Etihad and Serbia's JAT to sign partnership deal August 1

BELGRADE Fri Jul 26, 2013 7:35am EDT

BELGRADE (Reuters) - The United Arab Emirates' Etihad Airways will a sign a strategic partnership deal with loss-making Serbian flag carrier JAT Airways on August 1, a Serbian government source said on Friday.

Neither airline would reveal details of the deal on Friday, but after signing a preliminary agreement last month on a possible equity investment Etihad CEO James Hogan said the airlines would discuss "ways to further integrate their networks and help JAT Airways achieve efficiency, build revenue and reduce costs".

Etihad and JAT agreed in April to share route-booking codes but stopped short of an equity tie-up, though Belgrade-based media have suggested that Etihad may take a stake of more 49 percent in JAT.

The new agreement will be signed on August 1 by Serbian Deputy Prime Minister Aleksandar Vucic and Etihad's Hogan, the government source said on Friday.

Serbia is aiming to offload loss-making state businesses, including JAT, drugs company Galenika and the Zelezara Smederevo steel mill, to keep its 2013 budget deficit at about 4.7 percent of output and secure growth of up to 3 percent.

However, its attempts to sell JAT have failed because of lack of interest from prospective buyers.

JAT currently operates 10 Boeing (BA.N) 737-300s and four ATR EAD.PA(SIFI.MI) 72-200 turboprop aircraft on 30 routes within Europe and to the Middle East.

(Reporting by Fedja Grulovic; Writing by Maja Zuvela; Editing by David Goodman)