The Serbian government has increased its share in Air Serbia to 82% through recapitalisation for 100 million euros, just two days before the carrier’s partnership with Etihad Airways, which now holds an 18% stake, marks its seventh year. In comparison, Etihad turned a forty million US dollar loan provided to the Serbian carrier into a 49% stake on January 1, 2014. The Serbian Minister for Finance, Siniša Mali, said the funds will be used to mitigate the effects of the coronavirus pandemic, as well as make loan repayments. “We stabilised the company and its balance sheet in the best way. We also strengthened the state’s participation and returned some loans and debt caused by the coronavirus”, Mr Mali said.
He noted the company’s restructuring plan, drafted over the past two months, has been adopted. “Not only is Air Serbia entering 2021 without any problems, it is also thinking ahead, about how to use the void left by Montenegro Airlines’ collapse on routes out of Tivat and Podgorica so that our company can earn more and maximise its services”, the Finance Minister said. He added, “Air Serbia is of vital national interest. Its importance was demonstrated throughout the height of the pandemic, during which it carried medical equipment, ventilators, medicine, as well as our citizens stranded across the world”.
Etihad Airways has not commented on the reduction of its ownership stake in the Serbian carrier. In a statement earlier this week, Etihad Group CEO, Tony Douglas, said, “We’re working hard to build a new Etihad. We’re committed to becoming more efficient, more sustainable and a more innovative airline”. The Emirati flag carrier has terminated flights to Belgrade and announced its withdrawal from commercial activities on the Serbian market. Based on current inventory data, the airline will be ending its wide-ranging codeshare agreement with Air Serbia, which counts almost thirty routes.
Yet again, the Serbian Govt seems to have got a bad deal out of this. They pump in EUR100M for an additional share of 31% taking them to 82% of the shareholding. What about all of the earlier amounts which they pumped in throughout 2019 and up until this latest injection of funds ? Despite this, EY still has a share of 18%. For everything that the Serbian side has provided, they should have reclaimed 100% ownership of the company, not just 82%.
ReplyDeleteStrange deal making indeed ....
The government did not continuously pump money into JU in 2019, they provided them with a fixed sum that was drafted in the national budget. That was €19 million.
DeleteSince EY did not want to pay its share the government provided JU with capital in return for the shares. I suppose JU will need more than €100 million so the government kept 18% as a backup plan for the next cash injection.
I don't think you are altogether correct. The previous Minister for Transport announced earlier this year at the onset of the corona crisis that they would provide JU with a considerable injection of funds to help their liquidity during the crisis. So there has been alot of money pumped in since the EUR19m you refer to.
DeleteMy point is simply that in addition to the EUR100m, there has been much more and yet this still didn;t provide them with the ability to retake 100% share of the company ... doesn't sound like a good deal to me
You are speaking about 2020, he was speaking about 2019.
Delete'...of the earlier amounts which they pumped in throughout 2019...'
We will give you 49% ownership, for which you do not have to invest anything, just "lend us 40 million dollars" on which we will pay 7% interest. After 7 years, we will reduce that 49% of your ownership to 18% and for that reduction of the share, we will give you 100 million dollars, and the loan of 40 million that we took of course remains to be paid at the interest we agreed before. This is not theft, this is not rudeness or ignorance, this is pure,...
DeleteThey didn't give 100M to Etihad, they put that money into company itself.
Delete"In comparison, Etihad turned a forty million US dollar loan provided to the Serbian carrier into a 49% stake on January 1, 2014. "
ReplyDeleteThis is telling.
It can be viewed as Air Serbia's value increasing over the last 7 years.
DeleteAnd who is happy to pay this amount for Air Serbia other than GoS? Is there anybody else that accepts this valuation?
DeleteIt just goes to show how advantageous this deal is for Etihad.
The whole Lufthansa Group is traded at Frankfurt Stock Exchange at 6 bln euro. And Air Serbia is less than 1% of income of LHG, not even starting to talk about non-covid profitability....
Are you seriously comparing JU and LH Group? That same LH Group that is based in Europe's number 1 economy? Some here need a reality check.
DeleteWhat I am saying is that while LHG has a value of 6 bln euro (verified by stock trades, ie people spending their own money on buying shares), I don't believe that a small company like Air Serbia has even a value of 1.7% of that, as it has less than 1% of income of LHG and contrary to LHG was always non-profitable even in non-covid times (unless you treat state subsidies as revenue). So I think the valuation for the recapitalisation is just unsustainable (in plain words: too high).
