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Etihad to Buy Stake in Serbia’s JAT as Hogan Reworks Carrier

Aug. 1 (Bloomberg) -- Etihad Airways PJSC, the third-biggest Gulf airline, said it will take a 49 percent state stake in Serbia’s unprofitable Jat Airways as part of a rebranding push that includes a new name and management.

Etihad’s initial $40 million investment in the Serbian company will be converted into equity at the start of 2014, and followed by as much as $60 million in shareholder loans to help renew Jat’s fleet, Etihad Chief Executive Officer James Hogan said today in Belgrade. Serbia will match the total, Deputy Premier Aleksandar Vucic said.

“The Balkans, as a crossroads to the world, is a huge opportunity,” Hogan said. “We believe we’re going to be very well-positioned to take advantage of that.”

The Serbian company is Etihad’s sixth equity alliance member following those with Aer Lingus Group Plc, Air Berlin Plc, Virgin Australia Holdings Ltd., Air Seychelles Ltd. and Jet Airways (India) Ltd. Serbia repeatedly tried to sell Jat in the past, including to Hava Yollari AO, the carrier known as Turkish Airlines. The company will in the future be called Air Serbia.

Etihad’s move is “another step to create a comprehensive network and a global footprint. Europe is a key market within this strategy and it should be to the benefit of JAT and Serbia,” Sebastian Hein, an analyst at Bankhaus Lampe, wrote in e-mailed comment. “The market entry is comparably cheap.”

The Serbian government agreed to assume the liabilities of its flag carrier, “so Air Serbia is a new company, a clean sheet of paper,” Hogan said.

New Management

Dane Kondic, former director at Sabre Airline Solutions and former Vice President Commercial at Abacus International, will manage the renamed and rebranded company, overseeing fleet renewal that will start with a lease of two Airbus A319s, under a five-year management contract, Hogan said.

“Over the next 24 months, we’ll negotiate with Airbus and Boeing” about buying 10 aircraft for Air Serbia, he said. The choice will be between Airbus A319 NEO and Boeing’s 737 MAX models, he said.

Today’s accord follows an agreement for a code-sharing partnership in April, and Etihad said at the time that it would begin regular daily flights to Belgrade two months later.

With assistance from Gordana Filipovic in Belgrade.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

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

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