.

    ReplyDelete
    Replies
    1. Ryanair will come to Belgrade. The only question is when.

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    2. No chance. Unless they are given huge discounts which I doubt. That's why you don't see them at any capital city airport in ex-Yu.

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    3. They fly to Podgorica.

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    4. They do but they received big discounts there too.

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    5. I think Ryan is happy with flying to Nis for the time being.

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    6. How come they (both ryan and wizz) didnt crush Bulgaria air?

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    7. Bulgaria air is a dead airline walking who owns millios to SOF operator and stays alive thanks to goverment interfirence.

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    8. How can government interfere in air company in EU?

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    9. Companies in EU countries can get government assistance its a myth that they can't but it is highly regulated. The EU commission job is to make sure that there is an even playing field and that a company is not unfairly advantaged by the government assistance. This is where Malev got into trouble they were given way too much government assistance. Remember Adria was also investigated a few years ago and was found that the government assistance they revived was legal. I think it was Ryanair which actually got the commission to investigate Adria.

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    10. Yes but for example Wizz Air is backed by a massive investment fund. How can other, smaller players compete with that?

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    11. Anonymous at 2:19 PM
      By being smarter, offer something unique and or join with others.
      What you are suggesting is that Coca Cola should be banned because Cockta could not compete with them.

      Delete
    12. Bulgaria Air owed 30+ mio EUR to Sofia Airport (government-run) back in 2016. Recently, they started sending aircraft for maintenance to Lithuania despite the holding who owns Bulgaria Air has a significant share in Lufthansa Tehnik Sofia. Rumour around the block is LH refused to service aircraft for free.

      But don't worry, they will again pull the trick of bankrupting one company while other is being set up (Bul Air). Despite the fact Bulgaria Air is not owned by government, its purpose is not to make profit...

      Delete
  8. Key challenge Air Serbia is facing is uncertainty, not LCCs. Uncertainty over Etihad contract, leadership, fleet development, long haul expansion, status at airport once Vinci takes over etc.

    ReplyDelete
    Replies
    1. Status of the airport is not an issue since the government negotiated for Vinci not to effect JU's operations, and they seemingly agreed.

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    2. Concession contract hasn't been signed and made public yet. Serious airlines sort out other issues from the list and plan for years in advance. Five year contract with Etihad is not long enough to provide stability.

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  9. Any chance for Wizz to base a third plane?

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    Replies
    1. Not before 2019.

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    2. They haven't exactly had too much success with the latest round of routes they launched from BEG. They had to cancel two.

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  10. I think Vinci will first focus on bringing some legacy airlines to BEG rather than LCCs.

    ReplyDelete
    Replies
    1. +1 hopefully more European legacies.

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    2. KLM, SAS, Air France and British Airways would be good additions.

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    3. Alen Šćuric Purger1 February 2018 at 10:53

      In their airports Vinci has much more LCC than legacy. They are promoting their global contracts with biggest LCC (easyJet, Ryanair, Transavia...)

      Delete
  11. They've head 4 years to prepare.

    ReplyDelete
    Replies
    1. Exactly! They obviously knew it was coming like they said.

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  12. Good. They should face that challenge. If they can't make it so be it. Survival of the fittest.

    ReplyDelete
  13. "Vinci anticipates for Air Serbia to hold a passenger share of between 40% - 48%, which is down on its current figures."
    In December Air Serbia had passenger share 42% at BEG, and in January 41%.

    ReplyDelete
    Replies
    1. I think the article was referring to annual passenger share which is now around 52%.

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    2. If their share was down to 42% in January it means they have shed quite a few passengers.

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    3. Any info on what share it had during 2015 & 2016 January?
      Many thanks for the interesting info.

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    4. JU passenger share at BEG in January : 2015 - 53%, 2016 - 50%, 2017 - 50% as well, 2018 - 41%.

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  14. Becoming a low cost airline with expensive fares and branding it as hybrid won't help Air Serbia deal with competition.

