Air Serbia has been recapitalised by the government of Serbia, with the state increasing its stake in the company from 51% to 82%, while part-owner Etihad Airways has reduced its share from 49% to 18%. The increase in the company's share capital has been undertaken in order to mitigate the effects of the coronavirus pandemic. Commenting on the development, Air Serbia's CEO, Duncan Naysmith said, "We are grateful to the Government of the Republic of Serbia for providing support to the national airline to overcome business obstacles caused by the coronavirus pandemic in the most difficult year in the history of passenger air traffic". He added that "in this way, the foundations have been created for further uninterrupted business and that, with fundamental measures to rationalise the company's operations, which are already well underway, Air Serbia will be able to overcome difficulties, strengthen its position as a leader in the region and continue to provide direct and an indirect contribution to the Serbian economy, primarily transport and tourism".
In October, the Serbian government adopted a decree which enables it to recapitalise Air Serbia. Through recapitalisation, the state can increase its share in the company, which it can later sell to another entity. The Serbian government hinted over the summer that if Etihad were to fully or partially exit the airline, another strategic partner could be brought in. This recapitalisation measure is in line with the European Commission's Provisional Legal Framework, which regulates state aid to support the economy during the current Covid-19 pandemic.
The strategic partnership agreement between Etihad Airways and the Serbian government, unveiled in August 2013, saw the Emirati airline make available a forty million US dollar loan facility to Air Serbia which was converted into equity on January 1, 2014 for a period of five years. This was matched by an equal funding injection by the Serbian government. The two sides each provided further funding through shareholder loans and other funding mechanisms to meet working capital requirements and support network development. The five-year deal was later extended until further notice, however, Etihad’s involvement in Air Serbia has been significantly reduced, with the state providing subsidies and funds for the airline over the past few years. Etihad registered an 870 million US dollar loss in 2019 and its equity investments in carriers around the world have unravelled in recent years.
Under the transaction agreement between Etihad and the Serbian government, the Emirati carrier’s part ownership of Air Serbia can be terminated at any time. The agreement states Etihad can pull out of the deal in case of a material adverse event. It further notes, “This agreement shall cease to have any effect from the date of termination and no party shall have any claim against any other party”.
Toxic comments incoming in 3, 2, 1 ...
ReplyDeleteThose who complained about UAE company having 49% of European airline have no choice but to celebrate this move. Same for those who embraced increased government stake at some other EU airlines as part of their pandemic subsidy package.
DeleteWith news being this good, toxic comments will have a hard time in my opinion.
All that aid is worth just 31%? In a company which effectively has negative balance i.e. assets worth below the amount of debts.
ReplyDeleteNo, but in order to make this capital injection both parties had to agree. You could not do it against the will of the 49% shareholder. And that was the price to be paid by Serbia. Etihad could have actually allowed for Air Serbia to go under and GoS could not. Difficult negotiations for GoS.
DeleteFor this reason a valuation of Air Serbia for this transaction was 322 mln euro, which of course has no link with reality. I am assuming all money are going to equity and not partially as a loan.
Interesting they aren't fully exiting.
ReplyDeleteThey will for sure make some more money on that project before they leave.
DeleteHow do you know that "for sure"? Please provide some facts links and sources.
DeleteYou want MM to get access to their internal documents and reveal it in a comment? xD
DeleteIf someone claims "for sure" but provides no sources or evidence, it would make it a fair game to call such claim imaginary.
DeleteSerbia got some huge-ass donation from the UAE (Abu Dhabi) which included dozens of MRIs, CT scanners, ventilators, lots of PPE. So I guess it was a "donation" because the government only will be injecting cash into JU and not Etihad.
ReplyDeleteUnexpected that they kept 18%.
ReplyDeletewow
ReplyDeleteThe writing was on the wall years ago.
ReplyDeleteEtihad did a great job for AirSERBIA. From a dying airline to one of the best in this part of Europe.
ReplyDeleteOnce this pandemic is over we are going to witness the constant rise of our national airline. Would be wise to establish a strategic partnership with Russia or China and secure a long term stability. Just stay away from Westerners and we can hope for a bright future of Serbian airline.
