Air Serbia has requested an 82% reduction in the repayment of its multi million dollar debt to Etihad Airways Partners I BV and Etihad Airways Partners II BV, after launching talks with the special purpose vehicles set up by Etihad Airways in 2015. The carrier previously informed the funding vehicles that due to the financial strain caused by the coronavirus Covid-19 pandemic it may not be able to meet its obligations and payments. “Based on the recent market and economic projections for the future, the borrower [Air Serbia] has assessed what it believes will be its likely revenue in the short and medium term leading up to the repayment date. Based on such forecast, the borrower has indicated that the loan would need to be reduced by 82% in order for the borrower to 1) continue to operate until the repayment date, and 2) generate and accumulate the necessary cash to make such payment once trading activities recommence”, EA Partners said in a statement. The 82% reduction refers to each of the two loans individually. It should be noted that Air Serbia's part-owner Etihad Airways does not run the Etihad Airways Partners funding vehicles nor does it play part in its decision making process.
Five years ago, Etihad embarked on an international roadshow in Abu Dhabi, Dubai and London by creating the funding vehicles. The group successfully raised 700 million US dollars, which was split across the seven Etihad Partners entities, including Air Serbia. 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 next month 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. Air Serbia made its most recent interest payment in March.
The Serbian carrier has indicated that it is prepared to provide the Etihad Partners investors with details on how it concluded it would need to reduce the debt by 82%, together with its projections and financial models. “As of date hereof, the issuer [EA Partners] does not have any further information in relation to the borrower’s proposal. The issuer will provide further updates to the holders of the notes upon receiving further information in due course”, EA Partners concluded. Air Serbia recently outlined it was undertaking a number of cost saving measures in order to alleviate the effects of the Covid-19 pandemic. The airline has rationalised its fleet, renegotiated leasing terms for its aircraft, secured slots for 2021, deferred the payment of air navigation taxes for next year, as well as reduced airport fees and capital investments, among other measures.
They are practically admitting they are bankrupt.
ReplyDeleteNo, they are admitting that paying back these loans would bankrupt them. Don't forget that JU refunded all tickets which were requested meaning their cash reserves have gone considerably down. Even loads now are light meaning cash incomes are still low. There is a reason why airlines like LH got 9 billion Euros because they themselves couldn't pay their bills.
DeleteExactly opposite, ask what you can (it turbulent times), not to be bankrupt..
DeleteThey are actually using the chance given by current situation to try to minimize obligations. Smart.
DeleteI can confirm they are way better in tickets refunding than Lufthansa is!
DeleteAnd LH got something like 9 billion EUR from German Government
Social media would disagree. People are complaining they are not getting their refunds.
DeleteI am not saying they are good.
DeleteI am saying they are way better than market leader as LH is! Now you can see and conclude how Lufthansa is doing terrible job with tickets refunding.
My LCA tickets were refunded in about a week after I submitted the request. So obviously it works for many.
DeleteMind you, a lot of European airlines have not refunded tickets. Even those who have already received millions in aid.
FYI
Deletehttps://www.wsj.com/articles/airlines-are-withholding-billions-in-refundsthats-billions-with-a-b-11597238005
For the tickets I purchased on airserbia.com I got refund within 1 week.
DeleteFor the tickets purchased through agencies I had to wait much longer
I would say that Serbs who are complaining most know nothing. I had ticket in AirSerbia and in Brussels Airlines.
DeleteIt took me "long waiting time" for AS agent to reply of 20 minutes and 10 minutes to go through options and to receive vauchers on my mail. I saw so many complaints how this is unbelievable long waiting time, how they are stealing money etc.
In the same time, I took me "only" 3 calls to BA to get flight rescheduled ( refund was not even option). For each of the calls I had to wait between 1 and 2 hours ( ONE and TWO, yes) to get agent pick up and 3 times like that to get date changed only. I haven't seen too many Belgians complaining about this as they show understanding for the exceptional situation we are all in.
