Air Serbia to consolidate prior to growth

Air Serbia plans ease seasonality, grow its load factor and consolidate its operations prior to expanding its destination network. Following on from last year's growth, the airline will introduce seasonal services to Venice this summer but has reduced its overall operations. Speaking to EX-YU Aviation News, Air Serbia's CEO, Dane Kondić, said, "We have to iron out the seasonality. That is a huge problem for all EX-YU carriers and no one has cracked that nut. Bringing in aircraft, keeping them flying for four months and then parked on the ground for eight months is no good for anybody. We are having to do all of this against the backdrop of costs increasing significantly". He added, “If we were to go and put on new routes, they always take time. When we first launched Air Serbia it took a good eighteen months to two years for that concept to stick. If we now go on launching two to three new year-round routes, especially to some Central Asian or Eastern destinations, it's not easy, especially because you have to invest a lot, you have to stick it out, there is low efficiency of those aircraft because they miss two rotations that they could operate flying to nearer destinations, so it's expensive".

Mr Kondić noted that, “with our current business model, while still showing growth, it is growing at a decreasing rate. That means that we have to change something because we are not growing as fast as we need to grow with what we have. Meanwhile, if you look at the growth of low cost airlines, it is significant. So we can continue to do the same thing and grow at a slower rate, or we can look at the ideas that we are reviewing and see which of those we can apply to our business to ensure that we continue to accelerate our growth". He added, "Conceptually, we have to evolve our business model from what it is today, to a model that will allow us to continue to grow and continue to work to lower costs". Mr Kondić noted that fuel prices are increasing - it is already 50% higher than what it was last year - while ground handling costs at the majority of airports the airline serves have grown between 15% to 40%.

Air Serbia's CEO singled out lowering costs and tackling seasonality as some of the carrier's biggest challenges but noted that the airline's load factor has been improving over the years. "You don't solve seasonality by flying three or four new routes to various places. What we should be doing is growing our load factors with what we have. That's how you make a company stronger. There is still much more room to grow within what we have. The focus is going to be on internal consolidation and strengthening the business before we go on to any major further growth. We have to get better returns on what we have", Mr Kondić said. Air Serbia's average passenger load factor, a measure of seat capacity utilisation, increased to 72.4% in 2016, compared to 70.7% the year before. "When we took over the business, Jat's load factor for the final year was 67%. We achieved the same load factor with double the capacity. In the last three years, we have improved it year on year and we continued to grow the business", Mr Kondić concluded.