Air Serbia repays $63 million Etihad loan


Air Serbia has repaid its second and final loan to Etihad Airways Partners BV, a special purpose vehicle set up by Etihad Airways in September 2015 to raise funds for itself and its equity partners. Last year, the Serbian carrier repaid the first of the two loans, amounting 52.9 million US dollars, despite initially seeking to renegotiate the debt and defer the payments due to the financial strain caused by the coronavirus pandemic. After its request was denied and it faced a default on its debt, the airline made the payment independently in full. The second of the two loans matured this summer, with the Serbian carrier also making the full payment on time. The only other two parties to have successfully repaid their loan to the funding vehicle are Etihad Airways and Etihad Airport Services, while Air Seychelles, Alitalia and Air Belin have not done so.

Six years ago, Air Serbia’s shareholder Etihad embarked on an international roadshow, supported by lead advisor Goldman Sachs and UAE-based ADS Securities and Anoa Capital, by creating the funding vehicles. The group successfully raised 700 million dollars which were split across the six Etihad Partners entities at the time, including Air Serbia, for a mixture of capital expenditure and investment in fleet, as well as for refinancing. The funding vehicles comprise largely of international investment funds. The two Air Serbia loans, amounting to a total of 115.9 million dollars, were the two biggest financial obligations the airline had taken on from lenders.

Air Serbia previously noted it was able to restructure its business thanks to the loans, which led to record results over the past few years. “After the restructuring, which was possible thanks to the funds from this loan as well, the company recorded its biggest expansion in 2019, carrying a record 2.81 million passengers and flying to as many as 23 new destinations in just one year and launching operations from two new airports in Serbia - Niš and Kraljevo. During the first months of 2020, Air Serbia continued to grow, so in January and February, the number of passengers carried increased more than 20%, year over year. After resuming flights on May 21, 2020, the company remained focused on gradually increasing frequencies where possible, while safeguarding the health of passengers and employees”, the airline said. It previously noted the repayment of the first loan was proof of the company’s sound and responsible management before and during the crisis, and during the recovery from the consequences of the pandemic.



Comments

  1. Anonymous09:03

    One burden less.

    ReplyDelete
    Replies
    1. Anonymous12:00

      Let's see if they will now commit to investing in their fleet.

      Delete
    2. Anonymous13:13

      Google economists or so called self proclaimed aviation analysts should be happy!

      Delete
  2. Anonymous09:04

    Bit by bit JU is recovering from the Etihad plague.

    ReplyDelete
    Replies
    1. Anonymous09:06

      If it wasn't for Etihad they wouldn't exist.

      Delete
    2. Anonymous09:08

      Nonsense. If it wasn't for the government's decision to reform Jat Airways, Air Serbia wouldn't exist today. Etihad barely did anything. They got a few planes, created an imperfect timetable and introduced a completely disillusioned business model.

      Once EY left the picture Air Serbia started to thrive which makes sense as local (Serbian) staff will always know better than foreigners both in JU and EY.

      Delete
    3. Anonymous09:11

      Sure, the government would have reformed the airline by putting some politically appointed CEO in charge. Need I remind you who the government's representative is at the airline? Well, he would have been CEO.

      Far from it that Etihad was perfect but they did provide a big amount of starting capital, they got rid of the Airbus order, they replaced the backbone of the fleet, they brought in younger people into the airline, they replaced the majority of the crew who were in their 60s...

      Delete
    4. Anonymous09:15

      Btw the government appointed CEO (before Etihad came) is a man who today appears on conspiracy youtube channels saying that chemtrails are being ejected by foreign pilots across Serbia to kill the local population. I guess he would have reformed Jat.

      Delete
    5. Anonymous09:22

      Seems like you still don't get it. If the government wasn't ready to throw €170 million at Jat Airways, Air Serbia wouldn't exist. Etihad didn't even want to get involved but did it after they were ordered by the Sheikh.

      What Etihad did was that they set the reset on the clock, fired many useless employees but also hired many toxic ones. You can see that even today at JU ... unfortunately.

      Government made the first step but Etihad failed in many of their own. Air Serbia only started to recover and consolidate when both the government and Etihad stopped directly meddling. JFK in 2016 was the last business move by the government at JU.

