Air Serbia to renegotiate Etihad Partners loan


Air Serbia has notified Etihad Airways Partners I BV, a special purpose vehicle set-up by Etihad Airways in September 2015, that it will be potentially unable to meet its debt obligations and payments as a result of the financial strain caused by the coronavirus Covid-19 pandemic and will hold talks to reach a mutual agreement. Five years ago, Air Serbia’s part-owner Etihad embarked on an international roadshow in Abu Dhabi, Dubai and London, supported by lead advisor Goldman Sachs and UAE-based ADS Securities and Anoa Capital by creating a funding vehicle called Etihad Airways Partners I BV and Etihad Airways Partners II BV. The group successfully raised 500 million US dollars, rising within days by a further 200 million following a surge in interest from the international finance community. The raised funds were split across the seven Etihad Partners entities, including Air Serbia, for a mixture of capital expenditure and investment in fleet, as well as for refinancing. The funding vehicle comprises largely of local and international investment funds.

In September 2015, Air Serbia concluded a loan for 52.9 million US dollars from EAP I BV which matures in September 2020 with an annual interest rate of 6.96%. Furthermore, it finalised a loan for 63 million dollars with EAP II BV on May 20, 2016, which matures in June of next year. In a notification of a potential debt obligation event of default, EA Partners said, “As a result of the ongoing economic uncertainty in relation to Covid-19, and due to the official closure on March 19, 2020 of airports in the Republic of Serbia for inbound and outbound flights, the Borrower [Air Serbia] has notified the Issuer and Agent [EA Partners] of its inability to perform its principal business activity of worldwide civil air transportation and, therefore, of its potential inability to satisfy its obligations under Clause 6 (Repayment) of the Debt Obligation Agreement and any further payment obligations under the Debt Obligation Agreement”. It added, “The Issuer hereby confirms that any such default under the Debt Obligation Agreement would, in accordance with Note Trust Deed, render it a Defaulted Debt Obligation. The Borrower has stated its willingness to engage in meaningful discussions to find a mutually acceptable and suitable outcome. The Issuer confirms that payments due under the Debt Obligation Agreement were made by the Borrower on the most recent interest payment date being, on or around, March 19, 2020”.

The Serbian Ministry for Construction, Transport and Infrastructure recently noted that Air Serbia has incurred some forty million euros in losses since the start of the coronavirus pandemic, which grounded the carrier for two months. The ministry estimates that losses in the country’s entire aviation sector, including its national airline, airports and air traffic provider will reach up to 200 million euros by year’s end. The Ministry has also said it is working with Air Serbia on a range of measures to aid the company. “One of them is providing assistance in overcoming existing losses the airline has incurred due to the ban on commercial flights during the duration of the recession in the air transport sector. Another is to cover the losses for the transport of passengers and cargo”, the Ministry for Construction, Transport and Infrastructure said. It added, “First and foremost we will discuss relief for taxes and utilities, especially those payable to the state. A decision on whether and when the state would increase its ownership stake in Air Serbia would depend on the conditions and our financial capabilities”.

Comments

  1. Anonymous09:02

    This to me seems like an indication that the state will pay for this loan through which it will renationalise JU.

    ReplyDelete
    Replies
    1. Anonymous09:05

      That's a lot of money.

      Delete
    2. Anonymous09:07

      ^ They don't owe the entire sum. It says that they made their last payment in March and if the loan has to be paid off in June that means they probably paid the whole thing almost. The other one is due next year which also probably means they've paid more than half.

      Delete
    3. Anonymous09:48

      ^ This is not like a hole loan. You only pay the interest every quarter or every year and at the end of the 5 years you pay the principle. Usually you negotiate a new loan and you continue paying the interest.

      Delete
    4. It might not come to that, but there certainly should be no bailout money from the Serbian government unless it gets something out of it; either a matching amount from the UAE or an increased percentage of ownership of JU.

      An easy way out for Etihad would be to add surplus aircraft to the JU fleet/ownership in lieu of actual money. JU would just need to ensure that whatever is given is in great condition.

      Delete
    5. Anonymous15:52

      To anon 11:54:

      The world is now full of states propping up companies to the benefit of their private investors.

      If it is the state that pushes for early flight resumption, keeping up the network and frequences etc., because it wants to have an overall economic advantage, be it in tourism, be it somewhere else (so often mentioned on this site connectivity), then how do you expect a private investor to take an equal share of the losses that come with it. Who benefits is the one that takes the loss.

      Delete
  2. Anonymous09:02

    The conditions of that loan are terrible

    ReplyDelete
    Replies
    1. Anonymous09:08

      Fully agree! I am just puzzled how can anyone normal sign off such a deal unless again someone took a few % in their pocket(s)!?!

