Etihad No Longer Has Stake In Air Serbia: Now What?

Etihad No Longer Has Stake In Air Serbia: Now What?

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A decade ago, Etihad Airways bought a 49% stake in Air Serbia, as part of the carrier’s global partnership strategy at the time. In recent years, the airline has been decreasing its stake in the airline, and now Etihad no longer has any involvement in the company, as flagged by EX-YU Aviation News. What does that mean for the future of Air Serbia?

Etihad no longer owns any part of Air Serbia

In 2013, Air Serbia was born in its current form, as the company was a rebranded version of the former Jat Airways. The airline was a joint venture between Abu Dhabi-based Etihad Airways and the government of Serbia, with the two parties owning 49% and 51% stakes, respectively. This was ultimately part of larger scale cooperation between Serbia and Abu Dhabi.

Not only did Etihad own nearly half of Air Serbia, but the airline also had a contract to manage Air Serbia for a period of five years. So while Etihad was involved for the first five years, it changed for the second five years, as Etihad was undergoing a strategy shift of its own.

In 2021, Etihad decreased its stake in Air Serbia from 49% to 18%. Then in 2022, Etihad decreased its stake in Air Serbia from 18% to 16%. And now in 2023, Etihad has decreased its stake in Air Serbia from 16% to 0%. I’d say that Etihad “sold” its shares, but that’s not really the case here — rather the company was just recapitalized by the government.

Etihad no longer has a stake in Air Serbia

Here’s how Air Serbia CEO Jiri Marek recently described the situation between Air Serbia and Etihad:

“Etihad Airways is a minority shareholder but has no involvement in the company’s management. We are not looking for a strategic partner at the moment. Of course, I cannot comment on behalf of the shareholders, they might have a different vision. As an airline, our strategy is to cooperate with everybody with whom we can and where it makes sense.”

Here’s how Serbian Finance Minister Siniša Mali describes Etihad ending its stake in Air Serbai:

“Air Serbia is the largest airline in the region. From a carrier that was facing bankruptcy we created a leading company that now flies to four continents and a significant number of country markets. It has become an example of how an airline can become successful and can further contribute to economic growth. The state will focus on the continued development of our Air Serbia, which includes the acquisition of wide-body aircraft and the launch of new routes. I would like to thank officials from Etihad Airways, who have been Air Serbia’s partners and part-owners since 2013. They are leaving Air Serbia due to their own business decisions, while we continue to develop our airline.”

Etihad was involved in Air Serbia for a decade

Etihad’s investments have been a disaster

Around a decade ago, and under a completely different management team, Etihad had the plan of becoming a huge global player. Not only did the airline want to directly take on Emirates, but the airline also wanted to create a global alliance of airlines in which it invested, in hopes of giving the airline even more power globally.

Well that didn’t exactly end well!

This endeavor was perhaps the greatest failure we’ve seen in the airline industry in history. I mean, you couldn’t light money on fire more efficiently if you went to.

There’s not an airline I can think of that has squandered money investing in other airlines quite the way that Etihad did at the time. The government owned airline lost $5.6 billion in the four years pre-coronavirus, and Etihad’s investments in airlines have been a large part of the problem:

Etihad’s Jet Airways investment didn’t work out great

And now Etihad is giving up its stake in Air Serbia. So if my math is right, for the billions of dollars that Etihad invested in other airlines, it has proceeds of $1 to show. Yes, $1.

Etihad sold its stake in Air Seychelles for $1

I mean, seriously, how wrong can you get something? If Etihad’s investment strategy were any more wrong, the airline would have accidentally bought a stake in Air Serbia Total Landscaping.

What does this mean for the future of Air Serbia?

From a passenger experience perspective, Etihad’s investment in Air Serbia was initially phenomenal. Etihad thought the key to Air Serbia’s success was improving the passenger experience, so the airline introduced a great business class experience.

However, that all goes back quite some time. The reality is that Etihad hasn’t been involved in the day-to-day management of Air Serbia for years, so expect it to be business as usual.

