Air Serbia does not plan to cut capacity for the time being, noting it has entered the ongoing jet fuel crisis with a strong balance sheet. Speaking recently at the CAPA Airline Leader Summit in Berlin, Air Serbia’s CEO, Jiri Marek, said, “Air Serbia is continuing to add capacity. Reducing it ahead of the summer season, the only period when airlines can truly generate significant revenue and when demand remains strong, would be somewhat contradictory. Our approach to the market has always been agile. No one has the answer to the million dollar question of when this situation will end, but we entered it with a strong balance sheet and will adjust if necessary”.
The lack of hedged fuel remains a problem. “Our biggest issue at the moment is that we are not hedged. However, we have been profitable for the past five years, so we have certain measures and buffers in place. As a state-owned airline, hedging is ultimately a gamble - you can either win or lose. The purpose of hedging is to lock in budgeted costs. Until now, the question was always when the right time was to hedge, because fuel prices had been declining, whereas now they are rising. Nevertheless, we will get through it. It’s all about cost control”, Mr Marek said. Asked about state aid, he added, “We are not asking for state aid and we do not plan to do so”.
The CEO noted that the ongoing crisis could be used a springboard for further growth once it subsides. “Every crisis presents an opportunity. We are currently operating 70% above our pre-Covid levels, and now another crisis has emerged which will create new opportunities. With the current situation, there are now enough aircraft and pilots available on the market. Once fuel prices stabilise, we intend to seize those opportunities”.
During the ongoing summer season (March 29 - October 24), Air Serbia currently has 3.88 million seats on the market on scheduled services, representing an increase of 5.6% on the previous summer, or an extra 204.350 seats. The airline has made some adjustments to its schedule. In April, it reduced frequencies compared to its initial plan for the month, while it recently reduced planned frequencies between Belgrade and Athens for the remainder of the summer from eighteen weekly to fifteen weekly, which is still one rotation above last year’s levels. It has also reduced services to Krakow from four to three weekly. The remainder of the network remains unchanged for the time being.
Is it just me or are they hinting at more growth after the fuel prices come down?
ReplyDeleteI am sure they are going to look into getting more aircrafts, especially 330s and 320s as I can see those coming available at the very good rate.
DeleteIs there any chance they may look into the Spirit A320neos which are grounded? This could be an opportunity to make the shift to neo.
DeleteI expect it now, when others are cutting, JU will step up. Just as did with MUC. Fuel price in Serbia went up just slightly, comparing to other markets.
Delete@9.05 I was wondering the same. But these aircraft being from a ULCC, I think they would need a lot of work done before they could enter for JU. They would have to get rid of the business class big seats Spirit had, not sure if these aircraft also have ovens etc.
DeleteI doubt about neo’s. I think they’re still too expensive, only 2-3 years old. CEO’s on the other hand may be very interesting, those 10 years age
DeleteTrue. Forgot about their ceos
Delete@Anon 09:07
DeleteThat`s car fuel that "went up just slightly", due to state diminishing taxes, but what does it have to do with jet fuel, that is exempt from all local taxes by an international convention, meaning that the price depends solely on oil barrel price?
I`d strongly advise learning some basic facts about civil aviation before commenting here.
My advice also. You should learn that in Serbia, government set maximal price for ALL fuel types produced in Serbia. That is a way to control foreign owners of Oil companies. They have to sell cheaper diesel for agriculture, for instance
DeleteAir Serbia handled covid better than most airlines in the region. They can probably manage higher fuel prices too.
ReplyDeleteNot being hedged is a problem.
ReplyDeleteI doubt. Government will not allow huge impact to citizens and companies. Price differences will be controlled as did so far.
Delete^ You mean subsidies.
DeleteBecause the price of Jet-A fuel has doubled since February.
A massive chunk of fuel cost comes from state excise taxes, which the state can adjust if/when needed.
DeleteNo, it does not! There are no exises on fuel used in international air traffic! A state can only impose them on a domestic carrier - so did FR Yugoslavia back in the nineties with JAT, when a 727 was sent to Timisoara daily for fuel, given its capacity of 24 t - which I am sure Serbia is not going to do this time, but it does not matter actually.
DeleteIf you read article again, read last week articles about OU and LH and use your hear for a moment, you would realize that JU is NOT hit by doubled fuel prices in the world. At least fuel used at home Airport, which is huge majority
DeleteBut wasn't it published here that they already trimmed their network in April because of the war?
