Air Serbia - Etihad partnership enters new phase

Air Serbia is today marking five years since it relaunched under its new name on October 26, 2013 as Etihad Airways' equity partner. The Emirati carrier, which holds a 49% stake in its Serbian counterpart, has extended its initial five year partnership, however, the dynamic between the two is set to change. Etihad has not renewed its Management Services Agreement with the airline, meaning the Chief Executive Officer and Chief Operations Officer it appointed, Duncan Naysmith and Declan Keller, will stay on in their current roles until December 31, 2018, after which a change in management is expected. Furthermore, a number of key departments are set to be transferred from Abu Dhabi back to Belgrade, including revenue management and network planning. The Transaction Framework Agreement between Etihad and the Serbian government signed five years ago 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".

Etihad Aviation Group’s Chief Executive Officer for Equity Partners, Robin Kamark, said, “Etihad is honoured to have been able to help build Air Serbia into what it is today. We are looking forward to the next phase of our equity partnership as an engaged and supportive shareholder and cooperation partner”. He added, "Air Serbia and Etihad Airways have agreed that the equity partnership between the two airlines will be continued. Etihad continues to own 49% of Air Serbia and remains a fully committed and supportive shareholder in the partnership with Air Serbia’s majority shareholder, the Government of Serbia".

Over the past five years, Air Serbia handled over twelve million passengers, grown its destination network, fleet, revenue, load factor, launched transatlantic flights and has officially been reporting a profit since 2014, albeit with government support. In 2017, the airline posted a record sixteen million euro net profit. However, the carrier has made significant changes to its business model, transitioning into a hybrid full fare - low cost airline, a notable departure from the high-end legacy carrier premise it was relaunched under in 2013. Over the past year, Air Serbia has taken steps towards restructuring its business by reducing its workforce in late 2017, consolidating its destination network and putting on sale non-airworthy general aviation aircraft and equipment. CEO, Duncan Naysmith, told employees in an internal memo in February that focus would be put on "net profit, the new fare structure, in-flight sales, additional services that bring in ancillary revenues, as well as other initiatives to boost efficiency". The airline's restructuring coincided with the collapse of Etihad's equity investment strategy across Europe, which resulted in two of the continent's key airlines, Alitalia and Air Berlin, filing 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.

Air Serbia's CEO recently noted, "2017 was a pivotal year for Air Serbia that saw the airline implement fundamental changes to strengthen the business, which have already positively impacted on many key operating metrics. This is a fantastic sign of things to come. Despite intensified competition and other unfavourable circumstances in the market, ever since 2013 we continue to improve our results. We started 2018 with the same goal - to push forward on all the fronts, which will hopefully lead us to even better years ahead". Despite delivering on several of its middle-term business goals set out in 2013, including the introduction of long haul flights among other things, the airline has not taken delivery of new A320neo aircraft as scheduled and did not launch an international tender for the modernisation of its regional fleet as initially indicated in 2013.