By Aleksandar Vasovic and David French
BELGRADE/DUBAI, June 17 The United Arab
Emirates' (UAE) Etihad Airways has signed a preliminary
agreement with the Serbian government over a possible equity
investment in the Balkan country's loss-making JAT Airways.
Serbia is looking to offload loss-making state enterprises,
including JAT, pharmaceuticals firm Galenika and the Zelezara
Smederevo steel mill in a bid to keep its budget deficit at
about 4.7 percent of gross domestic product (GDP) and secure
growth of around 2 percent this year.
Previous attempts to sell JAT have failed due to lack of
interest from prospective buyers.
Etihad, which has been expanding rapidly, did not specify
the value of the potential deal, nor how much of a stake it
could take in JAT, adding any transaction would be subject to a
due diligence process and regulatory approvals.
"The two airlines will now intensify discussions about
collaborative efforts to further integrate their networks and
help JAT Airways achieve efficiency, build revenue and reduce
costs," Etihad chief executive James Hogan told a news
conference in Belgrade.
In April, Etihad and JAT agreed to share route-booking codes
but stopped short of an equity tie-up.
Earlier this year, the Serbian government said it was ready
to take on 170 million euros ($227 million) of JAT's debt, which
in 2012 stood at 3.68 billion dinars ($43.1 million), pay leases
for six new aircraft from EADS's Airbus and secure
severance payments for redundant workers.
Hogan said a minority equity investment could help JAT to
secure savings through pilot and crew training and fuel costs,
as well as through procurement and maintenance agreements for
common engine types.
"These are early days, but we are ... looking forward to
explore the possibility of a much deeper strategic commercial
partnership with JAT Airways," he said.
JAT currently operates 10 Boeing 737-300s and four
ATR 72-200 turboprop aircraft on 30 routes
within Europe and to the Middle East.
Partnership with Etihad is part of Serbia's bid to secure
investments from sovereign lenders outside the recession-hit
euro zone - the main trading partner of the European Union
Serbia has already borrowed from Russia, China and the UAE.
This year, it has secured a $400 million sovereign loan from the
UAE for agriculture investment and agreed more than $400 million
in investment by the Al Dahra agricultural firm based in the