Air Serbia has in fact grown very impressively in recent years, adding aircraft to its fleet and destinations to its route map. Now, there’s not much transparency surrounding Air Serbia’s financials, so I don’t know how sustainable the growth is, though I do hope Air Serbia continues on its path, since we don’t have many global airline options in Eastern Europe.

I have to imagine that the government of Serbia is eventually looking to privatize the airline, as government owned carriers in Eastern Europe don’t exactly have a great track record for staying in business long term. This gets back to wondering what Air Serbia’s financials are like, which we don’t really know.

The only thing that’s expected to change with Etihad no longer being involved is Air Serbia’s loyalty program. For the past decade, Air Serbia has used Etihad Guest as its loyalty program, but that doesn’t make a whole lot of sense anymore, given that the airline has no connection to Etihad anymore.

The plan is reportedly for Air Serbia to make changes on that front in 2024. Air Serbia might develop its own loyalty program, or might try to partner with another, more relevant loyalty program.

Expect Air Serbia to switch loyalty programs

Bottom line

A decade ago, Etihad helped co-found Air Serbia, and owned a 49% stake in the airline. Now the Abu Dhabi-based carrier has completely ended any involvement with the Serbian flag carrier, after decreasing its stake in recent years.

This also marks the end of Etihad’s airline investment strategy, as all other airlines have gone out of business, or have undergone major restructurings.

Air Serbia seems to be on a great path with growth, as the airline has grown its fleet and network considerably, and good air connectivity is good for the economy. However, the financials around the airline aren’t terribly clear. The only major thing that we’ll likely see change is that Air Serbia will stop using Etihad Guest as its loyalty program at some point, but no concrete details have been announced yet.

What do you make of Etihad ending involvement with Air Serbia?

Conversations (21)
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  1. max Guest

    EX-YU aviation wrote not to long ago that Air Serbia had first half profit of about 22.5m $.

    The best thing now for the airline is to grow a bit more and then for the Serbian government to find it a strategic partner. Right now it's still a small regional player but if they manage to continue growth they should be more attractive to bigger players.

    But in that region I'm more concerned about Croatia...

    EX-YU aviation wrote not to long ago that Air Serbia had first half profit of about 22.5m $.

    The best thing now for the airline is to grow a bit more and then for the Serbian government to find it a strategic partner. Right now it's still a small regional player but if they manage to continue growth they should be more attractive to bigger players.

    But in that region I'm more concerned about Croatia Airlines, their survival will pivot on A220 transition that's soon to start.

  2. Exit Row Seat Guest

    Small national flag carriers have a tendency to suck up sovereign wealth.
    Best for them to find a dance partner to maintain volume and cash flow.
    Word has it Miles & Moore and Fly Blue have requested space on the dance card.
    Belgrade is getting inpatient attending so many debutant balls.

  3. NathanJ Diamond

    “Air Serbia Total Landscaping”

    #loudchortle #cruelbutfair

  4. AS Guest

    I’m pretty sure the old Swissair also followed a similar strategy in the 1990s with a similarly disastrous result. Not sure how much money they lost but it might rival Etihad when adjusted for inflation.

  5. echino Diamond

    Are Air Canada Aeroplan redemptions on Air Serbia in jeopardy?

  6. The Nomad Guest

    > I do hope Air Serbia continues on its path, since we don’t have many global airline options in Eastern Europe.

    Serbia is in Southern Europe, along with the rest of former Yugoslavia (a country that bordered Italy and Greece). Go look up the United Nations geoscheme for Europe.

  7. betterbub Diamond

    "I can fix him" - person who could not fix him

  8. SullyofDoha Guest

    @Ben ---Not sure why no mention was made of the comprehensive codeshare agreement between Air Serbia and Qatar Airways. It might be an indication of even closer arrangements in the future, potentially leading to OneWorld!!!

    1. VladG Diamond

      They also have comprehensive codeshare agreements with Air France and Turkish Airlines, so their codeshares aren't really a big giveaway :)

  9. Mark Guest

    Air Serbia Total Landscaping. Hilarious!

