Air Serbia Is Expected To Restructure

Filed Under: Air Serbia

The Etihad Airways Partners concept has been a colossal failure. Etihad invested in a group of airlines, gave them some Etihad touches, and tried to turn them into a global airline group. While I think the concept of that isn’t necessarily bad, the problem is that they invested in incredibly unprofitable airlines, and Etihad doesn’t have much experience themselves in turning a profit. It was a nice vanity project while Etihad management had the money to throw around, but under increased financial pressure, the concept has collapsed:

One of Etihad’s other investments is Air Serbia. It’s my understanding that this investment was part of a larger agreement between the governments of the UAE and Serbia, so this wasn’t a straight investment in the airline. However, it looks like even Air Serbia may be in trouble.

On Sunday, Serbian newspaper Danas reported that Air Serbia is planning a restructuring. Per Aerotime:

Employees of the Serbian flag carrier received an announcement on February 12, 2018, stating that during a “recent” company’s strategic meeting it was decided to “define the direction of development in the coming period”.

The approach “will contribute to the successful adjustment of the company to the current conditions on the market, achieving better profitability and competitiveness,” is noted in the announcement, according to Danas.

The goal of the re-organization, as the statement reads, will be to focus on net profit, a new concept of tariffs, on-the-fly sales, additional services that will generate additional revenue as a product, and initiatives that will allow increased operational efficiency.

This sounds to me a whole lot like the Air Seychelles restructuring that was recently announced. The airlines also had one other thing in common — both airlines operate one longhaul route. Air Seychelles flies from Mahe to Paris (a route they’re discontinuing in April), while Air Serbia flies from Belgrade to New York. As much as I’ve had great experiences on that flight, I’ve wondered how much longer the route will stick around, given that it seems to consistently be quite empty, especially in business class.

We’ll have to wait to see the full details of this restructuring, though it sure sounds like Etihad is putting Air Serbia under more financial pressure. While I have a lot of respect for many of the people working at Etihad, the failure of the top level management with virtually all of their investments is just shocking.

  1. Oh, boy, they even photoshopped the screen content on that business class picture…

    Air Serbia can’t profitably operate from the country that can only fill in the planes of WizzAir and the likes. In a country where the majority of the population is strapped for cash and with no (noticeable) tourism, premium anything (especially the airline) is not a viable business option. The hard reality is that Serbia has no economy to support the demand… and has no access to ex-YU population anymore. What used to be a meaningful option for 20mil country, is hard to sustain with 7 million population that is on lower GDP level now compared to 70s and 80s. Besides, even with Ethiad’s “restructuring”, there is too much dead weight left over in Air Serbia (no “get-out-of-jail-free-card” of bankruptcy, they are still on the hook for all government taxes and the plethora of retirement and similar benefits).

    Only this time around, Etihad will not suffer the blow – they just gave a loan to the government of Serbia, that now has to be repaid by that same government. And the government, like any other, will rob the Peter to pay Paul.

  2. So far only 2 of Etihad’s investments turned out to be good; Jet Airways and Virgin Australia. These 2 actually had market potential, as should Alitalia. Air Serbia, Air Seychelles, and NIKI were all no more than vanity/governmental projects

  3. @ralf
    Haha , are You a comeduan?
    Jet airways successful, really?
    And as for virgin australia they haven’t made any profit in years.
    Keep taking your pills!

  4. “Air Serbia can’t profitably operate from the country that can only fill in the planes of WizzAir and the likes.”

    My inbound and outbound Swiss flights were full last year. I had a great time touring Serbia; it’s a true European gem. Bosnia and Croatia (which I’d visited before) were also enjoyable but Serbia was a lot of fun.

  5. No one seems to remember the colossal flop that was Swiss airline Etihad Regional. This was a very ambitious one.
    I was under the impression that Air Serbia was profitable. Etihad probably want’s that A330 back.

  6. Swiss has full planes because of inbound cnx. Wizzair has full planes because of dirt cheap fares. Air Serbia has empty planes because it has neither. The only airline I can’t underarand why it failed that was an EY project was Alitalia.