I got my three refunds from Air Serbia within 2 weeks. For two tickets bought directly from AirSerbia I got refund on my credit card, while for ticket bought through agency I got voucher.
Delete@09:20 I agree with you as I have the same situation with TK in trying to get my refund since March. Just a side note to say that the Corona thing is now used more as a major excuse by many to drag their feet, do little and have a justification for terrible customer service (as it used to be great in the past).
DeleteI am waiting for my fully flexible/red tariff ticket refund since 19 May (date of first request). It only took 5 emails and 2 phone calls for them to get a new promise on Tuesday that it will be done in 40-45 days!
DeleteI had a total of 11 tickets spread across August - October. I received vouchers for all of these (+10% added to each voucher value) within 3 days of submitting my request. Please stop spreading hate. Air Serbia has been one of the most efficient airlines when it comes to coronavirus related ticket refunds. On the other hand, other major airlines like South African Airways, which is a member of Star Alliance, have ben giving me countless problems.
Delete^ so if someone didn't get a refund in months that's "spreading hate"?
DeleteNo. I'm saying that this generalisation of inefficiency are actually individual issues and not the standard.
DeleteNo but it should not be presented as a fact because obviously refunds at JU are done efficiently and professionally.
DeleteAnd where is a connection between 115 million loan and refunding tickets?
DeleteSimple cash flow, try to read any business 101 book.
DeleteDidn't have a problem with LH refunding the money for my daughter and myself. Everything was done in 5 days for our flight from YYZ to DBV.
DeleteYou must be the exception
Deletehttps://de.trustpilot.com/review/www.lufthansa.com
Suprisingly Lufthansa refunded all my tickets after a short call within two weeks. The same occurred to my friends as well, so it seems this has not been a lucky exemption ...
DeleteIt has not occured to me. Waiting for more than 5 weeks already.
DeleteAnd there are so many cases where LH did not refund the money that they all established facebook group called RECHARGE.
So, yes , you were lucky exemption.
They would not be able to pay that loan even if there was no corona.
DeleteI am still waiting for my LH refunds. They are "being processed" for the past two months. But they will come.
DeleteWill they agree?
ReplyDeleteOf course they will agree, almost every business out there has reprogrammed their loans.
DeleteI don't see how this is reprogramming. When you reprogram debt both parties are better off.
DeleteNot necessarily, in many cases debt is reprogrammed with lower interest rates because the financial institution would rather earn less than lose everything once the other side goes bankrupt.
DeleteYou think the loaning party is better off by writing off 82% of the entire loan???
DeleteLike I wrote to you below, it's not clear from the text what they are asking. From point one and two it seems like they are asking for a grace period during which the loan payments will be reduced by 82%.
Deleteps chill with the exclamation marks.
Apparently they have already rejected this and are asking for the full sum.
DeleteCould you please provide link for that piece of news?
Deletehttp://rs.n1info.com/Biznis/a629468/N1-dosla-do-dokumenata-Er-Srbija-trazi-otpis-veceg-dela-dugovanja-Etihad-odbio.html
DeleteThank you.
DeleteHowever I believe this is very important part of the news
Autentičnost ovog dokumenta i navode koji stoje u njemu, pokušali smo da proverimo u kompaniji Etihad Ervejz, ali do emitovanja ovog priloga, odgovor nije stigao.
Well they can claim anything they want but if they didn't include any pictures then why should we believe them? Just because they are N1 which is anyway biased against anything related to the Serbian government?
DeleteEtihad Airways has little to do with this.
Delete"It should be noted that Air Serbia's part-owner Etihad Airways does not run the Etihad Airways Partners funding vehicles nor does it play part in its decision making process."
And good luck getting a statement from anyone at Etihad about anything. Most at the airline don't even know they own part of Air Serbia.
@9.19 you would find a way to defend them either way.
