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Serbia Will Rebrand JAT Airways, May Offer It to Etihad Airways

Oct. 22 (Bloomberg) -- Serbia plans to turn unprofitable airline JAT Airways into a debt-free company and possibly offer it to Etihad Airways, the third-biggest Gulf airline.

The possible arrangement with Etihad Airways may be worth $140 million and involve a lease of 12 new aircraft to renew JAT’s ageing fleet, Finance and Economy Minister Mladjan Dinkic told reporters at a business forum in Belgrade today.

“We will create a new JAT, we’ll free it from debt” and try to transform a failed purchase arrangement with Airbus for new aircraft into a lease agreement, Dinkic said.

The plan emerged after the government rejected JAT’s request for 35 million euros ($46 million) of sovereign-backed borrowing, he said. Serbia made an advance payment of about 20 million euros to Airbus SAS more than 10 years ago for the purchase of eight planes that was later canceled. The government is now seeking to include the amount in future negotiations.

Renewing JAT’s fleet may cost Serbia about $140 million “so it would be much cheaper to find a partner,” he said. An offer to Etihad may also include a new cargo facility in Serbia that can be used for exporting agriculture goods, Dinkic said.

Serbia’s latest attempt to sell JAT Airways failed in December. The previous government also had plans to split the airline in two to create a unit with marketable assets and another with liabilities that would be assumed by the state.

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

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

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