Etihad’s Air Serbia Shares Wanted By Serbian Ministers

Air Serbia, in which Etihad has a 49% share, might soon be fully nationalized. Serbia’s Minister for Construction, Transport and Infrastructure, Zorana Mihajlović, announced this week that the government is prepared for the possibility of Serbia purchasing all of Etihad’s share in Air Serbia. Why would the Serbian Government do this?

Air Serbia Etihad Airways Belgrade Nikola Tesla Airport liveries
Air Serbia was one of Etihad’s only successful investments. Photo: Getty Images

The announcement

MediaPortal reports that the Serbian Minister made the comments in an interview on Serbian television TV Prva in response to a question about how the country is going to help Air Serbia during its current financial troubles.

She said, “yes, we are discussing whether to purchase Etihad’s share”, noting that “it has now been demonstrated how important it is for us to have a national airline”.

The importance of Air Serbia for Serbia, which Zorana Mihajlović is referring to, has also been noted by many regional commentators over the past few weeks. Air Serbia has been performing numerous rescue flights to European destinations, and also to Washington and Los Angeles, bringing Serbian citizens back to the country. Air Serbia is also currently operating daily cargo rotations to China to bring back medical equipment and Chinese experts to Serbia.

In contrast, neighboring North Macedonia, which has no national airline of its own, has had to contract Wizz Air to perform rescue flights for its own citizens stranded abroad. But even this arrangement first had to wait until a tender was written, then launched, with Wizz Air finally selected as the operating airline.

Air Serbia Airbus A330 New York JFK
Air Serbia deployed its wide-body aircraft for rescue flights to North America and cargo flights to Italy and China. Photo: Getty Images

Air Serbia – a source of pride

Air Serbia is increasingly seen as a source of national pride, which has prompted the Serbian Minister to note: “Air Serbia has performed a highly important function for us, so it is now on Serbia to provide it with conditions needed to operate commercially”.

After framing this as a demonstration of Air Serbia’s commitment to social responsibility in the country, Zorana Mihajlović then made a case for Serbia’s flag carrier from an economic perspective too. She noted that Air Serbia has, in the past few years, grown its network by over 40 destinations, and increased its revenues significantly.

In the last year alone, Air Serbia expanded its operations to include the other two Serbian airports in its network. It first launched flights out of Niš, then out of a brand new airport in Kraljevo, Morava.

However, in both of these airports, Air Serbia is actually paid by the state to operate these flights, and its destination network is prescribed by the government too. Without this financial support, the services would not be commercially viable, given the very low prices Air Serbia offers for flights out of these two airports.

Air Serbia
Air Serbia is loss-making, but the losses are decreasing substantially every year. Photo: Getty Images

Even with state support for operations outside of its hub airport, Belgrade Nikola Tesla, Air Serbia still made a 30 million EUR (USD 33.3 million) loss last year. However, this is still a smaller loss than in the year prior. Given the current situation, Serbia estimates the loss to be at least double this figure for 2020.

Regardless of the financial position, the airline should not be worried about its survival. The Serbian Minister was clear: “there is no doubt at all about whether Serbia should be helping Air Serbia”.

Do you think Serbia is timing its decision well by nationalizing its airline during the current downturn in the aviation industry? Let us know what you think in the comments below!