The minority shareholder in Air Serbia, Etihad Airways, has until July 1 to decide whether it wishes to terminate its five-year management agreement with the company at the time of its expiration on January 1, 2019. If it fails to inform the Serbian government of its intention to pull out, the agreement will be renewed, as was the case with its equity investment in Air Seychelles. Under the deal, "The initial term shall be automatically extended by a further period of five years commencing on January 1, 2019 unless Etihad serves notice on the GoS (Government of Serbia) no later than six months prior to the expiration of the Initial Term that Etihad wishes to terminate this agreement".
The Serbian Prime Minister said recently that Etihad "has not indicated in the slightest" its intention to divest from Air Serbia, while the country's President noted that he would like for the Emirati carrier to remain a partner and expressed hope it would not pull out. Etihad may also choose to withdraw from some of its obligations, while remaining committed to managing the company since a total of five separate agreements were signed between the two sides. They include a Transaction Framework Agreement, Support Services Agreement, Investment Agreement, Consulting Services Agreement and a Shareholders’ Agreement. Air Serbia recently began advertising for a number of job vacancies within its revenue management and network planning departments which are currently, for the most part, handled by Etihad in Abu Dhabi. However, this move has been planned for some time. In case the deal is terminated, the agreement stipulates that "no party shall have any claim against any other party".
Etihad has so far made no indication on its future plans for Air Serbia. Its CEO, Tony Douglas, said this week that the airline intends to remain a major global carrier as it works on re-sizing its global business following record losses in 2016. Mr Douglas noted that the company has no intention of becoming a “boutique” operator and still aspires to being an “airline of choice”. At the same time, failed investments in Alitalia and Air Berlin, which both filed for insolvency last year after Etihad pulled the plug on funding, have led to a more “strategic” approach to expansion, according to the CEO. “That would be the take out, to be very disciplined, very measured. What we have embraced properly is a way to develop growth in a sustainable way. We will choose wisely, we will make sure that detail is well-attended to”, Mr Douglas said.
Etihad has been working on restructuring plans for the best part of a year after posting a 1.87 billion dollar loss for 2016 that cost previous chief James Hogan his job. While the carrier has slimmed down its freighter fleet and is cutting passenger destinations, Mr Douglas has so far held off from announcing widely anticipated plans for further fleet and network cuts. The CEO held out the prospect of closer cooperation with one-time rival Emirates, touted for a possible merger since Etihad fell on hard times. “I do admire what I observe from our great friends in Dubai”, he said. “We will continue to consider where appropriate the things that we could do together”.
So say they leave, what will Air Serbia have left? Do all the leased aircraft also disappear, do they continue to be used normally until their lease is up?
ReplyDeleteOf course the leased aircraft wouldn't "disappear". Etihad does not own those aircraft. They are all there on leasing contracts which Air Serbia, with our without Etihad, would have to renegotiate to extend.
Delete@AnonymousMay 3, 2018 at 9:02 AM
DeleteAs the deal from what I understood was with the Etihad, they'll have to renegotiate new deal with the Etihad or approach Airbus for new order.
It would have been cheaper for Air Serbia to gain access to Etihad's A320neo, as they'll be cheaper, most likely around €32 million per plane, talking directly to Airbus, these 10 aircraft will most likely cost between €42 and 45 million apiece, about the same OU is paying for their Neos. OU is paying €170 million for 4 A320 NEO aircraft, with first payment made earlier this year in tune of 250 million kuna.
Air Serbia would need to secure a commercial loan, in tune of €450 million, a loan Serbian government would need to underwrite and secure 10 A320 NEOs, however that takes time, and the chance of A320 NEO in Air Serbia livery before 2020 are slim at best.
@Anon 1:55
DeleteAll of this assumes Etihad is leaving. If they are not, NEO deal will continue probably with different delivery schedule.
Hopefully they quit idea of having 10 A320. Completely unfit for AS needs.
DeleteWith Etihad starting a new cargo line to Belgrade, hiring people in Belgrade for their "Shared Services Center" it does not look as if they plan to leave any time soon.
ReplyDeleteI agree.
DeleteAnd not to forget they are increasing frequencies to Belgrade to 10 per week. Just doesn't look like as if they are preparing to pick up and leave.
DeleteEtihad Cargo is launchong flights to BEG? Did I miss something?