      Delete
    2. Anonymous09:12

      It gets even better. Apart from the high interest rate, the payment due increases each quarter by 0.17%.

      Delete
    3. Anonymous09:22

      The A330-200 lease agreement is nothing better.

      Delete
    4. An annual interest rate of 6.96%
      Who would agree to such terms?
      SMFH

      Delete
    5. Anonymous09:34

      Unfortunately that is the reality we are living in not only in Serbia but in the Balkans and all of eastern Europe. Western/foreign companies come like predators and impose any conditions they want and local politicians are desperate (or incompetent) so they accept anything and everything. Until local countries become economically stronger we are going to be abused by those guys. Look at the deal Serbia signed with US Steel, disastrous but that's life.

      Only good thing from this Etihad deal is that we got an airline that has a future, something Jat Airways never had.

      Delete
    6. Anonymous09:47

      Well the government can sue Etihad because that yearly interest rate is actually illegal in Serbia.

      Delete
    7. Anonymous09:50

      You really think Serbia would sue Etihad i.e The United Arab Emirates? No chance. And besides there is no case. The majority shareholder - the Serbian government signed off on it.

      Delete
    8. Nemjee10:06

      The government signed it off because there was an EY management contract which was supposed to turn JU around and to make it profitable. They clearly failed there meaning that the government has grounds to pursue them even if they signed this loan agreement.

      At the end of the day the best thing is the pay for EY to leave JU and for this whole story to be finished. At this point there is no reason why EY should retain their shares.

      Delete
    9. Anonymous10:54

      @Anon 09:47: Why would such interest rate be illegal in Serbia?

      Delete
    10. Anonymous11:12

      Because according to our law it's called зеленашка камата and it's illegal.

      Delete
    11. Anonymous11:48

      6% interest is high, but not unreasonably high. I don't know the debt to asset ratio of Air Serbia, but it's probably on the high side, as most aircraft are leased and the owned ones are not worth much.

      I don't see how 6% interest rate between two business entities could be illegal to be honest.

      Delete
    12. Anonymous11:48

      The thing is that this loan is not under Serbian law but under Emirati or British law. So our courts do not get to pass judgement on this.

      Delete
    13. Anonymous13:05

      Тhen the government should claim they did their part while Etihad didn't thus breaching the terms of the initial agreement.

      Delete
    14. Anonymous18:24

      I would round off 6.96% as 7% - not 6%.

      Delete
  3. Anonymous09:02

    So basically they will default on their loan. Not good.

    ReplyDelete
  4. Anonymous09:05

    That's a lot of money. 115,9 million in total.

    ReplyDelete
  5. Anonymous09:07

    Ironically almost the majority fo those 7 EA partners are now bankrupt.

    ReplyDelete
    Replies
    1. Anonymous09:15

      ** of

      Delete
    2. Anonymous09:16

      Etihad know how.

      Delete
    3. Anonymous09:21

      Who are the parnters?

      Delete
    4. Anonymous09:40

      Etihad, Etihad Airport Services, airberlin, Air Serbia, Air Seychelles, Alitalia and Jet Airways

      Delete
    5. Anonymous10:43

      That reads more like an obituary list.

      Delete
  6. Anonymous09:13

    Good lord, Serbian taxpayers are f***ed.

    ReplyDelete
    Replies
    1. Yes but we get to have the prestige of JU501 coming to BEG from JFK.
      That is priceless!

      Delete
    2. Anonymous09:33

      Don't mention taxpayers, most importantly there is Air Serbia, which is apparently very important for the economy

      Delete
    3. Anonymous18:51

      @Happy taxpayer

      JU501 does not fly from Slovenia where you said you pay taxes. Do you need a link to Adria comments where you said it?

      Delete
    4. Anonymous06:55

      Wow so he is not even Serbian? Wow, ok.

      Delete
  7. Anonymous09:14

    Disaster

    ReplyDelete
  8. Anonymous09:18

    If this government ever collapses, I don't think any other will be able to support all the loans, borrowings, handouts etc JU has received under very poor terms.

    ReplyDelete
    Replies
    1. Anonymous09:21

      Neither do I, but I'm not sure they can afford Air Serbia to collapse either.

      Delete
    2. Anonymous09:25

      It won't end well either way.

      Delete
  9. Anonymous09:18

    This loan shows the reason the government should renationalize Air Serbia. These terms are terrible, like all other payment terms brokered by Etihad.

    ReplyDelete
    Replies
    1. Anonymous09:21

      +1

      Delete
    2. Anonymous09:23

      Agree. The subleasing agreement of the A330 from Etihad is also under very poor terms.

      Delete
    3. Anonymous09:26

      You're presenting it as if the government had no say in brokering these terms. In fact, as a majority owner they had to okay all of them.

      Delete
    4. Anonymous09:35

      Those terms are disastrous for JU's finances. Clearly some government genius who negotiated them got very rich with brown envelopes.