DeleteI don't know who in their right mind would allow someone to reduce their loan by 82% and then go as far as delaying the remaining 18%
N1 can't be named as a reliable source. I mean, they have anti-government agenda, so they are practically against everything that has government behind (I DIDN'T say that Pink and RTS are reliable either, they're not)
DeleteIf they wrote the fund had accepted this proposal you would say they are extremely reliable.
DeleteBut they didn't write that, they never write anything positive about JU.
DeleteLOL kids
DeleteYeah, as much I dislike the ruling party, N1 is most absolutely not an independent and unbiased source. They have their own agenda and they are super into bashing mid-sized and enterprise-sized government-owned businesses. And it's not hard to deduct why they are so keen on that - N1 is owned by a huge investment fund; it's very likely they are trying to lower sale value of these companies so their and partner investment funds can get them at cheaper prices if/when they are privatized. Regardless, not much difference between N1 and Srpski telegraf et al. regarding aviation in Serbia.
DeleteNo surprise there, almost all airlines have used this opportunity to get a better deal from banks and creditors. Unfortunately for JU, it's network and income was severely restricted by covid crisis. It's a true shame because their financial performance was improving over the years. Let's hope all these charters help them out a bit overcome all this. Seven charters tomorrow, not bad.
ReplyDeleteOuch
ReplyDeleteI think this is a wise move forward, restructure the loan and repay it over a longer period of time. Many airlines in Europe got loans from government to service their debt, so more debt to pay off existing debt. Not a good formula.
ReplyDeleteThis is not about delaying payment it's about reducing the loan by over 80%!
DeleteActually it's not clear from the text because if you read point 1 and 2 it seems like it's a delay in the repayment process.
DeleteGood move by JU
Delete@9.10. It is crystal clear. They want to cut 82% from the loan value and pay the remaining 18% later.
Delete"wise move forward" ..LOL
DeleteMakes sense, they should get it.
DeletePromise for 18% is better then zero.
DeleteAir Serbia are obviously in deep financial trouble. Although the Serbian government will keep them safe.
ReplyDeleteWhich airline isn't?
DeleteThere is no doubt JU will survive this with or without help of GoS. With this move in current situation they just try to gain some extra benefits.
You think that they can survive this without aid... LOL!
DeleteNobody can.
DeleteAsk LH
you just claimed JU can
DeleteNo, that is what you wanted to see.
DeleteThey are in deep financial problem the same like LH, AF, OS, OU... And I just said that despite your wishes one way or another JU will survive this.
I wanted to see this? You wrote it!
Delete"JU will survive this with or without help of GoS"
Sure. And you can be sure they will!
DeleteMake up your mind then. You obviously have no idea what you're rambling on about.
DeleteThe difference between the likes of LH, AF OS and JU being that they the first were profitable businesses before Corona, and JU never was.
DeleteAF has struggled for years and in many ways they used KL profits to cover their losses. Same with OS, they haven't published financial reports on their website since 2013. They also brag about having EBIT profit but are complete silent on their results after interest and taxes. How interesting, no?
DeleteOS three times broke, SN two times, Swiss two times, what are you talking?
Deleteit's amazing how many fans this airline has. People defend it for absolutely everything they do.
ReplyDeleteBecause there are many who attack them no matter what.
DeleteExactly opposite, it's amazing how many people would like they go bankrupt...
DeleteThey had many mismatch in the past and not everything they do is good enough but even if they find way to do smth smart people will use opportunity to express their irony and slight over them.
It is enough to see number of comments for article, and if it has many, you know for sure in the title stands "Air Serbia" and everything is horrible, terrible, etc...
Many guys proved they are "experts" only when talking about ASL, they live for those days.
I know! Right? Comparing it with LH and OS. Lol.
DeleteThey basically support it even though it cancels flights, lost luggage complaints increasing but yes, let's defend it. Unbelievable.
If your only job is to more or less write comments and defend everything related to Serbian government - of course this company gets loads of fans.
