Air Serbia continues consolidation drive


Air Serbia has continued to consolidate its business as the airline looks to further save costs. Last week, the carrier signed a deal with the Emirati-owned Airport Belgrade Catering (ABC) company to outsource its in-flight catering and sale services, as well as duty free products. ABC was fully acquired by the Emirati-owned Cirta Group, a consortium of companies supported by the UAE government entity Khalifa Fund for Enterprise Development - KFED. The new catering agreement was signed by the Chairman of the Cirta Group, Abdulla Al Shammari, and Air Serbia's CEO, Duncan Naysmith. Under the terms of the agreement, ABC will provide the Serbian carrier with catering services and logistics solutions for a period of eight years. The deal is renewable for a total period of fifteen years. ABC is the largest independent provider of airline catering services in Serbia. Located in Belgrade's airport zone, the company has a production capacity of up to 10.000 full meals per day. Apart from Air Serbia, it has also entered into a deal with Etihad Airways. "The agreement underwent rigorous processes to ensure that it met the industry requirements and complied with the existing regulations in the domestic airport and aviation sectors", the two parties said.

The Serbian carrier has not specified how the new agreement will affect its own catering unit - Air Serbia Catering. The company accounts for 80% of all meals served on Air Serbia's flights and in 2018 provided catering services for seven other airlines. In 2017, Serbia's Finance Minister, Siniša Mali, who was the Chairman of the Air Serbia Supervisory Board at the time, said, "We are working on outsourcing ground handling and catering in order to reduce costs and increase revenue. This is part of a business plan which will boost profitability. All of these measures are standard and part of a process where you try to reduce your losses on one side, and increase profits on the other". Since then, the company has transferred over 300 of its employees from Air Serbia Ground Services (ASGS) to Belgrade Nikola Tesla Airport's handling unit. The five-year deal gives Belgrade Airport responsibility over the airline's ground handling until 2022.

Air Serbia adopted a five-year development plan in 2017 and a restructuring plan in 2018, which was cleared by the Serbian Commission for the Control of State Aid. Consolidation measures over the past two years included the reduction of the company's headcount, the closure of its retail stores in several cities across Serbia, the listing for sale of obsolete general aviation aircraft, as well as engines, the sale of property located outside of Serbia and the introduction of a range of ancillary services. Air Serbia has posted a profit since 2014 but has also received state funds. It generated a record sixteen million euro profit in 2017. Its 2018 financial performance is expected to be made public in the coming days. Mr Mali said in April the country's national carrier had operated with a profit last year.




Comments

  1. And this after so much money was invested in JU Catering like buying new trucks, renovating kitchens, hiring new people... Great.

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    1. "Etihad know-how"™

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    2. Cuts should be made at the head office. That is where most of the workforce has bloated with people who don't do anything.

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    3. All that investment and then you outsource to other company! Ridiculous!

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  2. My guess is that they will close their catering department.

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  3. Well I'm glad that the Serbian government will sponsor a company owned by the state of the UAE. I guess this way we will cover the billions in losses made by Etihad.

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    1. Maybe they organised an internal tender like with ground handling. As far as I remember Swissport, Belgrade Airport and Goldair gave offers to do JU's ground handling but Belgrade Airport gave the best (cheapest) offer. Perhaps the same thing happened here.

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  4. This could actually mean that catering will be improved.

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  5. The biggest news for me are Nis flights which are doing relatively fine despite late announcement and Chachanski Chips yummy!

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    1. Chachanski Chips is die beste chips in the world

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  6. More money for the UAE. Not surprised.

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  7. No wonder the Italians chased them out.

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    1. Yes because Alitalia is a fine example of a well run business. They were probably angry Arabs were stealing in stead of the Italians.

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  8. By the time this gang is finished with JU there will be nothing left to sell off and close.

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    1. By the time Etihad is finished with Air Serbia only a shell of an airline will be left.

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    2. Hogan's strategy for JU was wrong for the market from the very beginning.

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    3. We will only be left with even bigger debts than with Jat.