      Today JU managed to somewhat operate normally because of local staff who are dedicated to making the airline competitive. Most foreigners are here to boost their CV until the next opportunity comes, that applies to both Marek and Naysmith. Remember that foreign guy who was in charge of operations? He stayed at JU only until he got an opportunity to move to Etihad. That will be the case with the two as well.
      If they really cared about JU then both of them would have addressed burning issues such as the ATR replacement and the introduction of regional jets. In stead what they are doing is maintaining the status quo while minimizing their risks. It's locals that have to fight them on many things to make JU competitive.

      Marek is in charge of the commercial aspect at JU. Why hasn't he introduced a competitive and modern frequent flyer program? That's one of his obligations. Of course he doesn't care because why should he risk it?

      Delete
    6. Anonymous09:30

      So you think that when you throw money at something it will magically be a top of the line business? Is that what you are suggesting? Where did this local "talent" come from. You think they would be there had the government run the show for 8 years? Sure.

      As for the frequent flyer, they use the Etihad frequent flyer program which, in my opinion, is quite good. The award tickets are actually very cheap and competative compared to other airlines, especially to New York. You can use the points for hotel bookings and car hire and you can earn points through partner airlines as well. So I fail to see your problem with it.

      Delete
    7. Anonymous09:30

      Yeah yeah, 63 MEUR came from charters. Mind you, 170 EUR is gross not net. These charters covered barely OPEX. Source of 63 MEUR is from eay different basket of eggs.

      Delete
    8. Anonymous09:37

      Ah yes, you are right. Putting a dedicated business class section on your A319s and offering meals to your passengers while charging them €350 for a ticket to Frankfurt was such a smart Etihad style strategy. Let's not forget their Happy Friday Sale to Budapest for 170 Euros. That was the product of Etihad's engagement.

      Let me remind you that the government fired Kondic because of disastrous financial reports. So it's not like the government was willing to throw money at the airline without seeing any improvements.
      As for local talent, they only got the chance to join the airline because of large number of people that left the airline. One part were the old Jat employees and then those who joined the airline in 2013/2014 left in large numbers. Just go through LinkedIn and you will see how many people worked for Air Serbia and then left after one or three years to move to some better company.

      Etihad program doesn't give any freedom to JU to create its own policy, they have to adhere to the one imposed by EY.
      The whole world uses FF program as one of their main strength but you think JU is smart because they are fully dependent on an airline which has proven itself to be more or less incompetent. Just look at their network and compare them to their neighbours.

      Delete
    9. Anonymous09:43

      Matter of fact is you wouldn't have Air Serbia today was it not for Etihad, regardless of your personal issues with them.

      Delete
    10. Anonymous09:52

      Matter of fact is that you wouldn't have Air Serbia if the government wasn't ready to throw money at Etihad.

      Delete
    11. Anonymous11:49

      I agree. I'm just saying that no matter the money thrown, the government on its own would never be able to execute anything. As has been the case all the way up to 2013.

      Delete
    12. Terapeut15:32

      Umesto da slave skidanje velikog duga oni se svadjaju oko dogadjaja iz 2013. Ovde ima posla za mene.

      Delete
  3. Anonymous09:07

    Well done Air Serbia!

    ReplyDelete
  4. Anonymous09:07

    where suddenly this money and in the middle of the pandemic?

    ReplyDelete
    Replies
    1. Anonymous09:08

      Large share came from the massive amounts of charters they did this summer, they are all paid for in advance and in full. Montenegro also helped where they are full and tickets are not cheap.

      Delete
    2. Anonymous09:19

      11 daily flights to Montenegro (most with 319) surely make a lot of money. especially with average price of 170€

      Delete
    3. Anonymous09:19

      We should get clarity where the money came from. They are a company that is over 80% state owned now so it should make these things public.

      Delete
    4. Anonymous09:24

      Don't forget charters to places to Hurgada. On Saturdays they have like 8 daily and all are 100%. That's a huge sum of money right there.

      Delete
    5. Anonymous09:26

      Plain and simple: if you have a bit of time, check the financial statements of JU for 2020 and you find there information about repayment last year of the first Etihad Partners loan. There is no need for all those speculations, if you can check the facts.