      Delete
  10. Anonymous09:22

    The amount of money being funneled into this company is astounding.

    ReplyDelete
    Replies
    1. Anonymous09:36

      What matters is that we are getting something in return, at least it's a business from which the country profits. Look at the amount of money Romania or Croatia poured into their own while getting so little in return.

      Delete
    2. Anonymous09:47

      You really can't be sure that the gain is bigger than the spending. Considering the amounts we are talking about here, I would be far from certain.

      Delete
    3. Anonymous10:54

      You can be sure you are getting much more than from Serbian Railways

      Delete
    4. Anonymous11:13

      JU is the main engine of tourism development. They are bringing most foreigners to Serbia so they more than compensate their losses.

      Delete
    5. Anonymous12:09

      On posts on a huge chunk of Wizz's flights to regional airports people argument how diversified BEG is with a healthy mix of legacy and budget carriers.
      I suppose all those other budget and legacy carriers fly empty to BEG and it is mostly JU who brings tourists and that is why it compensates for all the loses and crazy loans.

      Delete
    6. Anonymous13:06

      He said JU is the main engine, not the only one. With 40% market share at BEG that kind of make sense, no?

      Delete
    7. Anonymous13:09

      People also forget that without JU the state would not be able to get over a billion euros for the airport.

      Delete
    8. Anonymous16:48

      Slovenia and LJU are best arguments for keeping JU around, no matter what the cost. Look at the disaster in LJU once JP was let go. Now they have to go around and beg OU to care enough about them to open a base there.

      Delete
    9. JATBEGMEL20:28

      There has to be a limit as to how much is too much. If year after year you keep throwing in cash with no improvements, no/minimal growth, no return on investment, then whats the point.

      Sure, a national carrier can be vital for a country, but in Europe, with open borders, a huge amount of choice, large airlines, one has to ask whether a national carrier is worth the investment or just subsidies other carriers.

      Macedonia being an example, there was MAT and now Wizz. Connectivity is bad, but Wizz is probably larger than all airlines out of Macedonia that ever existed combined.

      Montenegro is funding an airline that has remained almost unchanged for over a decade, while debt has grown. Is Montenegro really better off than Macedonia?

      Yes, Air Serbia is costing tax payers, however we have seen over the years Jat transform into the Air Serbia we have today. The losses shown for 2018 have been one of the lowest in over a decade, while growing from 14 aircraft (~6 airworthy) to 21, with tendancy to further expand, as evedent by their plans for 2020. Further more, destination choice from Serbia has significantly grown, competition has grown, connectivity has grown.
      During this pandemic, JU was used for repatriating citizens (~15.000), delivering necessary cargo, what about the other former republics? As debated here, JU's 2018 financial figures showed that 8 million was the total loss. Do we honestly think that JU had not contributed at least 8 million euros to the Serbian economy?

      Delete
    10. Anonymous06:58

      I think contributed much more than €8 million, look at the number of Turkish arrivals that boomed once JU launched IST. How much has Serbia profited from more of them coming here? How many hotels, restaurants and shops they helped fill out completely?

      Delete
  11. Anonymous09:26

    Call it what you want, this company is not profitable and is bleeding money left and right.

    ReplyDelete
    Replies
    1. Anonymous09:32

      +100

      Delete
    2. Anonymous11:50

      True, like many other companies in this region, but unfortunately nobody cares about it and not even mention it...
      People here constantly emphasize how all exyu airlines are burning millions and millions but all of countries have full yard of "money burners"
      They are all our big problem and cleaning should start from each corner...but will that happen? Of course not.

      Delete
  12. Anonymous09:27

    Now you all understand why JU gets the subsidies it gets from the government.

    ReplyDelete
    Replies
    1. Anonymous09:36

      Yes, because government is mismanaging it every year.

      Delete
  13. Anonymous09:29

    The state must clearly provide a clear explanation about the ongoing situation with Air Serbia. Additionally, more information is needed with the Etihad deal, too.

    ReplyDelete
    Replies
    1. Anonymous09:37

      Only JU haters ask for explanations and clear info.
      The cheerleaders will tell you that soon.

      Delete
    2. Anonymous19:02

      Clear explanation was provided in the text.

      Delete
  14. Anonymous09:34

    Is this somehow related to this?

    A steering committee of debtholders, comprising largely local as well as international investment funds, submitted a proposal to Etihad about a month ago asking the carrier to agree to restructure the two bonds, due in September 2020 and June 2021, but have yet to receive a response, the sources said.