"From a dying airline to one of the best in this part of Europe."
DeleteThere's not many left anyway.
@sandwich_comedy if you mean exyu with this part of Europe then maybe yes
Delete@Naprednjakovic - You know, not everything needs to be belittled or shamed through SNS connections. He didn't say anything wrong. AirSerbia did improve in many ways, it is the strongest in this/our part of Europe and those are facts.
DeleteThe only unreal part here is you saying "maybe" it is best in ExYu.
Good. Time to find someone more reliable.
ReplyDeleteWhy didn't they keep the codeshare with JU.
ReplyDeleteThe question remains did the government had to pay for it?
ReplyDeleteProbably by paying off that Etihad partners loan.
DeleteGovernment said they would recapitalize the airline if Etihad didn't cover part of the losses during corona. They obviously didn't.
ReplyDeleteEveryone knew they wouldn't.
DeleteIt was only a matter of time.
ReplyDeleteGovernment share is now 82%, Etihad 18%. That means major airline from China share is 0%. Whoever broke the news about Chinese part ownership of Air Serbia deserves a fun roast.
ReplyDeleteYou might want to read the article and see what the government said about what they will do when they recapitalize the company.
DeleteThey could get max 31% of Air Serbia. Not very attractive and highly unlikely.
DeleteYou really think Etihad will keep its 18% stake? Highly unlikely. This is just temporary.
DeleteYou think Etihad wouldn't sell their 18% if there was a buyer? They'd jump on it in an instant.
DeleteEtihad most certainly isn't arranging the acquisition by the Chinese. If it happens it will be done in a political deal between Chinese and Serbian government, just like Etihad's partnership was concluded.
DeleteWith shrinking percentage available to Chinese ownership that deal looks less appealing. Compare that to 80% of Wizz ownership that will be outside of EU on Jan 1 2021.
DeleteThere is no "shrinking percentage". Unless you believe JU is a very well-standing prosperous airline so nothing in this world could force Etihad to sell their 18% stake. If a Chinese airline decides to invest into JU, Etihad will immediately sell their 18% stake along with whatever the government sells.
Delete-Etihad will immediately sell their 18% stake
DeleteIs that a fact? Did EY make a statement?
They didn't make a statement that their stake at JU has been reduced either. So is this entire news article a lie?
DeleteNo, that part was announced by minister of finance. Part where Etihad will immediately sell their 18% stake is 18:50 Anon's figment of imagination.
DeleteWell, if it's your opinion that Etihad will keep 18% in a non-profitable airline while a Chinese company will buy 31% for an exuberant amount of money and then force Etihad to take part in covering loses/investments - sure, I'll go with the flow.
DeleteThat's not my opinion.
DeleteThis will help Air Serbia to survive and become even stronger! Well done!
ReplyDeleteWhy didn't Etihad pumped in some money? They own 49% and all the time citizens of Serbia are ones who need to pay while Etihad is just taking profit?
ReplyDeleteThey realised they are never getting back from their investment in Air Serbia, much like their other projects. Doesn't make sense to keep paying into a black hole.
DeleteEtihad didn't invest because they have no money, they are broke.
DeleteThy are never truly broke as long as they have support from Abu Dhabi emirate. They can burn money for as long as they want, the only question is for how it is going to be tolerated by their owners.
DeleteWould you invest your money?
DeleteThis is why it is called state aid. If the transaction were on market terms, it would not be called like that.
Abu Dhabi might be rich but they are not ready to indefinitely support EY like Qatar does with QR. That is why they made painful cost cutting moves.
DeleteWhy a foreign CEO when the GoS is now 82% owner of the company ?
ReplyDeleteWhy not? Why give immigrant work visas to people from ex-YU countries when there are unemployed residents? Why even let anyone cross your borders?
DeleteStrong argument ... I guess the job requires sufficiently low skilled labour which we don't have enough of in this country. Perhaps we could entice one of the many immigrants in our country, who would if nothing else, cost us 1/100th of the salary that we are currently paying to this CEO ?
DeleteImagine getting someone like former ceo Predrag Vujovic. Homegrown talent capable of destroying Air Serbia in no time.
