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.