DeleteIt is not about being the same as LHG, but about keeping proportions.
Understood?
This recapitalisation treats Air Serbia as having value equal to 3,8% of the market value of the entire Lufthansa Group (including in particular Austrian and Swiss). Do you agree with this valuation?
DeleteNope. If you pay 100 mln euro for 31%, it means that 100% is supposed to have the value of 322 mln euro. And compared to LHG group value of 6 bln euro, it means 5,3% of the LHG value. This is the valuation under this deal;)
DeleteAnon 10.33.
Well first of all you can't compare the two because when you are on the stock exchange the price is more or less transparent as is the purchasing process. When you are not then you are buying shares at the price the seller is selling them at as is the case here. Drawing parallels here is nonsensical so you should stop.
DeleteAlso don't see why you are talking about what's unsustainable and what's not. This aid is because of covid, they are not getting €100 million in non-covid times. Back then they were getting less than 20 million which is nothing for a country like Serbia, especially since JU brings tourists who spend much more than that.
So, whole LH group is valued 6 billions and German government granted than with 9 billions of aid. What a fool they are!!!
DeleteI wonder why all you clever and knowledgeable aren't CEOs of at least AirSerbia or even kiosk at the corner?!
Do you know what debt financing means? Do you understand that without state aid LHG would be insolvent and its shares worth close to zero? Start learning.
DeleteSince you are telling others to start learning maybe you could do the same. Lesson number one, don't compare apples to oranges or in this case JU and LH.
DeleteI don't think Jat was more valuable than that back in 2013.
ReplyDeleteGood luck
ReplyDeleteWill the management be replaced?
ReplyDeleteIt would be logical.
DeleteSince Etihad still has 18% I wouldn't be surprised they leave Naysmith as CEO.
DeleteThey will have to at least change the supervisory board structure.
DeleteIt was reported on here in February that Italy initiated a criminal investigation against naysmith. I wouldn't be surprised if Italy demands his extradition and he is imprisoned.
DeleteIt was just an investigation
Deletehttps://www.exyuaviation.com/2020/02/air-serbia-ceo-named-in-alitalia.html
Yes but there is never smoke without fire. That man is extremely corrupt.
DeleteYou realise the entire former Alitalia management was put under investigation and absolutely nothing happened. And here you are announcing warrants and extraditions.
DeleteNothing happened because the investigation is still ongoing. But make no mistake, in an Italian court taking a sympathetic pro-AZ point of view, EY and its management team, will have much to answer for. Naysmith was the CFO, so if they do look for scapegoats amongst the EY mgt team, together with the then CEO, these 2 guys will be in the crosshairs. I would hate to be in his shoes.
DeleteSerbian Govt don;t need him to be the head of their company if things go awry in Italy ....
The investigation is still ongoing Anon 10.20. We should wait for the process to be finished before writing that criminal's defense. The whole Alitalia-Etihad saga was full of scandals and corruption. This is just the tip of the iceberg.
DeleteYeah, Alitalia is a darling otherwise, it's bad Etihad that caused all the issues.
DeleteWell Naysmith and others stole from Alitalia as I am sure Italy wouldn't be launching this high level investigation without a good enough reason.
DeleteLet's see. Alitalia did great before Etihad and is doing great again after Etihad.
DeleteOh, wait...
That's besides the point. Obviously the Italian authorities believe there was a massive scandal regarding Etihad that they want to investigate. Seems like people like Naysmith only came there to steal money, at least that's what Italian investigators believe. I think they will persecute him because he did steal and two because Italy wants to punish Etihad for its unwarranted arrogance.
DeleteSo what could we see happen next at Air Serbia?
ReplyDeleteCost cutting, network and fleet reduction.
Delete"it is also thinking ahead, about how to use the void left by Montenegro Airlines’ collapse on routes out of Tivat and Podgorica so that our company can earn more and maximise its services”
ReplyDeleteQuite interesting. Could this mean they get fifth freedom rights from Montenegro?
DeleteObviously Montenegroo is Air Serbia's playground
DeleteSiniša Mali for Air Serbia CEO :D
ReplyDeleteI wouldn't be surprised.
DeleteJust a comparison that Croatian government gave 46.5 million earlier this month for 1% share increase.
