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Etihad acquires part of Serbian airline

Etihad Airways has plans to acquire 49 percent of JatAirways and has been awarded a five-year management contract for the Serbian airline.

These are two of the key components of a strategic partnership agreement, signed by Etihad Airways and the Government of Serbia, which includes a fleet of new aircraft and a new integrated network of international destinations to Serbia.

JatAirways will be rebranded and renamed to Air Serbia. Dane Kondic has been appointed CEO of Air Serbia. Kondic has more than 20 years of experience in the travel industry, holds dual Australian and Serbian citizenship and speaks Serbian.

"The name Air Serbia will carry the national identity into other markets and clearly establish the Serbian brand in a way that JatAirways could not," Aleksandar Vucic, deputy prime minister of the Serbian government, said.

The partnership agreement with Etihad Airways follows the launch of Etihad flights between Abu Dhabi and Belgrade, Serbia in June. The agreement will improve trade relations between the United Arab Emirates and Serbia as well as boosting the tourism sector in both countries.

"We are delighted to welcome Air Serbia to our equity alliance and look forward to working constructively with them and their stakeholders to build a sustainable, competitive and profitable airline,” James Hogan, Etihad Airways' president and CEO, said. "We will have tough decisions to make, but the financial investment by Etihad Airways and the Government of Serbia, together with the positive impact of our joint management expertise and experience, will help ensure this airline, with its proud history, now has an even brighter future."

Economic ties between the two countries, valued at 23.3 million euros (US$30.8 million) in 2012, three times greater than in 2011, continue to expand with a number of government agreements signed in recent months that will lead to investments in agriculture, defense, technology and tourism.

Within the agreement, Etihad Airways will make available a 30.2-million-euro (US$40-million) loan facility, which will be converted into equity Jan. 1, 2014. This will be matched by an equal funding injection by the Government of Serbia.

Etihad Airways and the Government of Serbia will also each provide further funding through shareholder loans and other funding mechanisms of up to 45.3 million euros (US$60 million) to meet working capital requirements and support network development for Air Serbia.

"Etihad Airways' reputation, financial strength and stability will be of significant benefit to Air Serbia and we are delighted to launch this strategic partnership. Air travelers to and from Serbia will soon benefit from an incredible range of new products and services,” Vucic of the Serbian government said. "The partnership will provide passengers with an extensive route network and smooth flight connections. It will also consolidate and enhance both airlines' market competitiveness as the relationship deepens over the coming months."

Tail fins on Air Serbia aircraft will feature the Serbian coat of arms and the country's state colors of red, white and blue. A key figure in the rebranding of the airline was 25-year-old graphic design student Tamara Maksimovic from the Serbian city of Novi Sad.

Among other planned developments will be an expanded flight network and code-sharing with Etihad Airways and airberlin. The new destinations to Air Serbia’s network are Abu Dhabi; Banja Luka, Bosnia; Beirut, Lebanon; Bucharest, Romania; Budapest; Cairo; Kiev, the Ukraine; Ljubljana, Slovenia; Prague; Sofia, Bulgaria; Varna, Bulgaria and Warsaw, Poland.

One of the first new destinations to be launched by Air Serbia will be a four-flights-a-week service between Belgrade and Abu Dhabi. It will start in October and will move to daily when the new fleet grows to facilitate an increased service.

The JatAirways fleet of 10 Boeing 737-300 aircraft will be retired from scheduled operations, and in the short term will be replaced by leased narrow-body aircraft. In the longer term, an Air Serbia order will be made for 10 new narrow-body aircraft.

Air Serbia will become Etihad’s sixth equity partner following investments in airberlin, Air Seychelles, Virgin Australia, Aer Lingus and Jet Airways.