DeleteYes
Deletehttp://www.exyuaviation.com/2018/04/etihad-cargo-launches-belgrade-service.html
Oh wow thanks. Missed that
DeleteEY are increasing their own presence trying to cement their market share once they cut lose AirSerbia. Mind you they are increasing staff and operations under their own brand not that of AirSerbia. If you are preparing to leave a joint-venture, this is how you do it...reestablish own presence before you go so that your market share is not jeopardized.
Delete@Anon 2:36 ...or someone is just wishing very hard for EY to leave JU despite signs to the contrary.
DeleteEverything we see seems as departure being prepared. It is a lucrative deal for them but overall money they make here is not huge. Smart move to concentrate on core issues
DeleteTick tock
ReplyDeleteIf Etihad leaves Serbian government will probably have to return 40 million USD loan they got from Etihad which was convertedto equity.
ReplyDeleteNo. According to the agreement, there’s no obligations on return of investment.
DeleteOk, interesting I wasn't aware of that. That is good news for GoS.
DeleteI am not sure there is no obligation EY investment to be returned.
DeleteCould you please provide us a link to the agreement?
They are still owners of 49 percent of the company even if they withrow from management agreement. But I suppose they will sell it to the government. We will see for how much. Probably much more than $40 mil.
DeleteWould EY be required to find a substitute partner like they did for Etihad Regional?
ReplyDeleteThat worked out well.
DeleteWhat happens with the A320 neos and YYZ??
ReplyDeleteIn case of breaking up the agreement, Etihad would need to return back the deposit Jat Airways paid to Airbus in the 1990s. In this case we will definitely not see the neo's coming.
DeleteYYZ has nothing to do with the deal with Etihad. Air Serbia beared all expenses on getting approvals and licenses to fly to Canada.. Even with Etihad staying it is not neccessary to start these flights. But assuming for alleged awesome load factors on JFK flights, they definitely should give YYZ a try. But do not forget procuring the next widebody will take a lot of time.
Hopefully they do not proceed with YYZ adventure. They need to concentrate on sorting other issues
DeleteJU should join Skyteam as soon as possible, with Etihad stake or without, it doesn't matter
ReplyDelete+1 they need join some alliance asap. Sky Team would be the best fit.
DeleteIf Etihad stays, then possibility of joining some alliance will be result of Etihad decision on same matter. They will not go separate ways regarding this.
DeleteJoining Skyteam would be difficult with TAROM a member right next door.
DeleteNo, it won't Air Serbia is good for Skyteam even because of TAROM which is weakened, has permanent lossess, passenger numbers are lower every year and Romanian governmnet struggles on privatizing it. Adding Air Serbia will make things better for both parties and be a good platform for backing off Star Alliance which became too strong. Instead we will get a SkyTeam secondary hub triangle BEG-PRG-OTP that would open a lot of novel possibilities and improve connection with remote markets, also make connections via AMS, MXP, CDG and SVO bettter, cheaper and more available..
DeleteI seriously doubt that Tarom would allow ASL, an airline right next door to it to join Sky Team.
DeleteI think One World would a much better fir since it doesn't have any presence in Eastern Europe after the demise of Malev and Air Berlin.
Just my2cents
Nothing except Star Alliance would make sense. They are too strong and JU should try to secure its piece in STar Alliance cake
Delete*A literally makes the least sense of all options.
DeleteSkyTeam makes the most sense as JU codeshares with mainly SkyTeam airlines: SU, AF, KLM, RO, AZ, UX.
DeleteJU joining SkyTeam, they would get additional partners in DL (JFK), ME (BEY), OK (PRG).
Take it a step further, with JU ditching Etihad Guest FF program for KLM’s Flying Blue program could be very benefitial for attracting more premium pax for JU.
SkyTeam could help start new markets through new partners: SV (JED, RUH). JED bound IL76’s at BEG suggest a cargo demand, Saudi tourism has grown in the region (48.127 Saudis visited BH last year, increasing by 188%), potential pilgrim tourism through local and transfer traffic, as well as a new market of Saudi bound tourists once they start issuing tourist visas. SV has a limited presence in Europe.
On the other hand, JU hasnt had good relations with Star Alliance carriers. LH cancelled the codeshare with Jat, OU doesnt code share with JU along with the problems JU had in Croatia when they launched ZAG, LO and CA agreements not that impressive, leaving A3 and JP the best as it comes from Star Alliance for JU.