DeleteAnon 09:22
DeleteIn the past it was much more "cheerleaders" here, nowdays "haters" are dominant...so do not even think to say that anything related to ASL is not excellent , but just good...
Every bad situation with other companies is quite understandable and so what, but same with ASL is unforgivable ...Let's shut it down before new morning.
Haters are dominant? You never saw JU comment section?
DeleteAnon 10:09
DeleteLol....read more carefully every day, and you will conclude by yourself
Give me a definition of "hate" comment.
DeleteNo matter how hard to some is to admit, but AirSerbia is good company and has good service. They also built their brand well and positioned as company you like. That is the reason for so many fans here, I would say.
DeleteWhat is the reason for hate, I don't know. Even if someone had some bad experience, I still see no reason to hate.
I never hated Air Serbia and never will, but Im often here called to be hater because I dont consider them as a successful company.
DeleteHow long did it take for EK, LO, BT, LH, A3...to become successful companies? Why is everyone expecting JU to do it overnight? It took Wizz over a decade to start reporting their financial reports.
DeleteA3 is a private owned successful company which made money all these years except the economical crisis ones.
DeleteAir Baltic got 100 million lats (130€) in 2011. for covering losses, next year they cut losses from 121 to 27 million. In 2015. they got more 130 million from private investor for fleet modernisation so they ordered 50 A220s. Last year they lost 7 million without any state aid.
So whats JU waiting? Cost of national carrier in Serbia to now is 500 million euros. Still company has no new orders, it needs to pay 115 million loan... Simply JU is not doing so good as BT or A3 .
+1000 anonymous 11:48. Especially for A3, they were successful since day 1!!
Delete@ 11,48
DeleteWe already discussed the 500 million EUR figure, the other day as a matter of fact, and that that number is incorrect, regarding Air Serbia.
You also have to take into consideration that the government has pushed for projects such as JFK which has affected the finances of the airline. Just removing the investment into launching and maintaining JFK the past few years would give a different picture of their finances. This wasnt the case in either A3 or BT.
Even still, something has come from the investment into the company. 13 younger aircraft have entered the fleet, rebranding, expansion in destinations and frequencies, new website, 2 mobile apps, onboard wifi, dedicated business class lounge at BEG, migration to Sabre booking system, new base in INI, flights launched from KVO, amongst others.
500 million is the cost of having a national carrier in Serbia. Maybe that is not Air Serbias aid but it is a cost of making Air Serbia.
DeletePeople are saying how JFK route become profitabile so how it then effecting their finances? Or what is the real financial result of JFK route?
Everything is nice what you said, but just compare what A3 done with 0 euros from goverment or BT with 130 millions from private investor.
True. If JFK was easy to sustain, then why did most Eastern European carriers pull out?
DeleteDuring socialism, almost all opersted flights there. Still remember MA, VV and LZ with their 767, OK and RO their A310, OA with their A340.
It is an expensive route with lots of competition but I guess it gives JU a lot of prestige, which is understandable.
It all boils down to whether you see JU as a national, strategic asset or not. If you do then you will understand the role it plays in macroeconomic terms and how it helps maintain Serbia's economy competitive. If JU was to be shut down, how many routes out of BEG would disappear and how would we bring them back? Through subsidies given to airlines like FR or W6? JU has the ATR thanks to which many regional routes can be profitably and efficiently operated. Would that be the case with Wizz Air's high density A321?
DeleteThe real question we should be asking ourselves is whether JU is on the right track or not? If you say no because they are losing money then you also have to explain why you think their improving finances are not good enough reason to keep investing in them.
After all, civil aviation is an expensive business where profit margins are rather thin. It's unrealistic to expect JU to be as competitive as A3 or BT when JU has so many hurdles placed in front of it starting with the government's constant meddling in its affairs.
