Bloomberg News

Etihad Plans Code-Sharing With JAT in Step to Wider Deal

April 15, 2013

Etihad Airways PJSC, the third- biggest Gulf airline, added Serbian national carrier JAT Airways as its latest code-share partner and said the accord should prove a first step toward a more comprehensive tieup.

Abu Dhabi-based Etihad will begin regular daily flights to Belgrade starting June 15 and attach its code to 23 of JAT’s European flights, with the Serbian company doing likewise on 21 Etihad services, the companies said.

“This is just a start of our cooperation,” Etihad Chief Executive Officer James Hogan, told a news conference in Belgrade today. “As we move towards June 15, you will hear more about Etihad Airways and the partnership with JAT.”

Successive Serbian governments have tried to make unprofitable JAT attractive to potential buyers to shed state assets as part of austerity moves designed to bring the former Yugoslav republic in line with the European Union, which it wants to join.

The Cabinet of Prime Minister Ivica Dacic said in March it would take over 170 million euros ($220 million) in liabilities. The carrier will also lease four planes to upgrade its fleet and buy four Airbus jets by 2015, Chief Executive Officer Vladimir Ognjenovic said in an interview today.

The Belgrade-based airline posted a $37.13 million loss in 2011, according to its website. Last year’s loss has not yet been released.

‘Fleet Renewal’

Two A319s will be leased through Slovenia’s Adria Airways DD, while BOC Aviation, Asia’s biggest aircraft lessor, and Awas Aviation Capital Ltd. will provide one A320 each, Ognjenovic said after meeting with Hogan.

“We wish to continue the process of fleet renewal and we hope that we’ll conclude the contract with Airbus” for purchasing the four planes, Ognjenovic said. “With that, we would renew the fleet completely by 2015.”

Serbia made an advance payment of about $23.5 million to Airbus in 1998 for eight planes and later canceled the order. The government is now seeking to include the amount in talks with Toulouse, France-based Airbus.

JAT pilots, who now fly Boeing 737-300s and ATRs, will start training for Airbus aircraft next week, based on the leasing agreements with Singapore-based BOC Aviation and Awas, unit of Terra Firma Capital Partners Ltd., Ognjenovic said.

Etihad Group

Today’s accord may ultimately lead Etihad to take a 49 percent stake in JAT, adding to its equity stakes in Aer Lingus Group Plc (AERL), Air Berlin Plc (AB1), Virgin Australia Holdings Ltd. (VAH) and Air Seychelles Ltd.

Etihad spoke with Serbian Finance Minister Mladjan Dinkic in Abu Dhabi and “it’s a very early stage where we are having a look at JAT to see whether” an “opportunity could exist, but its very much early days,” Hogan said. “We wouldn’t be entering a deal if we felt it created a risk for Etihad.”

Etihad is still looking at Jet Airways (JETIN) (India) Ltd., Hogan said in response to questions at the press conference, while declining to comment further. Negotiations over the purchase of a stake in the Mumbai-based carrier reportedly cooled last month.

“We are still involved in those talks at the moment,” Hogan said. He declined to elaborate because Jet Airways is a listed company.

JAT will become Etihad’s 43rd codeshare partner as the Gulf carrier seeks to build a network of allies while avoiding membership of formal groupings Star, SkyTeam and Oneworld.

Improved Finances

“We expect this cooperation to bring benefits to our passengers, more convenient connections and better prices, which will be seen in JAT’s balance sheet in the coming months,” CEO Ognjenovic said at the same news conference.

The number of passengers will top 1.5 million in 2013, for the first time in two decades, Ognjenovic said.

The Serbian carrier will have access to destinations including China, Southeast Asia, Australia, South Africa and North America, while Etihad will gain access to cities in western and eastern Europe.

“Through this partnership,JAT and Etihad will streamline access to and from Serbia,” Hogan said.

To contact the reporters on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net; Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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