      And honestly the answer is probably very simple: it was somehow refinanced. A bank loan with the state guarantee seems most probable to me. There is nothing wrong with refinancing.

      Delete
    6. Anonymous09:28

      Average income per charter flight: 30 000 eur
      Average operating cost of that flight 22 000 EUR

      Montenegro services: income 25 000 op-costs 14 000

      Any questions?

      Delete
    7. Anonymous09:31

      That means that on average they sell a charter seat for 100 Euros per direction.

      Delete
    8. Anonymous09:31

      I love this talk about charters.

      Folks, you do realise that the entire income of JU in 2020 was most probably below 100 mln euro? And they need to meet all of their other costs out of that (and the 100 mln equity from the state aid injection) and you want them to put aside 115 mln USD for loan repayment?

      Do you think that tour operators are idiots paying high margin fares for their tourists, when they buy seats in bulk?

      Delete
    9. Anonymous09:32

      "And honestly the answer is probably very simple: it was somehow refinanced. A bank loan with the state guarantee seems most probable to me. There is nothing wrong with refinancing."

      If you read the financial report as you talk about, you would actually see they didn't take out a new loan.

      Delete
    10. Anonymous09:33

      You do all remember that the government injected 100 million euros into the airline at the end of last year as part of recapitalization?

      Delete
    11. Anonymous09:34

      anon 9:28

      Yes, everybody can make something up on internet.

      Delete
    12. Anonymous09:36

      anon 9.32

      If you read this as you apparently claim (which I do not believe), pls tell us what was the positive operational cashflow for 2019 and 2020?

      Delete
    13. Sve strucnjak do strucnjaka15:39

      Sta ako su se nagodili da dobiju popust i vrate manje od navedenog iznosa?

      Delete
  5. Anonymous09:08

    I find it hard to believe that during corona times they managed to have so much around without getting it from state.

    ReplyDelete
    Replies
    1. Anonymous09:17

      Apparently they were collecting money for this payment for the past few years. So, no, the money was not pumped into JU one day and they repaid the loan the next day. They knew when the loan will mature and they were obviously collecting that sum way before corona.

      Delete
    2. Tesko mu da poveruje15:44

      I find it hard to believe I am sitting in a comfy chair at 12km altitude going 800km/h in a metal tube weighing hundreds of tons. But it's true.

      Delete
  6. Anonymous09:13

    I remember how some people were saying how they would go bankrupt because of these loans and their repayment. So much for that.

    ReplyDelete
    Replies
    1. Anonymous09:16

      Well I guess some people's dreams of them going bankrupt have been shattered.

      Delete
    2. Anonymous11:51

      Who was dreaming of them going bankrupt... please

      Delete
    3. Anonymous01:00

      Many on here actually.

      Delete
  7. Anonymous09:18

    The conditions of the loans were a rip-off with high interest rates and pre payments to the creditors

    ReplyDelete
    Replies
    1. Anonymous09:22

      +1

      Delete
    2. Anonymous09:44

      Fully agree! I am just puzzled how can anyone normal sign off such a deal

      Delete
    3. Anonymous09:44

      What were the conditions of the deal?

      Delete
    4. Anonymous11:52

      The interest rates were very high.

      Delete
  8. Anonymous09:20

    And speaking of Serbian staff that always knows better they seem to keep Mr Naysmith and Mr Marek. It would be nice if ASL could keep its nose above water but new important challenge is ahead almost at the doors! Fleet replacement plans!

    ReplyDelete
    Replies
    1. Anonymous09:23

      Since they seem to have the cash, they really should address the fleet.

      Delete
    2. Anonymous09:25

      They are keeping them because government wanted foreigners in that position. For God's sake Naysmith is under criminal investigation in Italy. It was even reported on here.

      Delete
    3. Anonymous11:04

      Or either the other way around. They gave cash to EY to repay this ransom. And now they won't have money for fleet renewal.

      Delete
    4. Nemam pojma al' volem da komentarisem15:53

      Etihad Airways was not the lender. Money went to the lender not EY.

      Delete
  9. Anonymous09:23

    This is fantastic news

    ReplyDelete
  10. Anonymous09:43

    Sada kada su se oslobodili tereta mogu da planiraju proširenje flote i linija za sledeće leto.