    ReplyDelete
    Replies
    1. Fully agree. Prices in white fare are same as the lowest fare in the previous model. Frankly, I was happy with the previous JU model and was JU was my preferred airline. Now its service is not worth to pay extra.

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    2. exactly. the new fare structure was not introduced in order to lower the prices of tickets, fill the planes and increase revenues.
      it was introduced to lower JU costs

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  15. LCC will surely hurt ASL but I don't think they can take ASL to bankruptcy. ASL will feel LCC expansion on routes where majority of passengers are leisure travelers. On routes where majority of travelers are transfers to some far destinations or business travelers they won't be hurt. These new tariffs ASL introduced are they try to minimize impact of LCC on destinations with significant number of leisure travelers.

    ReplyDelete
    Replies
    1. But the new tarrifs are exactly the same, the only difference is that for the lowest tarrif (which is now like the regular one from before) you can't even bring luggage.

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  16. The issue is that Air Serbia should not have a preferential treatment because no local, private company is shielded from competition. How many local businesses have been shut down because they were forced into bankruptcy by foreigners?
    Furthermore, I look at some of their White Tariffs and destinations such as Milan, Copenhagen, Larnaca... are between 25.000 and 30.000 which is crazy.

    It's one thing to face competition from lowcosts but it's another to make their life easier like JU does.

    ReplyDelete
    Replies
    1. I was fearing this would happen. The white tariff is basically just the normal tariff from before while all the other economy tariffs are now much more expensive. I don't understand who they think will travel with them.

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    2. It really is a scam. I don't know what they are thinking.

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    3. In Larnaca's case the fare has gone up.

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    4. Still the same huge mistake, focusing on transfer instead of O&D passengers. Overcharging Serbian passengers who want to fly direct with them.

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    5. There simply are not enough O&D passengers for JU to justify having more than 5 aircraft. They need transfer aircraft.

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  17. Ne bi bilo lose napraviti istrazivanje koliko samo ljudi iz Beograda i Novog Sada koristi usluge GEA-tursa koji prevozi putnike od vrata kombi prevozom do aerodroma u Budimpesti, Temisvaru i Nisu. Vecina mladih ukljucujuci i mene putuje tako. Vrlo rado bih putovao iz Beograda, ali zaista nisam spreman da dam 250e za kartu do Berlina kad mogu za 25e.

    ReplyDelete
  18. Anyone checked has Air Serbia decreased fares on BEG-TXL route since easy announced their flights?

    ReplyDelete
    Replies
    1. I just checked for random dates in September. Their fare on the lowest white fare (just hand luggage) is 198 euros.

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    2. wow how competitive...

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    3. BTW easyjet for the same period fare is 77 euros!

      So for the same service:
      easyJet: 77 EUR
      Air Serbia 198 EUR

      Guess which one people will pick.

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    4. Yikes. Their pricing is all wrong.

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    5. In addition: Easyjet offers a free airport check in, so technically their product is even slightly better than the one of Air Serbia

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  19. I always thought that the best way for JU to compete against LCCs is by evolving and improving their transfer passenger model but now they are moving away from it and competing for P2P traffic with low costers. Unfortunately I think they will loose in that game on routes where they have competition.

    ReplyDelete
    Replies
    1. Issue is transfer pax are the lowest yielding. For example Beirut is doing great load factor wise because it is filled with transfers but it is probably one of their worst performing routes financially.

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    2. You are 100% correct BEY is a good performer but it's an expensive route. If they focus more and more on P2P then it makes it unnecessary. I assume a lot of passengers from BEY take up seats to CDG at cheap prices, unabling JU to sell them to P2P passengers at higher fares.

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    3. I think BEY does well. If it was such a bad performer then they would cut it like many others.

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    4. Exactly, if we want to fly Belgrade - Beirut it is usually 400+ Eur, Belgrade - Paris rarely below 250... and then we are subsidizing transfer passengers from Greece, Cyprus and Lebanon!