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  9. I love how the Serbian media is quiet about this and not reporting it.

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    1. Of course they are quiet. In Serbia if you don't get a press release to copy and paste you don't report it.

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    2. That is unfortunately true. It is not only (auto)cenzorship. Thanks exYU for reporting this.

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    3. I work at one Serbian TV station as video editor and I can confirm this... 99% of news news are written and filmed by Tanjug

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    4. I do read Danas and watch N1 and it's the opposite.

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  10. Any idea what will happen to the employees of Air Serbia Catering?
    If the vast majority of their work is now outsourced to an Emirati owned company what will they do?

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    1. Maybe the same case as ground handling? They will transfer the workers to the other company.

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    2. The Airport Belgrade Catering (ABC) company already has employees to do its work. And if they hire new I doubt they will take Air Serbia Catering employees who are earning a lot more money than their own.

      Just my2cents

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    3. They might have workers but they don't have enough workers to handle an extra 20.000 flights per year. Same as Belgrade Airport Ground handling had workers but didn't have enough to handle Air Serbia's flights.

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    4. Unless the Government-JU forces them to hire the Air Serbia Catering staff they will just get new and cheap people instead.

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    5. Finding new people in Serbia might be an issue. There is a severe shortage of workers in many sectors - cooks, cleaners, drivers, nurses...

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    6. They will probably offer them transfer under less favourable conditions to this new company. Older workers will most probably have to accept. Typical pattern.

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    7. Guys there are just 87 employees at Air Serbia Catering

      "U pripremi obroka učestvuje 87 zaposlenih, na čelu sa glavnim kuvarom Zoranom Miškovićem. Tim kuvara je obučen i spreman za pripremu specijaliteta različitih kuhinja širom sveta - lokalna, mediteranska, arapska, kineska, itd"

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    8. That means they can switch and look for other customers, both airlines and traditional catering services.

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  11. Све вам је неко други крив. :(

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  12. Sad, they've had their own catering unit for longer then any of those running this company are old. It's easy being CEO when you are selling off and closing down everything you have for a few cheap dollars so you can show a profit. Then with a multi million salary you will disappear and move onto the next company.

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    1. The management doesn't really care. Their only aim is to show good results on paper so like Kresimir Kucko they can get a new job at another airline when they finish with Air Serbia. The difference is that Kucko at least worked for Croatia Airlines before he became CEO.

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    2. These consolidation measures is what allowed Air Serbia to open over twenty new routes this summer and lease aircraft.

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    3. I assume that Air Serbia's books are improving with all of this cost cutting. Their costs must have gone significantly down.

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    4. Not necessarily. Fuel costs have gone up.

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    5. "These consolidation measures is what allowed Air Serbia to open over twenty new routes this summer and lease aircraft."

      WHAAAT!!?!! hahahahaa

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    6. Anonymous at 09:41

      These STATE SUBSIDIES is what allowed Air Serbia to open over twenty new routes this summer and lease aircraft.

      There, fixed that for you!

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    7. Bullshit, they expanded this summer thanks to getting back their 1998 deposit. How about you do some research before writing the same nonsense over and over again!

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    8. JU is getting subsidies to open the 10 new routes from Nis.
      So they are correct, subsidies are helping JU expand.

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    9. As far as I know JU did not get back Airbus deposit that Government of Yugoslavia paid in 1998. It was allegedly returned to the state. They probably used it for recent helicopter purchase for police?! Can anybody confirm?

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    10. No that is not true. The full deposit amount (from 1998) was returned directl to Air Serbia by Etihad in December 2018.

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  13. I think having its own catering department is pretty stupid these days, after all some of the major airlines don't have it but I have a feeling this is a fishy deal with UAE.

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  14. If it results in improved catering than I'm all for it. We will probably see the effects of it from winter 2019/2020.

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    1. The catering can be easily improved IF the airline is willing to pay more for it.

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    2. * then I'm all for it.