  7. Yesterday I was due to fly BEY-LHR via Belgrade. They cancelled BEY – BEG 20 days ago. I was told “refund or a flight 48 hours later, or before”. Yay. So got money back and had to book another flight, no interlining even though their T&Cs say interlining. Last time I book with them.

  8. I really hope the JFK-BEG flight lasts through the summer – really don’t want to have to re-book to a connecting flight.

  9. Well, they seem to be on a downward spiral. Let’s judge them based on SVO-BEG flights.
    When I took Air Serbia in 2014, they offered menus, metal cutlery, hot meals and a variety of wines and liquors, including cocktails, in economy, you could select seats and bring free luggage.
    When I took Air Serbia in January 2017, they no longer offered menus or metal cutlery, but the hot meal, seat selection, luggage and alcohol were still there.
    When I took Air Serbia in December 2017, they changed the cabin seats to superslim Recaro ones and only provided a cold small sandwich and a muffin. No alcohol, except wine. No free seat selection, but luggage was included.
    As it seems to be from their website, now they don’t even offer free meals, drinks or free luggage allowance to all of their passengers due to their new fare rules.
    So basically Air Serbia went from a quite delightful premium airline to a true low-cost carrier (with fees for airport check-in and stuff like that), at least on their medium-haul and short-haul flights.
    Very sad.

  10. Lucky…. do some historical research. Its called the “Hunter” strategy of Swissair, which once was known as a flying bank. Then look who the advisors and consultants were. McKinsey, might be a clue.

  11. The Etihad strategy reminds me very much to the one chosen by the late Swissair. The management was investing in non-profitable airlines and tried to become a global network. At the end, Swissair grounded and went out of business. No Swiss is part of Lufthansa group and is doing very well. Hope Etihad, which is a great airline, has learned from this experience….

  12. I think James Hogan will go down as one of the most disastrous airline CEOs in history. The man had no idea what he was doing – if you read the accounts of his time at Gulf Air prior to Etihad, you could have seen this coming. Gulf Air was left in a terrible state by the time he left and by all accounts the blame lay squarely at him. This shows a particularly terrible lack of due-dilligence on Etihad’s part and is also a wider cultural problem symptomatic of thinking by hiring a western executive they will get something better or secret to success. James Hogan was a disaster from beginning to end, and no way near the Tim Clark they fatally depended on him to be. He should never work in the airline industry again.

    Etihad as an airline was always an unnecessary vanity project, especially as Emirates is the de-facto flag carrier by name and recognition. If I were the owners I would reduce their ambitions to become a small regional player, with key long-distance connections that remains profitable.

  13. @EvenSteven
    There are just a few reasons why AZ almost crashed under EY:
    – Millions spent on new uniforms, new cabin interiors new livery and reservation systems. All of them absolutely unnecessary but done through companies close to Hogan&Co. And neither of them reflecting Italy
    – Cancellation of fare combinability with AF/KL, but not introduction of anything similar with EY partners.
    – Transfer of A320s to AirBerlin, which are now used by LH to compete with AZ exactly on its own market
    – At least 2 daily flights to AUH from several Italian airports.
    – For those brilliant decisions, the EY management enjoyed a salary of at least 1 million a year, excluding benefits (attic apartment on Piazza di Spagna to name just one)
    – and finally – add to that the “we are the best and the clients should be thankful if we allow them on board” attitude.
    Sorry this was a bit off topic, the whole alliance was not based on logic and economics, but purely on Hogan’s vanity.

  14. @vlcnc

    That’s Sir Time to you 😉

    All kidding aside, from what Cham says, it sounds like all of this wasn’t just a vanity project for Hogan, but also somewhat lucrative for his pals?

  15. No I didn’t mean it was a vanity project for Hogan, more the Abu Dhabi rulers. Hogan was an opportunist and actually totally screwed them over! He is everything wrong with recruitment at that level and in that region – he should have never been allowed near Etihad after Gulf Air and certainly shouldn’t be allowed near an airline business again.

  16. I thought air Serbia was the only one of Etihad airline partners that made a profit?

    Either way it’s likely since airberlin Etihad isn’t giving any funding to the other airlines which is why Air Seychelles is discontinuing long haul

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