    The proposal, which has not previously been reported, involves a maturity extension of the debt by up to three years but would require Etihad or its owner, the oil-rich Abu Dhabi government, to guarantee the repayment of the underlying loans that were made to airlines partly owned by Etihad such as Air Serbia and Air Seychelles.

    https://www.aljazeera.com/ajimpact/etihad-told-restructure-debt-face-legal-action-sources-200521133306952.html

    ReplyDelete
    Replies
    1. Anonymous09:42

      Well it's related to EAP but not directly to this Air Serbia loan. Don't think Etihad will agree to pay Air Serbia's debt. They agreed for Alitalia and Air Berlin because they are bankrupt!

      Delete
  15. Anonymous09:45

    Who knows how many genius loans such as this one exist. Even an amateur can see how bad this loan is.

    ReplyDelete
  16. honestly, this couldn't happened at a better time

    if the 2020 was a regular year then it would be plain to see that JU is loosing money and borrowing with inflated interest to finance operations. that would make things harder for the government to save JU, since it would draw a lot of negative press

    now corona gives them an excuse to pay that sum with a valid excuse, takeover the company and prolong its life without much questions for another 2,3 years

    ReplyDelete
    Replies
    1. Anonymous10:02

      Indeed, and this is the case with all defunct carriers worldwide. They will all get bailed out because of Corona.
      But i still think a consolidation in this sector will still be inevitable at some point in near future.

      Delete
  17. Anonymous09:47

    The State is subsidizing JU so they can make payments for this loan

    ReplyDelete
    Replies
    1. Anonymous09:48

      Well I'm not sure because that same subsidized JU just announced they are DEFAULTING on their loan.

      Delete
  18. Nemjee09:52

    Maybe it's time for Serbia to sue Etihad for the incompetence of its 'consultants' from Abu Dhabi who led the airline from one failed strategy to another. JU only started to consolidate once management was transferred to Belgrade.

    In the end they will probably reprogram and restructure the loan to make it more acceptable and realistic.

    ReplyDelete
    Replies
    1. Anonymous09:56

      No chance. Vucic and the Sheikh are friends and he has too many personal business interests tied to them. Belgrade Waterfront being one.

      Delete
    2. Nemjee09:57

      Which is why I am sure that in the end these loans will be reprogrammed and their debt restructured.

      Delete
    3. Anonymous09:58

      Let's say Air Serbia is renationalized, my question is would they be able to continue the way they are going now? The majority of the current top management was selected by Etihad. With Etihad, they would presumably go as well. Somehow I'm not very pumped to see some politically appointed party member who didn't know how to run the stable in his village run an airline.

      Delete
    4. Nemjee10:09

      And where would they go? They wouldn't go anywhere because they are comfortable in JU. There can't be re-nationalization when JU is already a national airline. What the government can do is buy out their minority partner.

      In my opinion, the best thing would be for them to pay off Etihad and to list JU on the Belgrade Stock Exchange (like BEG). They can release EY's shares and have others buy them.

      Delete
    5. Anonymous10:51

      No private entity would be interested in buying those shares. Only the Government.

      Delete
    6. Anonymous11:05

      "the best thing would be for them to pay off Etihad and to list JU on the Belgrade Stock Exchange (like BEG). They can release EY's shares and have others buy them"

      Aw, and now we talk market economy:
      Well, guess what, that can only wotrk if a company is PROFITABLE.


      Delete
    7. Anonymous11:14

      Main reason why JU is not profitable is EY and its expert management. We all remember how smart they were with their various boutique models.

      Delete
    8. taking loans is CFO obligatio
      CFO position was always in belgrade

      Delete
    9. Anonymous12:15

      And it was also local (middle) management in Belgrade who was signing employment contracts for 1700 people for a fleet of 21 planes.

      Delete
    10. Anonymous13:09

      Yet the CEO was was signing all that was an EY puppet, that's what matters in this story. Dane was found and approved by EY.

      Delete
    11. Anonymous19:25

      @Petar C

      Wrong. When EY took over and that loan was signed, management CFO position might have been formally located in Belgrade but it was 100% Etihad managed. CFO was South African, Dimitri Courtelis, Head of Financial Control at Etihad before being appointed CFO of Air Serbia. Look it up before making comments.

      Delete
    12. Anonymous06:59

      Wow true, I completely forgot about him! He was very bad, not just for the airline but for the work environment as well.

      Delete
  19. Anonymous10:19

    This vanity project is turning to be a cash black hole. But I am sure the benefits are higher, consider all the sandwiches sold in flight, not to forget the kikiriki.

    But do not worry, part of the 6+% interest is staying in the country in form of dubious projects and payments to the right people.

    Ovo je Balkan! <3

    ReplyDelete
    Replies
    1. Anonymous10:30

      So you are implying that there is no benefit from Air Serbia?

      Delete
    2. Anonymous10:44

      Let him believe so

      Delete
    3. Anonymous10:52

      Don't forget the Cacak chips.