ReplyDeleteJust read the article
Delete"The airline has made some adjustments to its schedule. In April, it reduced frequencies compared to its initial plan for the month, while it recently reduced planned frequencies between Belgrade and Athens for the remainder of the summer from eighteen weekly to fifteen weekly, which is still one rotation above last year’s levels. It has also reduced services to Krakow from four to three weekly. The remainder of the network remains unchanged for the time being."
Yes, you have to read whole article. But slowly, with understanding: "The airline has made some adjustments to its schedule. In April, it reduced frequencies compared to its initial plan for the month"
DeleteThe April reduction had nothing to do with jet fuel crisis. They do that every year.
DeleteSmall frequency adjustments instead of panic cuts are a good sign.
DeleteSomeone will be angry. Very angry!
ReplyDeleteAnd we know who 🤣
DeleteHIM 🤡🤡🤡
DeleteThese are actually great news!
ReplyDeleteWell done JU!
I'm glad they have not cancelled their expansion plans with the new routes. 2 down, 7 to go.
ReplyDelete* 8 to go actually.
DeleteContinuing expansion while fuel prices are volatile is risky but airlines that grow during downturns often come out stronger when the market recovers.
DeleteThe Toronto launch suddenly looks even more impressive considering the current fuel environment.
DeleteMany predict that once this war ends and the Hormuz reopened, fuel prices this time next year could be at $50 per barrel after the UAE exited OPEC and will likely sell oil at a much lower price.
ReplyDeleteI really really hope so
DeleteThe airline clearly has confidence in the summer season. Nearly 3.9 million seats is a huge operation for a carrier of Air Serbia’s size.
ReplyDeleteThere is no such war or world crisis which could prevent Serbs to go vacation.
Delete40% of JU's passengers are transit
DeleteSo? 60% of demand is generated by Serbian market.
Deletehahaha
DeleteIf fuel prices stabilise by winter, I wouldn’t be surprised to see Air Serbia announce even more new routes for 2027.
ReplyDeleteAir Serbia’s biggest advantage right now seems to be flexibility. They adjust frequencies quickly instead of making dramatic network cuts.
ReplyDeleteopenly admitting that the airline is not hedged is interesting
ReplyDeleteThe majority of airlines in the world are not.
DeleteNot hedging fuel can hurt badly if prices continue climbing but it can also save airlines huge amounts when prices fall. There is no perfect strategy.
DeleteNo need to hedging when your owner set fuel prices in your country. Isn’t that clear enough?
DeleteInteresting that Marek mentioned aircraft and pilot availability. Two years ago airlines couldn’t find enough of either.
ReplyDeleteThe ACMI operators are faca huge overcapacity crisis. A number of serb pilots flying for these operators are probably on unpaid leave so ready to join Air Serbia.
DeleteAir Serbia should use this period to secure additional aircraft leases for next summer.
ReplyDelete+1
DeleteOne thing that I didn't catch is why a government owned airline couldn't have hedged it's fuel?
ReplyDeleteMay be a substantial part of it if not the whole yearly needs.
One commentator stated that fuel has less increased in Serbia, the fuel at petrol stations in Serbia was already more expensive than elsewhere and the price is mainly government taxes so any government will adjust the public prices to what is acceptable in the country and avoid social unrest.
No need to hedging when your owner set fuel prices in your country. Isn’t that clear enough?
DeleteThe airline’s growth since 2019 has been remarkable considering all the external shocks aviation has faced since then.
ReplyDeleteA 5.6% increase may not sound massive but adding over 200,000 seats in the current environment is significant.
ReplyDeleteDon't let Jasmin read that summer cuts during the period you make most money is contradictory.
ReplyDelete🤣🤣🤣
DeleteThe key question is what happens in winter when yields weaken and fuel prices remain high.
ReplyDeleteIt is still far away.
DeleteNo need you to worry for JU.
Oil price over 100$ was also in 2008 and 2022, but fuel prices weren’t this high. This is all artificially organized by greedy oil companies. They are still redeeming losses caused by Covid. But when demand go lower, prices will go downhill
DeleteWell CEO says they don't plan to decrease capacity for the summer. He did not mention winter. I think they are also waiting to see how long this will go for.
DeleteAir Serbia has benefited from competitors retreating from certain markets over the last few years. Marek is right that crises create opportunities.
ReplyDeleteBelgrade to Athens was probably overscheduled initially. Fifteen weekly flights still gives passengers plenty of options.
ReplyDeleteHow many flights are there now when Aegean is included?
DeleteFuel is expensive for everyone so Air Serbia is not at a competitive disadvantage compared to other European carriers.
ReplyDelete