Air Serbia announced yesterday that it had paid its entire outstanding loan amount to Etihad Airways Partners in full. The news comes as a surprise because the Serbian flag carrier previously asked for a significant reduction in debt, as reported by the London Stock Exchange. Etihad Airways Partners declined the request and has now received the money in full.
Air Serbia pays Etihad in full
in an annoucement yesterday, Air Serbia declared that it has settled all of its remaining obligations towards Etihad Airways Partners I. EA Partners is a funding vehicle created by Etihad five years ago to raise money to lend to various Etihad partner airlines, like Air Serbia.
The obligation that Air Serbia had to settle was a $57.62 million loan taken out in 2015 and which matured on 28th September. Air Serbia has another loan to settle with Etihad Airways Partners, for $63 million, maturing in June 2021.
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Air Serbia made great use of the loan
When Air Serbia entered into a partnership with Etihad Airways, it received both the know-how and the funding needed to turn it from a loss-making regional airline known for its poor customer service into a leading airline in the Balkans.
The Serbian national airline outlined the use to which it has put this loan in its statement:
“After the restructuring, which was possible thanks to the funds from this loan as well, the company recorded its biggest expansion last year, in 2019, carrying a record 2.81 million passengers and flying to as many as 23 new destinations in just one year and launching operations from two new airports in Serbia – Niš and Kraljevo.”
Furthermore, Air Serbia outlined the ways in which COVID-19 disrupted its consistent and strong growth this year by highlighting what plans it had for 2020:
“During the first months of 2020, Air Serbia continued to grow, so in January and February, the number of passengers carried increased more than 20 %, year over year. After the start of the recommencement of traffic on 21 May this year, the company remained focused on gradually increasing the intensity of operations where possible, while protecting the health of passengers and employees.”
How did Air Serbia pay for the loan?
Just weeks ago, Simple Flying reported on the news that Air Serbia has requested a significant reduction in the debt that it has now paid in full. At the time,
“As a result of the on-going economic uncertainty in relation to COVID-19, and due to the official closure on 19 March 2020 of airports in the Republic of Serbia for inbound and outbound flights, [Air Serbia] has notified the Issuer and Agent of its inability to perform its principal business activity of worldwide civil air transportation and, therefore, of its potential inability to satisfy its obligations under Clause 6 (Repayment) of the Debt Obligation Agreement.”
However, this debt has now been paid off in full, and Air Serbia used the press release as an opportunity to highlight this. The CEO of Air Serbia, Duncan Naysmith, said:
“The payment of this loan is proof of sound and responsible management of Air Serbia before and during the crisis, and during the recovery from the consequences of the pandemic.”
How do you think Air Serbia managed to repay this loan? Do you think it will be able to settle further obligations too? Let us know what you think of this story in the comments below.