    ReplyDelete
  11. Anonymous09:45

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

    ReplyDelete
    Replies
    1. Anonymous09:51

      Which is why it's so important it has been repaid.

      Delete
  12. Anonymous09:45

    Ironically almost all of the EA partners are now bankrupt.

    ReplyDelete
    Replies
    1. Anonymous11:59

      The Etihad kiss of death.

      Delete
    2. Anonymous13:27

      Who are the partners?

      Delete
    3. Anonymous13:32

      It says in the article

      Delete
    4. Anonymous13:35

      Etihad, Etihad Airport Services, airberlin, Air Serbia, Air Seychelles, Alitalia

      Delete
  13. Anonymous09:46

    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. Anonymous09:51

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

      Delete
  14. Anonymous09:52

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

    ReplyDelete
    Replies
    1. Anonymous10:08

      What matters is that we are getting something in return, at least it's a business from which the country profits.

      Delete
    2. Anonymous00:59

      ^ True

      Delete
  15. Can JU go public? Is this possible and how would this help them?

    ReplyDelete
    Replies
    1. Anonymous00:59

      What do you mean?

      Delete
    2. Anonymous09:43

      He means: Can Air Serbia become akcionarsko društvo (ad) whith its shares listed on a stock exchange?

      That's what 'public company' means in English, not like 'javno preduzeće' in Serbian.

      Delete
  16. Anonymous09:55

    The support of the state is obviously so present especially securing such large amounts of money for such a small carrier.

    ReplyDelete
    Replies
    1. Anonymous10:30

      Well it's a state project.

      Delete
  17. Anonymous10:11

    Finally got rid of this burden. Now time to focus on the future.

    ReplyDelete
    Replies
    1. Anonymous00:59

      I don't think it was such a massive thing that impacted any of their future plans.

      Delete
  18. Anonymous10:12

    Anyone know who provided EYP with the funds? As in a list of creditors?

    ReplyDelete
    Replies
    1. Anonymous10:18

      The full list is not known. One of them is BlueBay Asset Management though.

      Delete
  19. Anonymous10:17

    So finally somebody had a look into the actual financial statements of JU to talk about facts and not myths. And that was me.

    In 2020 (all in thousend dinars):

    - cash from operations:

    negative cash generated by operations in 2020: 4,577,140 (38,9 mln euro)

    - cash from financial activity:

    cash injection from capital increase in 2020: 11,757,730 (100 mln euro)

    repayment of loans in 2020: 5,714,124 (48,5 mln euro)

    - cash available at the end of 2020:

    cash available at the end of 2020: 3,653,905 (31 mln euro)

    -

    income (revenue) in 2020: 14,286,123 (121 mln euro)


    So it seems the 2020 loan was repaid from the proceeds of the capital increase and not a new loan.

    There are obviously no data for 2021, but the free cash left in JU at the end of 2020 was to little to cover the negative cashflow of operations in 2021 and repay the loan to be repaid in 2021.

    Pls note that in a good year (2019) operations of JU generated negative cashflow in the amount of 1,946,645 thousend dinars (16,5 mln euro). It means that the cash outlow from the operations was higher by that amount than cash generated by those operations.

    ReplyDelete
    Replies
    1. Anonymous10:26

      Remember that this year they also got money from the budget and I assume they paid off the loan from that.

      https://www.exyuaviation.com/2020/11/air-serbia-drafts-future-strategies-as.html

      Delete
    2. Anonymous10:37

      The negative cashlow already includes subsidies. Without subsidies the negative cashflow from operations would be higher.

      To me what is needed this year in external liquidity is 63 mln euro for repayment of the loan plus minimum 25 mln euro to cover negative cashlow flowing from operations (in 2021 it will probably be somewhere between 2019 and 2020 figures). A bank loan with a state guarantee is the solution. I do not expect JU will be looking to reduce free cash to below 31 mln euro they had at the end of 2020.

      Delete
    3. Anonymous13:00

      Nice speculation.

      Delete
  20. Anonymous10:23

    Air Serbia should have asked Etihad to pay for it.

    ReplyDelete
    Replies
    1. Anonymous10:27

      Is Etihad actually investing something in Air Serbia?

      Delete
    2. Anonymous10:29

      No

      Delete
    3. Anonymous10:49

      EY made a fantastic deal for themselves with the government...