      Delete
    4. Anonymous11:18

      Also Toto from Kikinda, those two companies profit massively from doing business with JU. Air Serbia might be loss making but on a macroeconomic scale they are considerably boosting the Serbian economy, especially around INI and KVO.

      KVO flights have made that inaccessible part of the country accessible once again.

      Delete
    5. Anonymous11:22

      @10:44

      It's a zero sum game, so somebody is certainly having a benefit from this Air Serbia deal - not quite convinced it's someone you and I would want to though.

      Delete
    6. JATBEGMEL20:49

      @ 10,19

      Absolutely far from reality.

      Black hole on what exactly?

      Onboard sale alone is probably close to or the same amount that Serbia overall is funding JU. If the average pax (2018 numbers) spent on average 4€, it would be more than the subsidies by just above 15%.

      @ 11,18

      Its nice to have the KVO flights, but have they really improved connectivity? Same for INI.

      Delete
    7. Anonymous07:01

      Connectivity for the region. How long did it take to reach Vienna from Kraljevo or Novi Pazar in the past and how long does it take now? From NP it was probably close to 11 hours while now you have a 01.30 flight and an hour ride to the airport, so 11 became 02.30. Not bad.

      Delete
  20. Anonymous10:39

    So much money...

    ReplyDelete
    Replies
    1. Anonymous10:52

      Prestige is expensive.

      Delete
  21. Anonymous10:48

    This is bigger than AirSerbia, their move is just one piece of puzzle.

    https://wtvbam.com/news/articles/2020/may/21/exclusive-etihad-bondholders-put-airline-on-notice-with-debt-revamp-sources/1020747/?refer-section=business

    ReplyDelete
  22. Anonymous11:00

    "First and foremost we will discuss relief for taxes and utilities, especially those payable to the state. A decision on whether and when the state would increase its ownership stake in Air Serbia would depend on the conditions and our financial capabilities"
    Excuse me? What type of "relief" are they seeking for? JU is already the most privileged and protected airline in Serbia. Yes, increasing the stake would be an alternative yet risky decision. You don't want to takeover an airline that is generating so much loss expected to be 200 million by the end of the year. Come on, that's a LOT of money. It can better go to schools, hospitals or roads.

    ReplyDelete
    Replies
    1. JATBEGMEL13:10

      Air Serbia or not, do you honestly believe money would be better spent elsewhere?

      Look at the past 2, 3 months while this government has handled the pandemic. There was always a budget for schooling, the health care system, yet like everything else, funds get mismanaged, various scandals arise, and its always someone else at fault. Even North Korea better informed their citizens of the pandemic than our government. And you have trust that the very same people, without JU would do any better in improving the standard of health and education in Serbia with the funds allocated for JU?

      Besides, JU's loss is not 200 million, rather the aviation industry in Serbia as a whole (ie no overflight fees, various landing fees etc).

      Delete
    2. Anonymous19:36

      that's a LOT of money. It can better go to schools, hospitals or roads.

      $25B government subsidy (not loans!) going to airlines in the US can better go to public schools, hospitals or roads. Same with 10B for Lufthansa. There will also be government help to take care of this: Croatia Airlines hit by €14.6 million loss in Q1. Slovenia will pay OU to fly out of LJU. It can better go to schools, hospitals or roads, in case you want to bring that argument ever again.

      Delete
    3. JATBEGMEL21:24

      Fact is that in Serbia, money is mismanaged. Do you honestly believe that money spent on JU would drastically change any institution in Serbia, being health, education, sport, you name it.

      JU's defecit, as debated here, for 2018 was 8 million euros. Do you honestly believe that Serbia the past 2 years at least has had no benefit from JU?

      Think about it. Employee salaries mostly, if not entirely, spent in Serbia. Taxes (salaries, airfares, VAT). Do you honestly believe that none of the JU pax is buying anything at the airport?

      Is that road in front of your house/building bringing revenue to the country? The list goes on.

      Do you honestly think that the money spent by the US on the various wars world wide benefits American tax payers? Why is funding profitable American companies during a global pandemic bad but bringing 'democracy' to (insert country name here) good? Could that money not be better spent on public schools, roads or introducing afforable health care for its citizens?

      Funding airlines is ok to a certain point. If there is overall benefit from it, sure. But if the airline is a vanity project costing the country more than it recieves, whats the point and I agree. At this moment, Serbia has benefit from a national airline.

      Delete
  23. Anonymous11:17

    Haters are having a field day today!

    ReplyDelete
    Replies
    1. Anonymous11:18

      It's not the commentators here who took out a loan with 7% interest rate. That is borderline crazy.

      Delete
    2. Anonymous11:51

      Haters? 7% momko, 7% interest rate.

      Delete
    3. Anonymous18:01

      Momko? I see our worried neighbors are here.

