Etihad to retain Air Serbia stake, exit management

Etihad Airways is expected to announce within days that it will retain its 49% minority stake in Air Serbia, however, it will not renew its Management Services Agreement with the airline, which expires on January 1, 2019. The repercussions of the termination are still unknown, however, it is likely to include the departure of Etihad-appointed staff from key management roles, which will coincide with the transfer of the airline's revenue management and network planning departments from Abu Dhabi back to Belgrade next January. A number of high-ranking positions at Air Serbia are currently held by Etihad employees, including the post of Chief Executive Officer, Chief Financial Officer and Chief Operations Officer. The Transaction Framework Agreement between Etihad and the Serbian government states, "Before expiry of the term of the Management Services Agreement, Etihad will seek to identify competent Serbian nationals as candidates for the positions of Chief Executive Officer and Chief Financial Officer within Air Serbia". The move will mark the partial withdrawal of Etihad from Air Serbia, however, the latter is expected to remain part of the Etihad Airways Partners alliance, frequent flyer program and retain its codeshare partnerships.

Etihad signed a dozen agreements with the Serbian government upon its partial takeover of Jat Airways almost five years ago. They include an Investment Agreement, Shareholder Agreement, Management Services Agreement, Agreement for the Provision of Grants to Air Serbia by the government, Training Agreement, Travel Services Agreement, Convertible Loan Facility Agreement, Frequent Flyer Migration Agreement, as well as separate agreements relating to the long-term commercial arrangements between Air Serbia and Belgrade Airport, fuel provider NIS and maintenance provider Jat Tehnika. The Management Services Agreement, which is expected to be terminated, covers a number of areas, including that Air Serbia should receive discounts at its home base in Belgrade and that Etihad shall act as a training services provider.

Spearheaded by Etihad Airways' former CEO James Hogan, the company's equity investment strategy across Europe unravelled last year. Two of the continent's biggest airlines, Alitalia and Air Berlin, filed for bankruptcy after Etihad pulled the plug on their funding. while the Emirati airline also withdrew from its stake in Switzerland's Darwin Airline, which later filed for bankruptcy as well. Commenting last week on Etihad's failed investment strategy, the CEO of International Airlines Group (IAG), Willie Walsh, said, "Etihad did change the landscape a little bit because, as everybody knows, Etihad was playing catch-up and they were doing things that people questioned. I’m not going to have a go at [James] Hogan, he’s retired from the business and I wish him the best, but everybody looking at the strategy that they were pursuing did question whether this was a sustainable strategy and we can see that from what has happened recently that it wasn’t". Qatar Airways' CEO, Akbar Al Baker added, "You know, to buy airlines, and take equity in airlines to feed into your hub to increase your passenger numbers, doesn’t work. Well the proof has already been in the carrier in our region".

Etihad Airways holds stakes in Air Serbia (49%), Air Seychelles (40%), Jet Airways (24%) and Virgin Australia (20%).