Europe

Air Serbia: Changing the Balkan Airscape

Uros Maksimovic

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Serbia’s national airline is now a strategic partner of Etihad Airways, a flag carrier of the United Arab Emirates. The rebranded Air Serbia aims to become the leading airline in the Balkans, while Etihad wants to use Belgrade as a hub.

As with its predecessor, Jat Airways, Air Serbia will operate flights to destinations in Europe, the Middle East and North Africa. But the airline also has ambitious expansion plans and a partner with the resources to make them happen – an ingredient that is often missing when Balkan countries announce major projects.

Let’s break down what the new partnership means for the traveler, as well as the broader impacts of a move that will shake up the skies in the Balkans.

New Horizons

Air Serbia will add seven new destinations by March 2014, including cities such as Beirut, Cairo and five more locations in Europe. Service to major European metropolises such as Paris and Moscow will be expanded to two flights per day[d1] . Etihad has also confirmed plans for Air Serbia to begin flights to Chicago and Toronto, home to some of the largest Serbian Diaspora populations in the world.

 Strategic Partnership

 One of Air Serbia’s destinations is Abu Dhabi, from where Etihad and many of its partners operate flights to Asia, Africa and Oceania. Air Serbia passengers will have access to these flights[d2]  through a codeshare agreement. The airline has also promised to strengthen existing ties with major European carriers to enable more effective flight connections.[d3]  The result will be better worldwide connectivity for the airline and an entire country that is keen on attracting foreign investment. But it is more than just that.

 Political instability, corrupt governments and outdated infrastructure

 With Serbia and other Balkan countries edging closer to membership in the European Union – and enjoying visa-free travel to the EU – the Balkan airline market has considerable investment potential . Located on a major international transit route, the Balkans are home to tens of millions of people .

 But the region is also notorious for its political instability, corrupt governments and outdated infrastructure. In the aftermath of the global financial crisis, any potential investor would have needed an abundance of cash and a willingness to take the gamble. Facing stiff competition from Emirates and others, and needing new inroads to the European market, Etihad has both.

The UAE carrier acquired a 49% stake in the Serbian airline, re-branded it, and secured partial management control. They installed Australian Serb Dane Kondić as the company’s new Director, and he means business: 10 Airbus planes will enhance the Air Serbia fleet almost immediately on lease, replacing their aging Boeing 737s. The company has also announced a long-term fleet renewal plan.

So, does everybody win?

Not quite. Other Balkan carriers will face stiffer competition, most notably Croatia Airlines, which continues to respond to financial shortfalls by reducing its network and fleet. Internationally, Gulf carriers see the benefit in setting their European home base in the Balkans to compete with the big Western European airlines. Foreigners cannot own a majority stake in any EU carrier, nor can they control the management of an EU airline. Most of the former Yugoslav republics are not EU members yet, making them the perfect European-based platform for the Gulf companies, whose growth has already scaled back the success of EU airlines in Asia and Oceania.

Whatever the result of the international airline tussle, Serbia and much of the Balkans will soon become better connected than ever before. Transit re-connects the Balkans to the world, and it brings business.

Many thanks for the contribution from Milan Ducic