No OneWorld carrier cooperates with JU since AB went bankrupt, while JU operates to only 2 OW hubs for which demand is restricted to both due to visa requirements: LHR and JFK. QR is the only OW carrier operating to BEG, to which JU doesnt have any cooperations with.
They won't leave but with certain key departments moving back to Belgrade, it will give JU greater autonomy from Abu Dhabi and possibly the chance to make some smarter decisions.
ReplyDelete+1
DeleteGood riddance I say.
ReplyDeleteWhy? JU has developed quite nicely under their ownership.
DeleteSerbia paid for all of it. With that kind of cash they can pay Lufthansa support which offers professional management to airlines and voila.
DeleteAnd then it would become a Lufthansa feeder.
DeleteWhy is that a problem? That is exactly what JU should become. Feeder of largest traditional company in the continent which operates from the markets were we have largest diaspora. Plus to serve some additional routes if they are profitable and operate charters. That is actually the smartest strategy company could have.
DeleteOK, there's going to be a new theory: Adria is going to take over Croatian and Airserbia.
ReplyDeleteI wouldn't count that out.
DeleteIf that 4k fond has the cash for it, why not? Even put the scrap of a MontenergroAirline in the package. Finally would all national names disapear from the wings. ADRIA is a OK name for all ex-yu countries.
DeleteOnly Croatia and Slovenia are EU members, no need for Montenegro or Serbia in the "group".
DeleteIt doesn't matter if in the EU or not, just hold AOC's from all countries
DeleteSure, no problem. Except you can't share crews and aircraft between AOCs (licences, work visas). Has a great chance to be very profitable operation!
DeleteEverything can be sorted out.
DeleteMy personal guess is that they will pull out. I expect some changes at EK EY in the future, definitely the UAE will not go on and keep the current sizes of the two. The EC just implemented new regulatiins in terms of fair aviation competition, others could follow. EK btw parked several A380 and B77W in DXB, apparently not just cause of lack of pilots
ReplyDelete"Air Serbia recently began advertising for a number of job vacancies within its revenue management and network planning departments"
ReplyDeletefinally!
I agree that this was a major problem and the reason a lot of bad decisions network wise were made at Air Serbia. Simply someone from Abu Dhabi with no knowledge of the region can't plan out your network with flights to Varna at 3am.
DeleteYou mean that Australian Hogan? Hogan was EY's nightmare. So glad he's gone forever.
DeleteVarna's schedule wasn't the problem. Generally pricing was. I still remember a €169 promo fare to Budapest. On top of that we are all familiar with AUH's pricing when it comes to White Fares.
DeleteA team in Belgrade would manage this much better.
VAR simply could've received the same SOF afternoon flights. It can compete with FB,OS and TK. Really hoping to see them resuming flights soon. VAR is growing and now is the time, even with W6 and FR presence, JU can still get its share.
DeleteYou can fly from SOF-ATH for 11 euros 2x a day with Wizz or Ryan, or for ~50 euros with legacy airlines. Last time I check SOF-BEG was 110 euros (oneway). Is this the cost of having a national carrier? Pay crazy prices for flights that should cost times less?
DeleteBEG-SOF is moreover a transfer route rather than O&D. Most people use ground transport because it's cheap and distances not very far.
DeleteVAR could resume if JU launches afternoon flights.
I can't believe that on SOF-ATH both FR and W6 are flying it daily but they wont try BEG-ATH where we only have the two legacies...
DeleteVarna on the Atr could not fit in the noon regional wave, that's why it had to be operated at night.
DeleteWill JU get a new CEO. Isn't the current one only temporary?
ReplyDeleteIf they extended Air Seychelles, they will extend Air Serbia deal too.
ReplyDeleteAir Seychelles have completely different customers. And are not facing LCC competition in own backyard. Who ever goes to Seychelles is not looking for 9,99eur tickets.
DeleteJu will finally be sold to LH. Germany owns the whole of Europe anyway.
ReplyDeleteI don't think Lufthansa was ever interested in Jat/Air Serbia.
DeleteCircumstances have changed significantly in the region in the last few years.
DeleteNo, at this moment LH is not interested in JU and it will remain so at least in next couple of years.