  10. Bobby J Member

    In that same article and interview, Marek states that they have also considered joining Turkish Miles & Smiles or Flying Blue. The latter would make sense for Air Serbia and also connect them (eventually) to Skyteam. However, I’ve long argued that Air Serbia could be a good fit for oneworld. Eastern Europe is one of the biggest holes in the oneworld network.

    1. VladG Diamond

      Agree that both SkyTeam and OneWorld would benefit from the addition of Air Serbia, as they have excellent coverage of the Balkans. However, their CEO has said several times that for an airline of their size, joining a global alliance would bring more cost than benefit. It was probably a signal for the alliances to sweeten their offer somehow.

    2. Samo Guest

      The entire Europe is a hole for oneworld, which only has bases at edges of the continent (MAD, LON, hEL). Air Serbia won't solve this since they're also located in an excentric place. Oneworld desperately needs a central European carrier, such as LOT, otherwise it just won't work because people will still be forced to fly Lufthansa.

    3. lilolme Guest

      I would say Serbia is almost as central as Poland is. Yes there is more Europe north of Poland, but probably just as many people in the Balkans, Italy, Greece and Turkey region.

      OneWorld does need more central European partners as Star and ST have eaten up almost all the other major airlines.

      I also think LOT would benefit by switching to OW. I see no reason why both Lot and Air Serbia couldn't both...

      I would say Serbia is almost as central as Poland is. Yes there is more Europe north of Poland, but probably just as many people in the Balkans, Italy, Greece and Turkey region.

      OneWorld does need more central European partners as Star and ST have eaten up almost all the other major airlines.

      I also think LOT would benefit by switching to OW. I see no reason why both Lot and Air Serbia couldn't both join OW as Star owns or controls AT, LX and now AZ.

      If the ceo of JU is right then OW provides the least overlap and most opportunity for JU to shine on its own.

      BA should get on this before LH does cause it is just a matter of time IMO.

  11. Marco Guest

    *Lufthansa has entered the chat

  12. pstm91 Diamond

    For the past year and a half, Air Serbia has benefitted from the Russia-Ukraine war. If you flew them recently, a huge percentage of passengers are Russian traveling home or to visit family, especially since the routes to Moscow on TK have been so expensive and it's really the only other (convenient) way to get there from the US.

    1. VladG Diamond

      Just like Austrian Airlines hugely benefitted from the Balkan wars in the 90s. It's funny how the tables have turned.

      Interestingly enough, Air Serbia currently operates fewer flights to Russia compared to before the Ukraine war, because it's restricted by the bilateral agreement and Russian carriers can't operate to Serbia (for obvious reasons). As a result, ticket prices to and from Russia were insane for a while (think €1000+ for an intra-European return ticket). Lately...

      Just like Austrian Airlines hugely benefitted from the Balkan wars in the 90s. It's funny how the tables have turned.

      Interestingly enough, Air Serbia currently operates fewer flights to Russia compared to before the Ukraine war, because it's restricted by the bilateral agreement and Russian carriers can't operate to Serbia (for obvious reasons). As a result, ticket prices to and from Russia were insane for a while (think €1000+ for an intra-European return ticket). Lately the prices have started to come back to more sane levels.

  13. Mick Guest

    In regards to financials it’s telling that the Serbian foreign minister says nothing about profitability but merely talks about growth and national identity etc.

    1. VladG Diamond

      He actually does comment on profitability, but that part of the statement was not relayed in English-language media. 2023 is the first year in which Air Serbia has been profitable without state subsidies, and they are on track to end the year with a €50M profit.

    2. Mick Guest

      That’s very interesting and positive! Thanks for the insight

  14. TheAirlineKid Guest

    Guffawed loudly at the Air Serbia Total Landscaping…

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Mick Guest

That’s very interesting and positive! Thanks for the insight

2
AS Guest

I’m pretty sure the old Swissair also followed a similar strategy in the 1990s with a similarly disastrous result. Not sure how much money they lost but it might rival Etihad when adjusted for inflation.

1
echino Diamond

Are Air Canada Aeroplan redemptions on Air Serbia in jeopardy?

1
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