Improving finances means when you make less losses of more profit , not opposite. And JU is doing opposite when you consider they are making less and less profit every year. From about 15 million in 2017., to 12 million in 2018. and 9 million last year while aid is still about 20 million every year. So this is not good reason at all to invest.
DeleteAnd is it helping to Serbian economy when you invest 500 million in national carrier just to exist? Is that helping to economy or opposite?
JU should just try to become profitabile and thats it. They are trying it for 7 years and still I dont see when they will become an independent carrier from the state. It is possible and it can be done.
First of all, that 500 million was explained many times, that is why the number is wrong. I guess it doesn't really matter to you because you obviously have an agenda.
DeleteFurthermore, what matters is that subsidies are going down. I think last year they reached a new record low of €19.7 million. If we remove JFK flights then the loss itself comes close to €10 million which is pretty much ok given the circumstances.
From all that I read in your post(s) I can only assume you don't work in the private sector as business consolidation and revenue growth seem to be foreign concepts to you.
Expain then what is the cost of having the national carrier in Serbia?
DeleteOk you only understand finances and I do not, because I dont see improving results when you got 1.3 million less aid while you make 6 million less profits. Very successful airline....
Just to add
DeleteIs 115 million € loan also part of "improving results" or it is "national interest"?
Both
Deleteeven if there was no COVID this would happen. i wrote like a 2y ago that debts will be a problem and that government will have to take over and make sizable payment on account of some "helping tourism in serbia" grounds
ReplyDeleteanyone who thinks JU is generating money is:
a) 5y old
b) doesn't know a thing about aviation
c) voting for mr vučić
Truth be told you wrote many things in the past most of which were completely wrong.
DeleteNo one ever said that JU is generating money in its own right. But the case can be made that they're a net contributor to the Serbian economy.
DeleteIm always trying to explain this to the people, but they always call me a hater.
DeleteMy questions is, if there wasnt corona, would JU be able to pay its loans or the state would be respponsible again?
DeleteWhy are people behaving as of the state is some poor creature that is abused by JU? Many problems with JU are exactly because of the state starting with JFK. If they lost €11 million to JFK but got €19 million in aid from the state then it means JU itself lost around €8 million which is a great result.
Delete@ Petar Čelik
DeleteYou definitely classify under b) and every single post you write confirms this. Quite often you literally chisel in stone that you have no clue about aviation but are very good in identifying the voters of "Mr. Vučić".
Stick to daily politics where you belong.
Another way to reduce costs is forget about primary airports and focus on secondary and even tertiary ones. Concentrate more on charters.
ReplyDeleteMXP to BGY
OSL to TRF
TXL to SXF
BCN to GRO or REU
BRU to CRL
German villages: FKB, HHN, FMM, LEJ
Charters to HBE, HRG, SSH, DAR, CMN, AGA.
JFK sell slots and move to LGA.
Add 2nd aircraft in INI and add more routes.
Base 1 ATR in KVO and do the same with INI.
Make the water paid and offer premium economy in JFK just like AF.
Offer small bag and 10kg fares just like W6 and FR.
Offer scratch cards on board.
Offer paid kosher, hindu meals
Offer paid headsets just like UX.
Upgrade mobile app and allow people to book. Extra revenue from application.
Air Serbia is a legacy airline and it has no any sence to move from legacy to the LCC airports. They should take more regional jets in the fleet and try to make airline independent from the state aid.
DeleteHaha yeah because flying to primary airports is the reason why they are losing money.
DeleteEven LCCs have eventually launched flights from main airports. There is a reason why an airport is considered as primary while others are not.
Resumptions of flights to MNE will be fantastic for JU because it will further boost their revenue making this Corona crisis easier. Flights are not cheap while flights are short and expenses low.
ReplyDeleteWho will go to MNE last week in August?
DeleteLike all other airlines, JU will need some government money. However, Etihad will have to contribute as well, given that it is part-owner. It can either contribute directly to the company with liquid assets (like cash) or in other ways (aircraft - which it has in surplus).