      Delete
    4. Anonymous20:20

      How so? In the end they withdrew from JU and no longer fly to BEG. Did they really profit from the partnership?

      Delete
    5. Anonymous00:58

      They profited big time, believe me. From paying various experts, Etihad know how etc etc. Especially in the first 3 months of the launch. The amount of money spent would make anyone's head spin. I will just let you know that they were bringing Indian cleaners from Abu Dhabi to clean the Jat/Air Serbia head office. And that's just for that. They even brought a photographer from Abu Dhabi to do staff IDs. So if they got people from AUH just for these small things imagine the whole lot of them that came, from cabin crew trainers, catering chefs and so on. All of that had to be paid for.

      Delete
    6. Anonymous01:25

      Indians are working on construction sites in Belgrade right now. They are cheaper.

      Air Serbia needed a quick image change and improved reputation to gain trust of foreign transfer passengers it suddenly needed for increased transfer focus. Air Serbia added over a million passengers in the first year of operations and many were transfers. Sometimes you need short term help from outside to make that happen.

      Delete
  21. Anonymous10:28

    So it seems all has ended well

    ReplyDelete
  22. Anonymous10:33

    My prediction is that in the end ex-YU region will have two airlines left: Air Serbia and Wizz Air.

    ReplyDelete
    Replies
    1. Anonymous10:50

      Based on what did you make that conclusion?

      Delete
    2. Anonymous11:22

      willingness of the state to support.

      Delete
    3. Anonymous13:31

      You have Croatian government very willing to support OU too.

      Delete
    4. Kad mogu komsije...16:06

      They clearly said yesterday, OU goal is to provide connectivity and not to be profitable. If okay for their taxpayers to finance the airline supporting LH feeder model, then it will be okay for Air Serbia to support own national airline.

      Delete
    5. Anonymous00:55

      Well exactly. It means more airlines, other than JU will survive in the region.

      Delete
  23. Anonymous11:22

    Does anyone know how much additional services (i.e. booking a seat in advance) help them improve finances?

    ReplyDelete
    Replies
    1. Anonymous13:30

      Before the crisis they did boast several times that the ancillary services were bringing them additional cash but they never specified how much.

      Delete
    2. Anonymous14:21

      Thank you for answering! I hope those ancillary services will help improve their overall result.

      Delete
    3. Anonymous00:54

      Here is a short article about it from 2019
      https://www.exyuaviation.com/2019/08/air-serbia-increases-ancillary-revenue.html

      Delete
  24. Neko se ozbiljno nafatirao para od uzaludnog, majmunskog posla sa ETIHAD,
    Bravo Mali, Bravo Veliki, ili veliki

    ReplyDelete
    Replies
    1. Putnik15:59

      Ono kad ne zelim da prihvatim realnost ja izmisljam teorije zavere i idealizujem kako je sve bilo savrseno u doba jata.

      Delete
  25. Anonymous20:09

    What will happen with Etihad's share in Air Serbia? Will they completely withdraw?

    ReplyDelete
    Replies
    1. Anonymous20:16

      Their share really is just one paper. It's not important. I guess for the usage of the frequent flyer program.

      Delete
    2. Anonymous20:19

      *on paper

      Delete
    3. Anonymous21:09

      Well it's not just on paper. They still have a management role in the company.

      Delete
    4. Anonymous00:52

      Which is crazy with just an 18% stake.

      Delete
  26. Anonymous20:17

    Now that the loan has been repaid they should think about fleet renewal, long haul expansion and joining an alliance.

    ReplyDelete
    Replies
    1. Anonymous00:52

      Only if the state coughs up the money for it.

      Delete
    2. Anonymous01:30

      Or if they get a better loan. Or use earnings to lease another A330 but avoid joining an alliance and delay ATR refresh by another year etc.

      Delete
  27. Anonymous10:50

    YU-ARA is coming back with much more lower lease rates, i just hope business class will be updated to ARB standard.

    ReplyDelete

Post a Comment

EX-YU Aviation News does not tolerate insults, excessive swearing, racist, homophobic or any other chauvinist remarks or provocative posts with the intention of creating further arguments. A full list of comment guidelines can be found here. Thank you for your cooperation.