      Delete
  24. Anonymous11:20

    We have all seen how fast Wizz is opening and closing bases (same as FR) so having a national airline provides a great deal of stability. Don't forget that many debt and issues JU has today are from the time of the 1990s. It will take time for the airline to be reset and fixed and JU has done a lot over the past two years.

    Like someone mentioned, RO and OU have received well over €100 million while their markets benefited very little from that. At least Serbia has massive advantages from having JU.

    ReplyDelete
    Replies
    1. Anonymous11:22

      This expensive loan with some of the worst conditions was not from the 1990s. It's from 5 years ago!

      Delete
    2. JATBEGMEL12:49

      I would think a good amount of debt was made in the 2000's.

      1990's saw a horrible period in Yugoslavia, JAT went from one of Europes larger airlines to being closed off to the world. The fact that they survived that decade is an achievement.

      The decade following was a disaster. The debts, scandals, mismanagement.

      Serbia could gain alot from JU, if managed well.

      Delete
    3. Anonymous18:03

      A lot of debt was amassed in the 1990s. For example how do you think YU-ANJ was maintained in impeccable condition while it was held hostage by the Turks in IST? They regularly paid for its maintenance and the plane even taxied around the airport. That's how it was ready so fast to fly back home

      Delete
  25. BA88811:24

    Lets open new routes.

    Increase fleet

    Introduce China

    (I read al this here in last six to eight weeks)

    For some the message is: Reality check long time overdue....

    ReplyDelete
    Replies
    1. Nemjee11:27

      What has that got to do with loans that were signed years ago? JU needs critical mass without which it has no future.

      Delete
    2. i love this comments

      lets fly to canada, lets buy a380, lets have formula 1 circuit, lets establish a space program...

      like the market here isn't small, poor, already saturated and with low cost competition

      Delete
    3. Anonymous15:40

      Petar why are you throwing shade at BEG/Air Serbia again?

      -like the market here isn't small: it isn't small, 6,2 million passengers in 2019 and growing faster than regional competitors.
      -poor: incoming passengers (UK, USA, Germany etc) are not poor and they drive the demand
      -already saturated: Not at all. IATA report said for Serbia: ..expected to grow by 7-8% each year on average over the next 20 years, doubling in size each decade.
      -and with low cost competition: new renders of BEG are showing 35 gates. Who are they building them for? Did you see dozens of Air Serbia planes at bridges? Couple of Wizz planes are on remote B platform. That's how it's going to be.

      Delete
  26. Anonymous11:33

    I think what you’re all forgetting is the state Jat was in before Etihad rebranded it into Air Serbia. 4 barely functional jets and a schedule they couldn’t adhere to. That’s about it.

    ReplyDelete
    Replies
    1. JATBEGMEL12:35

      That all could of been done domestically.

      I dont at all support this government in any way, however the previous government severely mismanaged Jat which brought it to that point. Clown after clown turning the airline into a circus.

      Delete
  27. The Etihad deal brought Air Serbia back to life and turned it in to a major regional player as well as profitable company.
    Respect to that. They were nothing but expanding. If we didnt have this pandemic , we would be talkin the best year in aviation history in this country.
    I am really happy for GoS to use taxpayer money to support JUs recovery. The JU story was, actually, the best taxpayers money ever spent. I really hope they buy off Etihads share even though Arabs were great partners.
    Get those SSJs and the new era can begin.

    ReplyDelete
    Replies
    1. JATBEGMEL12:31

      I agree that JU has grown into a decent sized airline.

      However, where I dont agree is that it is tax money well spent.

      ASL has not once shown a profit since its launch.

      Tens of Millions was spent funding a failed concept. Dont get me wrong, the boutique concept was nice while it lasted, but imagine what that money could of done in terms of fleet renewal and expansion instead.

      Etihad has shown in many ways to be a horrible partner. Looking at their own situation is enough, not to mention their other 'partners' that have bankrupted in the mean time. JU has only really started to thrive once EY management had mostly left. It shows that Jat didnt necessarily need EY to turn around.

      Delete
    2. Air Serbia is clearly making profit. Annual reports show that every year. In a few years when the debt is payed off, they will be in plus. Their business success and constant growth shows that it was money well spent.
      All major airlines moved to hybrid model so wll done to them in a quick adoption to the new circumstances.
      Etihad was reliable partner to JU and was a crucial support for this successful story.
      Full support for GoS in state aid for Air Serbia. The best tax payers money spent in decades.

      Delete
    3. JATBEGMEL21:43

      @ Parti

      ASL has not made profit since its inception. We have debated this soo many times.

      Major EU airlines made the move to a hybrid model while JU spent millions on a boutique model before following as well.

      EY has not been a reliable partner. The whole deal in various forms has been a scandal. Fact is that JU is seeing reduced losses and growth since EY management has mostly left.

