Serbia unveils Etihad contract

Etihad’s takeover agreement of Jat made public

The Serbian government has published the majority of its secretive contract with Etihad Airways, for the latter’s takeover of a 49% stake in Jat Airways, which was subsequently relaunched as Air Serbia. At a press conference in Belgrade, the Serbian Prime Minister, Aleksandar Vučić, made public the Transaction Framework Agreement, leaked by the press earlier in the year, and the Investment Agreement signed between the Serbian government and Etihad Airways. However, the government did not publish parts of the contract related to Air Serbia’s business plan, saying it was a trade secret. “This is an internal document that contains information on what we wish to achieve”, Mr. Vučić said, adding that he hoped no one would mind.

The Prime Minister said he was thankful that a strategic partner was found for Jat Airways since the carrier was generating annual losses of some 35 million euros, although in reality those losses were far greater. “An aging fleet averaging 26 years, frequent technical issues... The government had major problems with Jat, as well as with outstanding debt and it was often misused by politics. Over the past few years, the government attempted to sell Jat three times but failed to find an investor. Etihad was a unique opportunity”, the PM said. He added, “Have we not taken these measures, Jat would have been shut down, which would have caused economic and social problems and a loss of respect for Serbia because a national carrier is the mirror of each country”.

According to the published contracts, Etihad will invest up to 100 million dollars into Air Serbia, forty million through recapitalisation and a further sixty million as a loan to the airline’s founder. However, Mr Vučić noted, “This loan has not been used, as we expect to operate with a profit by the end of the year”. For its part, the government will provide 42 million dollars in cash payments. A further forty million dollars will be paid in taxes to Belgrade Airport and the state has also taken on debt left over from Jat Airways, 80% of which is owed to the state itself. However, the agreement does not specify any limit on the government’s investments. “Those are our only obligations. No one could have dreamed of something like this”, the PM said. He added that due to Air Serbia’s partnership with Etihad Airways, the carrier was able to order ten brand new aircraft with a discount of fourteen million euros per piece. The agreement also shows that Air Serbia will be given a dedicated terminal at Belgrade Nikola Tesla Airport, which is to be overhauled and brought up to the airline’s standards. “Through all this work, we think we have achieved something positive for Serbia. Air Serbia will become a regional leader and we expect it to become even more successful by 2016. I hope no one will have a problem with that”, Mr. Vučić concluded.

The agreements signed between Etihad Airways and the Serbian government (in both Serbian and English) are now available for download on the Serbian government’s official website. They can also be found below.