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  15. These are all desperate measures which show how clueless the management is. They are copying exactly what AB has been doing for some years before they went bust.

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    1. That shows you that all consolidation measures are coming from the same kitchen - EY.

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    2. Everything JU does is masterminded by Abu Dhabi. Unfortunately they have also led ALitalia and Air Berlin to bankruptcy.

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    3. Yep, the famous EY know how on how to bankrupt an airline in 3 easy steps! ;)

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    4. @9.28
      They haven't "led" Alitalia and Air Berlin to bankruptcy, they just haven't been able to prevent it. Air Serbia is a much lighter bite in comparison.

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    5. @Anon 9.26 - It is obvious Etihad is forcing them to pull these steps. Hopefully it pays off

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  16. Well I wouldn't say that this is unprecedented. Most airlines don't have their in-house catering.

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  17. Air Serbia Catering may invest in ground catering, and be allowed to open a restaurant at BEG airside. I think they used to have one long ago. And also anyone could buy their airline meals in the companys former headquarters in Bulevar Umetnosti.

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    1. You can buy Air Serbia made sandwiches at Idea supermarkets. It even has the Air Serbia logo on the packaging.

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    2. Really? That is cool. Will have to look for them.

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    3. Yes try the Idea London shop. They always have them.

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  18. My guess is that next they will discontinue their line maintenance and go back to Jat Tehnika doing all their maintenance work.

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  19. There are very few European airlines with their own catering. Don't see what the fuss is about.

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    1. Outsourcing the catering function is nothing spectacular. Even Turkish Airlines does not have it, they outsourced it years ago. Why would it matter whether the catering provider is owned by JU or a 3rd party? It would still be a company registered in Serbia, with local employees and local supply chain. They are not going to bring meals from Abu Dhabi in cargo planes, contrary to common conspiracy beliefs.

      But it's always good to make a fuss about JU. For some people, life simply wouldn't have any purpose without a daily dose of hate.

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  20. Anyone know how many people worked at catering?

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    1. 87 according to Air Serbia's website.

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  21. Well makes sense. A UAE company owns catering company at BEG. And then you have a UAE owned airline which is the biggest customer at that airport.

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  22. Rumor is they will return basic catering to JU in economy.

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    1. That would be nice but I doubt it. How much have they invested in BOB.

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    2. How much have they invested in Air Serbia Catering only to outsource it.

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    3. True it is possible it comes back. We will have to wait and see.

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  23. The point here is not the cut in headcount - they are simply outsourcing a function that can be done cheaper by a 3rd party who will provide the same level of service they currently deliver.

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  24. The most hilarious thing is that they continue to publish profit each year. Who are they kidding?

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    1. Because they get a government injection each year which goes towards their finances. So just like Croatia Airlines sells its slots and represents a profit, Adria sells its brand name to represent its profit, Air Serbia gets government injection and presents profit. It's not illegal in either case.

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    2. In this case state aid is mostly illegal. Some measures are not but most are.

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    3. If it were the EU would have acted or at least hinted like in the case of Montenegro Airlines, it hasn't.

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    4. They surely did. But it is high politics and nobody cares about government of the small country throwing away money on a local company which does not influence European market greatly.

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    5. So they cared enough about the Montenegrin government so much so that they wrote in the EU progress report that subsidies should stop, yet in the the Serbian report they made no mention of the national airline.

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    6. Read the report. It is full of criticism regarding State Aid control. They do not refer to specific cases except Zelezara Smederevo.

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    7. Yes you should also read the report, especially concerning transport and then air transport.

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  25. incredible. it seems that JU is running into one direction, then suddenly stops and then starts running in completely opposite direction, like sheep in some kind of shepherd dog exercise

    starts as a 'boutique' - ends up as a some kind of hybrid lowcoster with transatlantic flights
    this has made them change product, put in more seats, introduce those ripp-off tariff system and made that fancy and costly lounge obsolete

    they gave revenue management and route planning to EY only to in-source it in last year or so

    catering and ground handling have higher margins than flying and now they've outsourced both
    they poured god knows how much money into their own catering unit. halal, kosher, transatlantic menus....

    wow

    also, i would love to see some analysis of what was the benefit of introducing sabre

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    1. +1

      The "benefit" of introducing sabre is that someone at Etihad has a share in that company. That's why they forced it onto every one of their acquisitions even though its inferior. Ironically Air Serbia has a stake in Amadeus Serbia. So you outsourced something you owned... well I guess the same pattern is continuing.