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    5. Unless you have a private company, I doubt you are subsidizing anyone.

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    6. I am a tax payer so I am subsidizing.

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  20. Air Serbia simply doesn't have a strategy. And that's the main problem.

    ReplyDelete
    Replies
    1. Well first it was "boutique", now it's "hybrid".

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    2. Now it is a boutique-hybrid ;)

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    3. Now it's a glorified Wizz Air

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    4. You should all waah your mouth before talking about the "new wings of Europe".
      You are making certain professional posters very upset.

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  21. wow I don't think any airline gets so much criticism from readers here then Air Serbia.

    ReplyDelete
    Replies
    1. Because it's the only ex-yu airline which is trying to play waay out of its league.

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    2. Well you have to look at the arguments (most) people are giving to form their critics. On that basis you can decide if the critics are justly.

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  22. BEG and INI keep on growing while JU keeps on shrinking. It's not LCCs that are to blame, it's the airline's management.

    ReplyDelete
    Replies
    1. I think that's why Dane was sacked. He kept on making the situation go from bad to worse. I hope it's not too late to fix what was destroyed.

      Delete
  23. In light of Air Serbia's positioning problems on the market, I have to ask someone in the know how on earth does Ukraine International Airways survive. They are a national airline with some dirt cheap prices.

    ReplyDelete
    Replies
    1. And not only they survive but they aldo have very large growth.

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    2. It's a very good question, and I won't pretend to know the answer. But as an observer I would say that they have a very clear strategy: They went for cheap tickets, buy on board, high frequencies and connecting east to west, and they are sticking with it. A similar example is Pegasus.
      All the while our dear Air Serbia acts like a 'guska u magli'.

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    3. 40+ million people + a rapidly increasing emigration.

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    4. sure, but do they make profit or are they backed by the state MontenegroAirlines-like

      P.S "guska u magli" lol

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    5. Ukraine International recorded a 17% growth last year with an average LF of 80%. The passengers breakdown is 55% transfer passengers. So i doubt 'emigration' has anything to do with that.

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    6. Well my question is how do they manage it. Their fares are really cheap and on top of all that they are expanding long haul as well. I know Ukraine is a big market but there is also competition.

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    7. Their costs are low too though.
      Wages and national insurance, airport charges, cheap fleet, protection from competition through bilateral agreements.

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    8. you are all avoiding to answer: DO THEY MAKE PROFIT???? experts*

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    9. They took 5 new aircraft last year, 2 of them new from the factory. One should guess they're not paying them with air?

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    10. ...or trying to increase their losses. After all, they're private owned. All you should do if you're that desperate for an answer is make use of some induction.

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  24. Air Serbia is at least preparing themselves for the higher influx of LCC airlines in Belgrade ... Air Serbia understood their position, they know what is comming in the next few years and they now are building a strategy and infrastructure for that..In the last couple of months I do not read here that is the same way of thinking in Croatia Airlines, Adria or Montenegro.
    I do not claim that the moves of Air Serbia are correct - I only note that they realized their errors in positioning in the market and that they try a variety of tools to better adapt future developments.

    ReplyDelete
    Replies
    1. They are destroying their product while increasing their fares.

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    2. They should have started with that model from the very beginning. Nothing changed radically since they were launched back in 2013. Just lack of know-how from the Government and equity partner Etihad. Should have they started with this model way back then, the cost to the tax payer would have been much lower.

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  25. Neće propasti ASL dokle god ima pregršt lukrativnih slotova na LHR i dovoljno rezevnih motora pa čak ni tada!

    ReplyDelete
    Replies
    1. Exactly a lot of silver on the plate from them.

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    2. Rezervnih motora na 737 i AT72 starijih od 25 god? Nije to srebro, prije isluzena kobila

      Delete
  26. Now it's final time to create a strategy and plan for a controlled bankruptcy of Air Serbia in such way to minimize burden on taxpayers and the economy of the country.
    This agonizing story of JAT/Air Serbia must stop finally.

