Serbia’s Deputy Prime Minister Aleksandar Vucic (R), Etihad Airways CEO James Hogan (C) and Air Serbia CEO Dane Kondic (L) smile after signing a strategic partnership deal. Image Credit: Reuters

Dubai: Etihad Airways said on Thursday it will acquire a 49 per cent stake in Serbia’s national carrier JatAirways continuing its global expansion.

As a part of the deal, announced jointly by the two carriers in Belgrade on Thursday, Etihad Airways will provide $40 million (Dh146.8 million) in loan facility to the loss-making Serbian carrier, which will be converted into equity on January 1, 2014, subject to regulatory approval.

And this will be matched by an equal funding injection by the Government of Serbia, Etihad said in a statement, adding that the two parties will also each provide further funding “through shareholder loans and other funding mechanisms of up to $60 million” to meet the Serbian airline’s working capital requirements.

Etihad further said it has also signed a five-year contract to manage JatAirways, which will be renamed Air Serbia.

Welcoming Air Serbia to Etihad’s equity alliance, James Hogan, Etihad Airways’ President and chief executive, said in a statement: “We look forward to working constructively with them and their stakeholders to build a sustainable, competitive, and profitable airline.”

Financial strength

“The partnership will provide passengers with an extensive route network and smooth flight connections,” Aleksandar Vučić, Deputy Prime Minister of the Serbian Government, said in a statement, adding that Etihad’s financial strength and stability will be of significant benefit to Air Serbia.

Analyst Andrew Charlton of Aviation Advocacy told Gulf News that the move enables Etihad access to the Balkans and extreme east of Europe.

Echoing his view is Peter Morris, chief economist at aviation consultancy, Ascend as he says: “It is not a big investment commitment for Etihad, which gains a strategic presence in an interesting region of Europe. While there is not a great history of financial success in cross border airline investment, looking at the investment options for Etihad in that region, JatAirways would seem to be a reasonable option to pursue.”

Etihad, which earlier this week, won approval on a proposal to buy a 24 per cent stake in India’s Jet Airways, currently has equity investments in airberlin, Air Seychelles, Virgin Australia and Aer Lingus.