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    2. Anon at 10:05, u tryna to falsify history here? Amadeus asked for an arm and a leg when Air Serbia wanted to modernize their obsolete Amadeus systems and add online checking back in 2013. Air Serbia made a right move to decline it, kick Amadeus out and switch to Sabre that finally gave them modern tools to use.

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    3. Ask any travel agent in Serbia how modern those tools are. And did Amadeus also ask arm and leg from Air Berlin, Air Seychelles and Alitalia too? Alitalia immediately went back to Amadeus when Etihad left. There is a reason 98% of the world's airlines use Amadeus. Guess they don't have the famous Etihad know-how to see the advantages of Sabre.

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    4. Fake news. Amadeus GDS market share 44%, Sabre 37%, others 19%.

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    5. Alitalia can hardly be used as example for pointing out anything positive :) After divorce from Etihad they tried to "rollback" many things done by Etihad including this. It is not visible that made any positive move since they are massively funded by government since then.

      Also, it is not nearly correct that Amadeus is used by 98% of airlines, it has majority but not something like that. You have some really big names using Sabre.

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    6. LH Group, Iberia, AF and all serious airlines do use Amadeus as their GDS.
      It is one of the first ones in the world and extremely popular and reliable.
      Not that Sabre isn't but it is usually used by airlines who cannot afford the cost of Amadeus.

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    7. There are 3 GDS systems used by airlines, Amadeus, Sabre, Travelport.
      Briefly checked and it looks that Sabre is working with American Airlines, JetBlue, Singapore, China Airlines, ANA, Ryanair, LOT, United, Quantas, Aeroflot, etc. Also, companies like Expedia, Kayak...
      Some of airlines work with multiple GDSs. Some of of them are trying to impose additional fees when booking through GDS.

      I mean, Amadeus is bigger but it is not true that Sabre is used only buy minor players.

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    8. Just a quick comment on the above

      Generally most major airlines use all three systems to distribute their fares and seats to agents around the world, including nearly all of the airlines you mention above. But, if you are talking about hosting the airlines key IT systems then your example above requires serious modification as Amadeus provides it's airline IT system for Singapore, ANA, Ryanair, LOT, Qantas and many many others. They are also the IT partner behind Kayak and is a key IT partner for Expedia.


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  26. I had no clue Belgrade Airport had its own catering company... Even less that it was bought by a UAE fund :O

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    1. i think Belgrade Airport catering was created about 15 years ago. It was made by splitting up Jat Catering. Someone can correct me if I'm wrong but I'm pretty sure that's the way it went. It was bought by UAE a few years ago.

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    2. Thanks for the explanation.

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  27. Main question. JU is still a 51% publicly owned company. There was a tender procedure for these catering services?

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    1. There might have been but it wasn't public. Same way with ground handling. As far as I remember Air Serbia as a company is excluded from making their tenders public. This was adopted when EY got ownership. Same with the Belgrade Waterfront project.

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    2. The fact JU has 51% ownership of the Republic of Serbia doesn't make it Public Enterprise like EPS for example. Therefore, it does not fall under obligation of public procurement or so.

      The fact it has majority government ownership dpesnot make it public company, simply a private company with majority government (not public) ownership.

      Communism has made us look at the terms as synonyms while they are not.

      Air Serbia is in the same situation as Telekom Srbija

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    3. Ah wonderful. You just turn (majority) public company in A.D. and you just do not need to follow procedures for public companies. Clever way to extract money.

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  28. So if an external company can provide the same service cheaper than you can do so yourself, doesn't that make sense? Don't see a problem here.