      Delete
  28. Anonymous12:06

    Most people commenting here has no clue that the money was not borrowed from Etihad, but from third party investors via a special purpose vehicle (ie via a company established only for the purpose of this intermediation). Just because that spv has Etihad in its name doesn't mean the money came from or goes now to Etihad. With the help of this spv all companies belonging to the Etihad group TOGETHER borrowed money for their own purposes from third party investors on the market.

    The same about interest rates. The 6 years bonds issued by Air France-KLM in 2016 in euro had a coupon of 3.75%. At what interest do you think Air Serbia should normally be borrowing money? 1%?2%? Pls remember Air Serbia has been at that time and continues to be very close to being bankrupt.

    ReplyDelete
    Replies
    1. 1. yeah, it is really an outstanding move when you borrow money @7% and then do nothing with it, put most of it in the bank @2% for a couple of years

      CFO-of-the-year-award-type of move

      2. you are giving a valid reason why it is such a bad move. 3,75% vs a 7% for a loan backed by the emirate royal family with EY, Alitalia, Airberlin in the pool?


      3. the only reason for that "loan" was for EY to show that it is not supported by royal family money, but that it is financed on market levels. meaning, to show to the USA regulators that accusations for subsides are unsubstantiated

      4. JU was nowhere close to bankrupt until 2020. so please, please please stop lying

      Delete
    2. Anonymous12:31

      Bankrupt? But there is something I clearly don't understand. How come JU first became a boutique airline, then a low-cost. Then it survived in 2016 and then expanded and expanded. First wave in 2019 and second was supposed to be now. If an airline is so ambitious then how come it suddenly not be able to pay the loans?
      With regards to this SPV you're talking about, what was the % of this distribution? Why did it not work out for 9W for example before it got bust?
      What about HM? What is their financial situation at the moment and do they have the same issue with the inability to pay their loan?

      Delete
    3. Anonymous12:33

      ^ There was (and still is) this thing called the coronavirus which grounded commercial aviation transport, Air Serbia included. Possibly you slept through it.

      Delete
    4. Anonymous13:26

      Re Petar Celik and others:

      The repayment was not guaranteed by the Emirates Royal Family. None of the airlines from Etihad group guaranteed repayment of the entire amount borrowed under the bonds.

      Air Serbia was for years loss making and would go bankrupt if not for the help of the state.

      If you believe Air Serbia creditworthiness is the same as Air France-KLM, then I have nothing to add.

      And by the way: in 2016 Serbia as a state issued 8 years USD bonds with the coupon 6,75% (total issue amount 1bln USD).

      Anon 12:06

      Delete
    5. Anonymous13:45

      All airlines will send similar letters to this fund. Fund will then send a letter to creditors. Part of the debt will be written-off, rest will go to refinancing.

      That is the game.

      Delete
    6. Anonymous14:20

      Taking in consideration the circumstances and economic situation in Serbia it is absurd JU to be compared with AF or LH.

      But beside that we need to know that JU has survived wars, sanctions, market shrinking, terrible decrease of economic standard, powerty and many, many more.

      As soon as companies like LH or AF faced similiar situation for only 3 months (and JU crisis for lasting for decade) they already asked for huge help from their Governments. Otherwise they would file for bankrupty.

      So, yes probably Air Serbia would go belly up (the same like OU, YM etc) if there was no financial help from its Government but JU did not have 70 years of more-less stabile economic growth like LH.

      As soon as something similiar but in much smaller scale hit LH they cried out to get billions. Otherwise they would also go belly up.



      Delete
    7. my point is that JU was made unnecessarily to take that loan to show to US authorities that EY group is legit when it comes to financing
      later JU got a much more favourable ~15mil USD loan from serbian development fund (1% i think) and now has much money stashed on a bank account, but with much lower interest rate

      as for other things, of course it wasn't guaranteed by the royals directly, but who thinks that they will let this loan default on EY share of the debt?
      AB share is lost
      AlItalia will be interesting to see how it unfolds

      Delete
    8. Anonymous14:59

      something like this...

      ****
      Under the latest proposal, creditors would write off the portion of the debt owed by bankrupt carriers Air Berlin and Jet Airways, equivalent to $344 million, the sources said.

      Debt owed by Alitalia, the Italian carrier, would be included in the proposed refinancing because Etihad agreed to cover it under a private "debt assumption agreement" signed by the two airlines in 2016, the sources said.
      ****

      Delete
    9. Anonymous15:16

      To anon 14:20.

      You missed my point completely. I was saying that the interest rate on these bonds was ON MARKET TERMS at the time of their issue.