ReplyDeleteThe interest rate is much too high for this loan and should be reduced by at least 4%, which would bring $4.5 million in interest savings annually.
Otherwise, bankruptcy is not as dramatic as it used to be, given that JU does not have as many assets as it had in the past. Re-establishing a new airline might be cheaper than paying off a loan with an unreasonable interest rate. The average age of the fleet is 21 years old.
The lenders would have a lot more to lose ($100+ million) if JU goes bankrupt than if the Serbian government were to re-start from scratch a 100%-owned national airline spending $100+ million).
a short and concise answer LOL to anon 12:38 emotional plea and hope.
Deleteyou think Air Serbia dictates the narrative of its debt? that JU will wield its lever of power and force conditions on the financial markets....LOL LOL LOL
what planet do you live on?
The opposite is true, the financial lenders will PUMMEL JU and take full ownership, and there goes YU in the hands of a financial group like Adria, good luck.
to anon 17:38 [LOL] - this is where the 51% ownership majority has the benefit. It means that the Air Serbia can decide independent of Etihad on whether or not to go bankrupt, unless there is a specific clause in the contract that would require more than 50%, but I'm pretty sure EU rules prohibit such a clause.
DeleteMoreover, the creditors do have any power to take full ownership - they only can go after the debt and money owed. They would get some of their money back through the liquidation process, but I doubt that JU has $100+ million in assets for the full amount.
Etihad does not own JU, it has less than 50% ownership. It is not the creditor to JU either, as the lenders are a separate company. Take the examples of the other airlines that Etihad had partial ownership in that went bankrupt - there was no "take full ownership" or "PUMMEL"ing.
Good lesson learned here about foreign ownership; make sure that the State owns more than 50%.
Legitimno je pokusati izvuci sto vise iz nastale krize.Srecno.
ReplyDeleteEconomics 101 :
ReplyDeleteWhen a borrower admits it can’t repay its creditor its 53+63= 116 million dollar debt, your Bankrupt.
OMG, I had no idea Air Serbia was SO heavily in debt at 6.9% interest!!!!!!
Do you actually think Etihad will be merciful? why would they be?
Disappointed and disaster....
Nisu uzeli pare od Etihada.
DeleteCreditor rejected 18% and is asking for a full amount? That's a bad response to Air Serbia's anchoring. With Covid creating a mess in the aviation world creditors have to settle for a lot less. They might be able to negotiate more than 18% but still nowhere near the full amount they are asking for. Air Serbia should hire top business negotiator to get them a solid deal close to efficient frontier.
ReplyDeleteEtihad as the owner of 50% of the debt should be much interested in a debt cut ...
ReplyDeleteNo one forced Air Serbia to borrow such amount at such interest rate. After 55 months out of 60 the life of the transaction Air serbia just realized that it has a problem! think about the local investor's for bit.
ReplyDeleteOf course nobody forced them to borrow at such rates, but it is easier to funnel more money this way, isn't it?
DeleteJU serves it purpose, just as Telekom Srbija does, the only difference being the fact that TS don't have that many fanboys justifying every move it makes.
But Serbian Railways...Have you forgotten them?
DeleteThey made huge loss and not a single hater remembered them despite the contribute to Serbian economy much, much more than Air Serbia
Just imagine serbia without JU.... we could be in mercy of lcc...
ReplyDeleteSuch as W6 to London or BVA...Min 300 EUR RT.
DeleteReal LCC
They're bankrupt
ReplyDeleteLet me quote some dear neighbours...
Delete"JU is in Serbian DNA".
No matter how pationate you wish it JU is not going belly up as GoS will never allow it.
Does your life finally make sense Michael?
Deletehttps://www.reuters.com/article/us-etihad-airways-debt-restructuring-exc/exclusive-etihad-bondholders-put-airline-on-notice-with-debt-revamp-sources-idUSKBN22X1CS
ReplyDelete