Serbia in talks to form a new airline out of JAT Airways, wants to team up Etihad

Serbia is looking at the idea of carving a new airline out of the loss-making JAT Airways business, with the government to help with the leasing of new aircraft from EADS’s Airbus, Finance Minister Mladjan Dinkic told local newspaper Blic.

Government guarantees would back the new leases but a rejuvenated airline could then link up with another carrier, such as the fast expanding United Arab Emirates state-run airline Etihad, Dinkic said in the paper on Monday.

Serbia looks to Etihad to invest in revitalized JAT Airways. Photo by Steve Walsh.

“We have plans to … lease 12 new aircraft from Airbus and that new company would receive $140 million-worth of sovereign guarantees for that,” Dinkic was quoted as saying.

But he also said that during a recent official visit to Dubai an idea emerged that Serbia could offer a stake in a reformed airline to Etihad, which could then take over the lease guarantees.

“This (teaming up with Etihad) is still an idea, but the making of the new JAT and the renewal of its fleet are definite government decisions,” he was quoted as saying.

In March JAT, which operates 14 ageing aircraft, secured government guarantees of 10 million euros ($12.56 million) for a loan to cover short-term liabilities and a year earlier it borrowed 51.5 million euros from the government to help renew its fleet.

Serbia, struggling with a budget deficit projected at 6.2 percent of gross domestic product (GDP) and public debt seen rising to 60 percent of GDP this year, has long wanted to sell JAT, which last year made a loss of 3.2 billion dinar (27 million euros).

Two years ago a deal to sell JAT to Turkish Airwaysand Latvia’s Baltic Aviation Systems failed to materialise and an auction in 2008 collapsed due to lack of interest.

Last month Serbian officials said Belgrade was negotiating to sell the airline to AirAsiabut the Malaysian company denied that it was interested.

($1=0.7674 euros)

(Reporting by Aleksandar Vasovic; Editing by Greg Mahlich; Editing by)