    ReplyDelete
    Replies
    1. Haha yes they should create a strategy to bakrupt an airline with 2.5 million passengers, 20 aircraft, 1,000+ employees and 40 destinations.

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    2. Please .... seriously ... please stop talking BS. Thank you.

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    3. Well, Air Berlin had more passengers, aircraft, employees and destinations and it still went bankrupt.

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    4. But Air Berlin is not the only airline in the country. Air Serbia, being the only airline in the country going bankrupt would create chaos.

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    5. And neither was Air Berlin a national state owned airline.

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    6. Truth be told AB did not go bankrupt. It was bought by LH which took its employees as well.

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    7. Treba uhapsiti Dinkica i ekipu. Placaju 200 miliona evra dugova JATa i jos barem 150 miliona evra AS plus dug Etihadu. Ko zatvara oci pred tim je cist idiot. Toliko o zaradi od aerodroma.

      Delete
    8. Jel Malev bio veći od Air Serbie? Sa više aviona, putnika, linije?

      Jel bio jedini u državi?

      I jel bankrotirao. Zgazilo ga ko čik u par dana.

      I jel propala mađarska avijacija? Budimpešta? Jel nasto kaos?

      Delete
    9. Каос можда није настао али је аеродром у Будимпешти доста финансијски оштећен јер је Малев плаћао редовне цене за разлику од нискобуџетних за које су морали градити оне огавне пластичне тунеле.

      Колико је Малев имао ваздухоплова у Будимпешти а колико их мају Визер и Рајанер. Колико више плаћају класичне компаније а колико нискобуџетне? Е ајде сада мало се позабави математиком па ћеш видети.

      Delete
    10. To ste pročitali u kristalnoj kugli ili ste bacili grah, jel financijski podaci tako što ne govore.

      Malev je bio dužan aerodromu Budimpešta kamaru para. LCC plaćaju. Manje, ali plaćaju. Broj putnika se rapidno povećao, stoga je i ukupna masa novaca koji stižu povećana.

      Konačno, aerodrom je nakon bankrota Maleva prodan, za više novaca nego što je bio plaćen prije Maleva. Valjda to govori da je model bio uspješan.

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  27. So many experts on here commenting...

    ReplyDelete
    Replies
    1. I guess you are one of them as well.

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  28. From 31th march Belavia add third weekly Belgrade flight from Minsk to Belgrade(non stop)

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  29. Air Serbia certainly has an uphill battle ahead. Hopefully their new strategy should make them more competative against LCCs in the future.

    ReplyDelete
    Replies
    1. I hope so. The new strategy is primarily aimed at them reducing

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    2. It might reduce costs but I don't think it will make them more competative. Quite the contrary.

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  30. The comment made by Ryanair makes me think they are interested in BEG.

    ReplyDelete
    Replies
    1. They are just provocative and rude, like true hypocrites. That is their style. They pay the loudest lip service to free market, and than laugh all the way to the bank to collect generous subsidies received by various local government entities around Europe.

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    2. Ryanair did not like when free market (i.e. Norwegian) took tens of their pilots last year. They threw tantrums and then capitulated and agreed to not-so-free market unionization. True champions of double talk!

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  31. if AS fails:
    1. O&D will be covered by others, probably cheaper prices due to LCC, more tourists in BG, cheaper flights for the locals
    2. Transfers will be gone -> big hit to BEG and its pax numbers
    3. Less cheap transfers for the region
    4. No flag carrier, what a loss lol
    5. Less reasons to brag for the politicians

    ReplyDelete
    Replies
    1. But it won't fail.

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    2. ...because baba Manga said so?

      Delete
  32. Is Air Serbia still driving this airport upgrade project or is it dead now:

    http://www.exyuaviation.com/2017/11/belgrade-airport-announces-new-overhaul.html

    ReplyDelete
    Replies
    1. Yes. It's happening.

      Delete

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