Etihad Airways, have announced plans to acquire 49 percent of JatAirways, the Serbian national airline. The Abu Dhabi-based carrier has secured a five year management contract for the Serbian national airline.

The strategic partnership agreement, signed by Etihad Airways and the government of Serbia, includes a fleet of new aircraft, and an extension of the Serian airlines' network. The agreement follows the launch of Etihad Airways flights between Abu Dhabi and Belgrade in June 2013.

The strategic partnership agreement was announced by James Hogan, president and chief executive officer of Etihad Airways and Aleksandar Vučić, deputy prime minister of the Serbian Government, at a media conference in Belgrade today, Thursday 1 August 2013.

With the agreement Etihad Airways will make available a $40 million loan facility converted into equity on 1 January 2014, subject to regulatory approval. This will be matched by an equal funding injection by the government of Serbia. 

Trade between the two countries is valued at EUR 23.3 million in 2012.

The re-branding and renaming of JatAirways to Air Serbia is a moment in the 80 year history of the Serbian carrier. Tail fins on Air Serbia aircraft will feature the Serbian coat of arms and the country's state colors on both sides.

Etihad Airways and the Government of Serbia will each provide further funding through shareholder loans and other funding methods of up to $ 60 million to meet working capital requirements and support network development for the newly created Air Serbia.

Among other planned developments will be an extension of the flight network, codesharing with Etihad Airways and airberlin, adding to Air Serbia’s current network of 33 cities another 12 destinations in Africa, Europe and the Middle East.

The new destinations are Abu Dhabi (complementing Etihad Airways’ daily service), as well as Banja Luka, Beirut, Bucharest, Budapest, Cairo, Kiev, Ljubljana, Prague, Sofia, Varna, and Warsaw.

Among the first new destinations to be launched by Air Serbia will be a four flights a week service between Belgrade and Abu Dhabi.

Complementing Etihad Airways' current daily flights, the new Air Serbia service will start in October 2013 and will move to daily when the new fleet grows to facilitate an increased service. 

The new Airbus A319 aircraft will be in Air Serbia livery, with a stylish cabin trim and product of a standard never seen before operating out of Belgrade.

The current 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 placed for ten new narrow body aircraft.

The strategic partnership agreement will provide career development for Air Serbia's cabin and flight deck crew with access to Etihad Airways’ training academy and facilities in Abu Dhabi.

Hogan said: “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. 

“In addition to creating scale, our renowned business model provides a unique common platform to drive synergies and cost savings which will be of considerable benefit to Air Serbia as the new airline evolves.

“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.”

Aleksandar Vučić, Deputy Prime Minister of the Serbian Government, said: “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. 

“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.”

Air Serbia will become Etihad Airways’ sixth equity partner following investments in airberlin (29.21 per cent), Air Seychelles (40 per cent), Virgin Australia (10.5 per cent), Aer Lingus (2.99 per cent) and most recently Jet Airways (24 per cent – subject to regulatory approval).