Etihad-backed Air Serbia stops flights to Abu Dhabi in latest equity partner restructuring

Air Serbia has announced plans to cut flights to the Abu Dhabi base of its shareholder Etihad Airways as part of plans to focus on short-haul flying.

The news marks the latest structural change at one of Etihad’s equity partners after Alitalia, in which it owns a 49 per cent stake, asked to be put under special administration this week.

Read: Etihad says will no longer invest in Italy’s Alitalia/

Air Serbia’s route adjustment strategy, following a review of its five-year business plan, will see the carrier outfit its Airbus A319 and A320 narrow-body planes with slimmer seats, the carrier said in a statement on Wednesday.

This in turn will allow it to increase capacity and better utilise its aircraft for flying in European markets, it added

The changes will also see Air Serbia cuts its Belgrade to Abu Dhabi service from October 29 to redeploy the A319 on shorter routes.

“After conducting an extensive review of our five-year business plan, we have taken the decision to consolidate our network by focusing on our European routes,” said Dane Kondić, CEO of Air Serbia.

“We will also be suspending our second longest route, Belgrade – Abu Dhabi, which will enable Air Serbia to increase the utilisation of our narrow-body Airbus fleet and maximise returns.”

Kondić said the carrier hoped to increase revenue, balance seasonal fluctuations in traffic and mitigate the escalating cost of fuel and other services through the changes.

Passengers with flights booked beyond October 29 will be provided with alternative arrangements including tickets with Etihad, which will continue to serve the Belgrade to Abu Dhabi route, Air Serbia said.

Etihad agreed to acquire a 49 per cent stake in Air Serbia, then JAT Airways, from the Serbian government in 2013 in exchange for providing a $40m loan.

Read: UAE’s Etihad To Acquire 49% Stake In Serbia’s JAT Airways

The next year it completed the purchase of a 49 per cent stake in Italy’s Alitalia for EUR387.5m ($422m).

Etihad said on Tuesday it would no longer invest in Alitalia following the board’s decision to enter administration.

It also expressed its continued support this week for restructuring efforts at Air Berlin, another troubled European airline in which it acquired a 30 per cent stake in 2011.

“We are starting to see the structural changes in the Air Berlin business that are required to create a sustainable future for Air Berlin,” said James Hogan, president and CEO of Etihad Aviation Group and vice chairman of Air Berlin.

“The financial results show that substantial work remains to be done, but I believe that the strategy unveiled in September 2016 is the right one, and in Thomas Winkelmann we have the right leader to accelerate the necessary changes.”

Bloomberg cited a page in Air Berlin’s annual report as revealing Etihad had agreed to support the German carrier for at least another 18 months, including EUR350m ($382m) of new funding. This would take Etihad’s total exposure to the airline to nearly EUR2bn ($2.18bn), the publication reported.