DeleteThe only possibility something to change would be big deal between EY and LH, EY entering star alliance and at the end of that deal JU to be picked up by LH as collateral factor
To me it looks more like they will stay. I agree for once with the government. There just does not seem to be any indication they are leaving.
ReplyDeleteIf Air Serbia were to get a new airline partner, who do you think would be interested?
ReplyDeleteNo one.
DeleteTurkish Airlines probably would. They are still very interested in the region. Serbia is an important market to them. Just today there are 4 Turkish Airlines flights to Belgrade. They are sending more and more often widebodies on this route. Almost all flights to BEG are now with A321s.
DeleteTurkish would be an interesting partner but I fear it would just become a TK feeder. They were not so succsessfull with B&H Airlines.
DeleteThey were not succsessfull with B&H because there was lots of political obstruction from the government.
DeleteWith the deal Etihad got with Air Serbia I think ANY mildly succsessfull airline would be interested.
DeleteVucic will be in Turkey next week for another state visit and Erdogan was in Serbia just a few months ago. Who knows.
DeleteWhat about Hainan Airlines? I was under the impression they were very interested in Air Serbia.
DeleteThey did seem ibterested until they pulled out of BEG concession.
Delete*interested, sorry
DeleteThey even signed a letter of intent with Serbian government to develop air traffic in Serbia and set up a pilot training center.
DeleteHainan I mean
DeleteAnd still no word on their financial results for 2017 or their operational results for first quarter 2018.
ReplyDelete2017 results will be published in July.
DeleteAnd Q1 2018 results?
DeleteThey don't have to share quarterly results. They only do if it is good and makes for good PR. Like they did for the first 3 years.
DeleteIs there any other European carrier that it needs 7 months to publish its annual results?
DeleteFor some reason, I have a feeling they will leave, even though I hope they stay. Etihad getting rid of major money burners, Italia and Air Berlin, should leave them more space to invest and develop Air Serbia (and Seychelles) properly. We will see in 2 months :)
ReplyDeleteSomeone wrote recently that their financial results for 2017 will be out in July. By then Etihad has to make a decision on future with Air Serbia. If JU posts big losses it will be used as an excuse by Etihad to leave and I think that is what they plan.
ReplyDeleteI guess we will know in 2 months.
DeleteWhy should Etihad care about JU's losses? It's not like they invested anything, the whole bill was covered by the Serbian government.
DeleteBesides rebranding the airline and getting a few Airbuses, Etihad had little to do with JU. If they leave nothing will change. Actually the situation might actually improve.
Those results will be "out" for the general public in July. Etihad has seen those results in March already. And they are stable.
DeleteEY helped a lot in 2013 related to leasing the planes.
DeleteLet's not forget terrible credit rating that Jat Airways had in 2013 where even with Government garanties almost nobody wanted to deal with Jat. Exception were Bulgarians who leased old and technically questionable B733 in sardine configuration for quite high price.
If EY leaves JU they might be facing similiar problems again.
From the other side JU might be able to plan more independently its routesand development, but at the same time it could be also "mac sa dve ostrice" knowing how Jat was destroyed
I don't agree with you. Jat was in the state in which it was because the government didn't allow it to manage its own affairs.
DeleteI think it was in 2010 that they got a loan from City Bank and most of it was kept by the government while JU got peanuts just to fix some technical issues it had with its fleet.
If EY was such a master at leasing aircraft then they would have helped JU replace those old Atrs and B733s.
The truth is that EY did the least they could do and they got the 10 Airbuses only for show, because they had to. That happened when the project was launched and that was it.
Let me remind you that YU-APD was the last A319 to join the fleet and that was in September 2014. What happened since then? Only one Airbus was added, the A332, and only because the government insisted on launching JFK flights.
All in all, if EY walks away, JU will live on.
Some things need to be put here on the right place.
DeleteJat Airways was in the state it was mostly due to the people who were running it. It means incompetent persons who played Gods and who reported only to the ruling political party.
The best proof for it was the fleet size Jat had in the spring 2013 when they had to cancel many flights due to the fact they did not do on time technical checks on B733. Without Government support they would not have been able to even lease Bulgarian B733 in sardine configuration.
Let me remind you that for each repair they did out of Serbia they had to pay in advance.