ReplyDeleteSo you are saying that JU was undervalued? Also OU has the extremely lucrative summer season. That's more valuable than cheap transfers from Krasnodar and Beirut.
DeleteOU has the extremely lucrative summer season in which they have a 15% share on the coast? Please continue to impress us.
DeleteYes it is lucrative. Have a look at their financial reports and you will see how much money they make in Q3.
DeleteAnd imagine, that's just 15% of the market!!!!!
DeleteWell OU by comparasion has huge competition on the coast during the summer because it is the most profitabile market in ex yu.
DeleteWell, Serbia doesn't have a coast, so can't have competition there.
Delete????
DeleteSerbia maybe doesn't have the sea but it does have demand in winter and far less seasonality. I'd rather go for that.
DeleteYou tottaly missed a topic of this.
DeleteDa vlada traži od Etihada 2 A330 za tih 18% i da rašire mrežu na prekookeanskim letovima.
ReplyDeleteTih 18% su praktički bezvredni u uspordbi sa dva polovna A330-200 čija cena doseže 150 miliona evra.
DeleteОдличан потез. Етихад их је ставио на ноге и подигао вредност, сада је време да држава опет преузме успешну компанију.
ReplyDeleteНакон пандемије можемо да очекујемо бум Ер Србије.
haha isti si ko Bravo Hrvatska and keeps winning
Delete������
DeleteParti je bot par excellence.
DeleteDa je Etihad sad uložio pare u JU rekao bi odličan potez.
This isn't going to end well.
ReplyDeleteSeems to me that it has ended very well ... Serbian Govt has formally increased its stake in the company and simultaneously watered down Etihad's involvement - which for the past year or so has been negligible anyway.
DeletePlus the Serbian government is happy that JU has the Serbia-Montenegro market all to itself. That's going to be a huge financial gift for JU and should help improve their finances. YM never stood a chance at becoming a normal carrier, JU has a chance.
DeleteAnon@12.30 - on the contrary, you should know that increasing Govt ownership is never the way to allow an airline to become a "normal carrier" ....
DeleteSo Lufthansa, Air France... are also not normal carriers? Then again you might be right, Lufthansa is going the LCC was from March.
DeleteIf the Serbian government is giving money to JU and not to Etihad then it means that they are diluting shares, releasing new ones. If Serbia was buying from Etihad then EY would be getting the money, not JU.
ReplyDeleteWhat do you think will happen to the A330? The contract expires in May 2021. Will ASK consider long-haul winter charters to warmer destinations?
ReplyDelete👍 !!!
ReplyDeleteIt's gonna be an interesting year
ReplyDeleteSeven years later, Air Serbia is still the tiny pebble in LH shoes. According to some reports, LH was approached in early 2010's to help Jat and LH turned them down. Germans probably thought pebble would dissapear by now, but to their dismay it only grew bigger and is now the dominant airline in the EXYU region with best chances to expand the dominance after pandemic.
ReplyDeleteAnd what would Lufthansa's return on investment be, should they decide to invest in JU back then?
DeleteEtihad wasn't exactly rolling in millions from JU every year...
Well for starters Lufthansa would keep some sort of presence in Montenegro where it's almost completely pushed out. In Slovenia it would tame JU which is not showing any signs of slowing down and then LH could get much more feed from Serbian in stead of having JU feed CDG and AMS.
Delete"keep some sort of presence in Montenegro where it's almost completely pushed out."
DeletePushed out primarily by an airline, who went bankrupt couple of days ago. That tells me there wasn't much money to be made for Lufthansa anyway, particularly if you are looking at year-round flying.
Well, the cake is there but it seems Lufthansa will have to take the crumbs. JU has taken the lion's share.
DeleteWhat cake are you talking about? Lufthansa does not even fly to Rostock, a German city of similar size to Podgorica with much bigger wealth and business than the whole Montenegro. If you want to fly with Lufthansa from Rostock you have to travel 190 km to Berlin or 200 km to Hamburg and that is it. From Lufthansa's perspective this is all crumbs. It seems to be a cake only from a perspective of your village. Sorry!
DeleteLufthansa lauched last year 5 weakly flights between MUC and Rostock.
DeleteI will have the honour of being the first comment of 2021. That's all
ReplyDeleteQuestions:
ReplyDeletehow much Air Serbia debt now?
What is the price for that 18%?
Do Etihad want to sell them?