DeleteOr Bajatovic ....
DeleteAnon@20.12 - it wouldn't matter who the CEO is - even Vujovic - because Mali and his acolytes are the ones who firmly have their hands on the steering wheel
DeleteSasa Vlaisavljevic could be a big chance ... he is close to the regime and since exiting his gig at BEG airport, hasn't been doing anything of note.
DeleteCulibrk from Telekom was recently replaced, so he is another guy who is available with big company experience
And how much in money is this recapitalisation?
ReplyDeleteAnd why would you want to know this ?
DeleteBecause it is interesting?
DeleteAgreed. But, if they haven't given details about a bunch of other things, then they aren't going to start with this either ....
DeleteThe GoS has been like this with JU from the beginning. It has implemented the "Mushroom Theory" - keep people in the dark and feed them shit
100 milions euros
DeleteThose who are capable using internet search already found out how much money is included, but I will keep you in the dark about it (and well fed).
DeleteWould be interesting to know what this change in structure means to the composition of the Supervisory Board - which was 5 GoS and 4 Etihad nominees .... I'm guessing that Etihad would be lucky to now have even 1 member on the Board - if that
ReplyDeleteI guess Etihad is much more interested in their own survival and business revival to worry about the number of seats they hold in AirSerbia's Supervisory Board.
DeleteIt all makes sense. UAE oil is in decline and they are opening up to technology and tourism hence becoming more open and not focusing on airlines. EY is in decline and always had its issues back in the days when they began with this crazy codesharing everywhere and the biggest disaster when they entered Europe with foreigners that had no clue how things work in Europe and thought they would overtake the masters of the continent AF/KL, IAG and LH Group. ASL is and was their most successful new project in 2013 BUT the ride was extremely bumpy and there were numerous reforms. However, as Australia will remain closed until 2022 and decline to Asia also dropped it no longer makes sense to use AUH as a hub.
ReplyDeleteASL may try and do BEG-SYD with a stop in HKG/SIN/KUL in the long-term.
What are you talking about ? It was foreigners who led the EY charge into Europe ! The Chief of the Equity Partners was the former no. 2 at AF/KL. Their problem plain and simple - was the fact that they invested into poorly performing airlines, that no amount of money or investment could have turned around or saved.
DeleteNo! EY did nothing but damage in Europe. What about AB, AZ, Baboo? What about Jet Airways? The master of disaster! ASL survived because of its JU Yugoslav heritage because if not, the faith would have been the same. I don't blame GoS of wanting to renationalise the airline and walking away from the EY problems..
DeleteYeah, I really miss seeing Baboo in our skies ....
DeleteGreat news for Air Serbia. Just like many other national (and de facto national) airlines they now have a safety net to protect them from pandemic effects. Combined with fleet reduction and renewal, workforce reduction and lease cost savings, announced consolidation of destinations, greater marketshare in Montenegro, impressive expansion of their Belgrade hub airport and other positive news, things are starting to look up for Air Serbia in 2021! Victorious day for Air Serbia, crushing defeat for haters.
ReplyDeleteOpening new destinations -> success. Consolidation of destinations (meaning cancelling or suspending destinations) -> success. Fleet expansion -> success. Fleet reduction -> success.
DeleteI am all in favour of state help to airlines in covid, but you are really an optimistic person, just like 'Montenegro keeps winning' guy.
It makes perfect sense once you are capable of putting it in the right context. Announcing new destinations in 2019 when 2020 looked great is good thinking and a success. Consolidation of destinations when market collapsed during pandemic is a success. Same goes for fleet expansion and reduction. Was this so hard to figure out?
DeleteStill couple of weeks ago saying on this portal that Air Serbia needs to cancel some destinations/some destinations are unsucessful/Air Serbia needs to reduce fleet was more than enough to be called a hater. Speculating how they should expand in fleet or destinations was the only right thing to do then.
DeleteAnd by the way, consolidating destinations in a pandemic is a must, but it is not a success.
Tomato, tomato.
DeleteAnyway, awesome day! This is as if Air Serbia was vaccinated against COVID19 today! They will survive this pandemic.
Only one, the best will survive.
Delete