      To support this I mentioned two things: (a) even Air France-KLM, a company with a much higher creditworthness than Air Serbia, was at that time borrowing long term on 3,75%, what fully justifies a higher interes rate applicable to Air Serbia debt (6,96%), (b) even Serbia as a state was at that time borrowing money long term at 6,75%.

      to Peter Celik:

      You cannot really compare a loan from the state with the bond sold to third party investors. Are you saying that that loan from the Serbian development fund was on market terms re interest? You really think Air Serbia can borrow long term on 1%?

      And if they didn't need money from the bonds, why did they take another loan from the state? You contradict yourself. All that money was spent long time ago.

      And actually the default shows the interest rate was too low! The risk of lending to Air Serbia and Etihad proved to be much, much higer.

      Delete
  29. Anonymous14:13

    Unfortunately, whilst turning JU around could have been done domestically without signing idiotic deals and having moronic consultants do what they did it simply wasn't going to be done. This is something that people seem to miss. We had Jat Airways in the state it was in which would have been replaced by W6 and whatever offer they could have gained.

    Now whilst it is important to remember that this deal is absolutely terrible and someone signing off on it is inexcusable, I think overall JU has done good things for the Serbian economy and tourism. From most key markets with which Serbia does business, Belgrade is not difficult to reach on an airline with good schedules and an ok product. It stimulates transit traffic through BEG as well as stimulating demand to new destinations which other airlines without a hub in BEG wouldn't be able to do.

    So I would argue that severing ties as much as possible with EY is the way to go, as long as clowns such as the people that ran Jat Airways are not brought back.

    ReplyDelete
  30. Anonymous16:07

    For weeks we have been reading here how Serbia will inject money into its airline, shield it from the crisis, gear-up further expansion etc., but nothing happened (even though state aid to AF, KLM, LH and similar is well on the way) and now we read that Air Serbia will default on payments, ie will become insolvent. What happened? How the two fit together?

    ReplyDelete
    Replies
    1. Anonymous16:11

      You obviously did not understand the article at all. They will renegotiate the terms of the loan so they don't have to pay the entire thing off. Almost every single airline in the world is renegotiating its borrowing mechanisms and terms. The government will certainly provide funds for JU. It has been doing it for years. Certainly won't stop now.

      Delete
    2. Anonymous21:42

      That's right, Anon@16:11. Just a refinancing in a time of coronavirus, trying to get some debt writen off and to negotiate best terms going forward. You should all try it with personal loans and mortgages.

      It is preposterous to say Air Serbia is suddenly surprised by this loan as haters tried to portray it. Government, EY and JU all knew about it from the start and were making regular payments over years. Pandemic downturn was a surprise but it was to everyone and Air Serbia will get help to overcome it just like others.

      When government recently talked about potential to expand Air Serbia fleet, they also knew about the loan. When Vinci bid for Belgrade airport concession, they did due diligence and knew about Air Serbia financial state and loans. They are not expanding airport to 27 jet bridges because they think Air Serbia will follow Adria's fate but because they expect further expansion of their major tenant.

      People please cut the drama and move on.

      Delete
    3. Anonymous22:35

      Creditors can agree to debt haircut only if an alternative is bankrupcy of the debtor and bigger haircut. If the governement owner of the debtor is not happy to accept bankruptcy of that debtor (including for prestige reasons), no sane creditor will agree to any haircut. What they may agree is extension of the maturity and so on, but only on the terms where they profit more.

      Vinci got this concession fairly cheap and will make money anyway. This is a typical French approach. If not thanks to JU, thanks to Wizz or others. Remember for now JU's fees at BEG are highly rebated as was commited by Vinci to Serbia and in turn it was discounted into the concession fee upfront (ie Vinci paid less for the concession as a result). They make more money on others and would make more money, if the discount disappears or if JU is replaced by the competition in huge numbers. In brief I don't think they necessarily bet on JU's success, the same was as Fraport in LJU did not bet on Adria's success.

      Delete
    4. Anonymous02:20

      What?! Vinci got this concession fairly cheap??? Compared to what? Do you have any clue how much more concession money BEG got compared to ZAG? And what is that nonsense about Vinci making more money on other airlines if JU is replaced by the competition?! Vinci is not going to make a ton of money from ANY airline. Most of the revenue over time will come from aux sources NOT from airlines. Millions of transfer passengers Air Serbia will be moving through BEG will be the key. And you use the word prestige in the wrong context here. It is meant only to describe some airline brands at other wannabe exyu regional hubs.

      Delete
    5. Anonymous07:07

      Didn't Vinci pay €500 million for an airport that handled barely 5.5 million passengers that year and whose infrastructure was in desperate need of improvement? lol
      They might have done many things but getting BEG cheap was not one of them. However Vinci recognized that BEG can handle 15 million passengers and that's where they plan on making money, it's a long-term investment my friend. They also know that no matter what, JU is sticking around and this loan does not worry them because they will just refinance it and get it over with.

      Delete

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