There was no point replacing B733 and Atrs after 2013 because JU owns them and B733 on charter flights (or replacement of A319/A320 on some scheduled flights) as well as Atrs on regional flights were bringing nothing but live cash.
There was even one interview with Kondic some time before he left JU saying that ATR72-200 save significant money to them as JU does not have to lease these planes.
2xB733 were retired as soon as additional cash had to be invested in them and it is logical move.
Getting A319/A320 for show or not - they are backbone of JU fleet now and it is the fact. JU has not introduced many new destinations recently (not talking here about the reasons for it) so therefore new planes were not needed (apart from A332).
Of course JU will live on if EY leaves, but how long we shall see. Hope it will not become Jat Airways where the screws were flying out of the wings during the flight or where successful management could not have at least painted the planes in Jat colours.
Nebojsa, actually there was a point in replacing ATRs after 2013. Air Serbia outlined the plan to replace them by April of 2018 (plans change though):
Deletehttp://www.exyuaviation.com/2015/04/air-serbia-to-replace-atrs-over-next.html
Did you know that Jat did not have control over its finances? The ministry of finances was in charge and was dictating what happens with the incoming cash.
DeleteMaybe Air Serbia did not launch any new routes but look at the amount of flying done by the B733s. This only goes to show that there is a realistic need for additional Airbuses.
As for the Atrs, Dane was spinning the news when he said they were saving a lot of money on them. Reality is that they are becoming increasingly unreliable. Look at what happened today. Zagreb was operated by the A319. Morning Ljubljana cancelled while the evening one was operated by the B733.
Mind you, YU-ANI is coming back. Why isn't Etihad sending one of its own Airbuses in stead of bringing back this old bird?
Like I wrote many times before. Air Serbia is alive today only because of the team that's running the show in Belgrade.
B733 were originally planned for charter traffic only, but later on they became useful as replacement for the planes out of traffic. They were flying also during winter schedule, at the time when JU planned to lease YU-APD.
DeleteAnd after all why not? The planes are owned by JU and this plane is still operational in Europe.
Regarding to reliability we all know that older plane does not mean less reliable plane. The point is that you need to invest more in that plane in order in can be daily operational, but you do not have to pay for leasing.
Didn't we hear on press conference held by Republican party that there was serious technical problem on Airbus aircraft in Zurich? It can happen to any plane.
JU must learn to be financially independent from Government. If Serbia joins EU in 2025 it will be learnt on the more difficult way.
I flew on YU-AND last week and I loved it. It was one of the most wonderful flights I ever had. However, as you said it yourself, the older a plane gets the more difficult it is to service it. Naturally, LH has no problem paying for their older aircraft but JU isn't exactly swimming in cash.
DeleteYou are right once again. JU must become financially stable and to operate independently from the Serbian government. However, how can they achieve that with all those departments located in AUH?
If they do bring them back, the situation in JU will only improve.
I wrote above text. Nebojsa
DeleteIf you start seeing Serbian state controlled tabloids running negative stories about Etihad in the next few weeks then it will mean they are leaving :D
ReplyDeleteLol so true. If you see front page of Informer on 30th of June with a photoshoped image of a burning Etihad plane you will know what they have decided.
Delete+1000!
DeleteNeka odu i treba da odu, daleko im lepa kuca i nasa deca ce otplacivati kredite koje su nam dali sa najvisim kamatama. Ko od Arapa vidi vajdu taj se nije rodio.
Deletenek' si ti nama sve rekO.
DeleteHas Air Serbia made any changes to their winter timetable so far compared to last year?
ReplyDeleteIf the contract is extended, do you think EY could invest in BEG-INI and even launch code share on the route?
ReplyDeleteBEG-INI is political story which depends from the result of the saga with Nis airport and EY has nothing to do with it.
DeleteAnonymous May 3, 2018 at 9:42 PM
ReplyDeleteAnonymous May 3, 2018 at 9:46 PM
Anonymous May 3, 2018 at 9:48 PM
Anonymous May 3, 2018 at 9:51 PM
LOL he strikes again in 4 spots within 10 minutes! All against Air Serbia from his perspective, from Etihad departure to hope Air Serbia will not start Toronto, to suggestion Air Serbia should join Star Alliance. All against Air Serbia interests.
You missed the comment regarding bad decision to get 10 A320. :)))
ReplyDelete