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    1. We don't know the value of this agreement.

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  29. You people are unbelievable sometimes. If JU was setting up their own catering service, you'd be accusing them of moving away from their core business, creating more places for party cadres, increasing the financial black hole etc. Now that they're outsourcing catering to a specialist and focusing on flying, you're complaining about past investments, existing workers etc. Sure, they've made plenty of blunders in the past, but this is clearly a market-oriented move in the right direction considering their size. Jeez.

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    1. yupp, everybody forget about investing several mils into the business and then outsourced it
      don't know what is market-oriented there, but okay

      also, do you believe the system that has made blunders in the past is capable making the right decisions now?

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    2. Only difference Vlad, JU is not setting up catering division here. It already has one and apparently has invested heavily in it in previous period.

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    3. nobody is forgetting how much they invested/spent/wasted there during the last years. but what different does it make? If they can not produce some decent meal at acceptable prices, and some other company can do it, go with the other company....


      currently, there are meals only for business class and new york, but they can produce 10.000 meals/day; if they are really ready to produce 10.000 inflight meals a day, and as they have no other significant airline customer we should finally expect some offers for economy again...

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    4. @Petar Čelik 5 August 2019 at 10:43

      Bussiness that made mistakes in the past should be capable of making the right decisions. If I was for example in apparel business and my t-shirts are not selling, I would change t-shirt design to what market wants to buy, right? Same with airlines.

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  30. The changes are necessary since the strategy proved to be completely off.

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  31. Really unfortunate. Jat Catering was founded in 1967.

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    1. It survived everything but Etihad.

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    2. Kakvi su bili cudo da su toliko i preziveli..O onim bajatim sendvicima bez obzira da li su se placali ili ne, ne vredi trositi reci

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  32. Toliko zlobe i podlosti zbog sve veceg uspeha i ekspanzije AS,strasno.

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    1. Koliko cenis da ce biti profit za 2018?
      25 mil eur?

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    2. Kad bi ti znao da se uspeh avio kompanije ne meri samo bilansom uspeha vec ukupnim pozitivnim efektima koje ta kompanija ostvaruje u maticnoj zemlji poslovanja...ali nema veze...

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    3. Ah da, Oxford analitika tip argumenta :)
      JU zapravo doprinosi milijarde srBskoj ekonomiji i bez nje ne bismo imali sve te letove i putnike. Ljudi jednostavno ne bi zeleli da udju u LH ili Ryan avione. xD

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    4. Ulazili bi one u sve te avione ali bi ih bilo ukupno bar 50% manje.

      Gradivo prvog razreda osnovne skole a za Oxford ne brini :-)

      A FR, JU i LH u istu recenicu moze da stavi samo onaj koji je od avijacije video muzej pored aerodroma

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    5. Ahahaahha muzej avijacije xD
      Ljubav prema JU je beskrajna.

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    6. Mrznja takodje

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  33. I think that outsourcing catering is right thing to do.
    Also, people talking about of previous investments are also right, obviously that was money thrown away.
    So, this looks like correcting mistakes from past. Expensive? Yes. Right direction? Yes.

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  34. Sometimes, news coming out of Air Serbia sounds like announcing weather forecast in Southern Pacific and East Asia with a conclusion that it would positively influence the profitability and success of the company.

    To all JU people reading this: JU must improve the communication department. Especially having in mind JU is the political pet project/ SPV aimed at attracting foreign investments. We get that and can deal with that with ease, just don't go overboard.

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  35. Focusing on a core business while outsourcing some functions like catering or ground services is what many small to mid size airlines like airBaltic and Air Serbia are doing to lower the headcount and costs. Excess headcount at Air Serbia has been identified and criticized for some time. If followed by catering headcount reduction or department spinoff, this move is therefore another step in the right direction for Air Serbia to realign the business and become more agile and in the end profitable.

    On the other hand, every step in the right direction for Air Serbia is what sends haters into frenzy, as witnessed by their reactions.

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