Air Serbia 101

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Everyone who has been following Serbian aviation will know that in less than a year, the local market underwent a revolutionary process at the end of which a new airline emerged- Air Serbia. When Etihad announced its intentions to takeover Jat Airways, it seemed that anyone and everyone in Serbia felt that they should publicly express their views and opinions regardless of how familiar they were with civil aviation. It’s worth pointing out that from the start almost everyone agreed that something had to be done with Jat Airways; disagreements emerged over what kind of business model the airline should follow.

Scepticism related to Air Serbia’s future started long before the airline’s business plan was made public. As early as February 2013, roughly the same time when first takeover rumours surfaced, a large number of sceptics did not believe there were any good enough reasons for a premium airline such as Etihad to even consider investing in a failing carrier such as Jat Airways. Even though I was part of the minority which believed that this scenario was very much possible, I can understand where the anger of the majority was coming from. For years and years, Jat Airways CEOs were politically appointed people with no aviation skills or knowledge- I have even dedicated entire posts on this blog to talk of this problem. Some of these CEOs have even managed to make the airline a laughing stock by proposing, for example, to sell tickets in post offices and on the streets.

In addition to a non-existent business plan, the airline’s fleet renewal strategy was often discussed as its fleet of 10 Boeing B737-300s were well over 25 years old. The airline also operated a fleet of 4 regional, turboprop aircraft (Atr 72-200), however, these were often neglected as the Boeing fleet constituted the airline’s backbone. Though the aircraft were safe, their comfort and efficiency were well below the industry standard which prevented the airline from being competitive not only internationally but also domestically. The latter was a serious problem for the Serbian carrier as its market share at Belgrade airport was constantly dropping over the last several years as a result of the liberalization of the Serbian market. In the end, Jat Airways managed to stop this negative trend and so it kept a market share of around 40% at Belgrade airport. Naturally, Jat Airways’ management, without any aviation knowledge, did this by considerably reducing its fares on almost all routes. Even though its passenger numbers did manage to recover, its yields collapsed. This is because the airline, one could argue, introduced a new business model- one that required a light cost structure. The airline’s management was probably not aware of this hence why the airline’s state only worsened with the passing of time. On the outside the airline seemed to be doing ok but behind the scenes the situation was precarious as the airline was slowly moving towards bankruptcy.

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In early 2013, the situation went from bad to worse as the airline’s winter timetable collapsed as a result of bad C check scheduling. In other words, a considerable part of the airline’s fleet was grounded which left the management with no alternative choice but to cancel numerous flights. This further hurt the airline’s image and reputation among the travelling public. It is also worth mentioning that the airline failed to keep up with modern aviation trends as it lacked a competitive frequent flyer programme as well as the option of online check-in. Simply put, Jat Airways was a dying dinosaur of an airline.  

The first major development took place on 15 April 2013 when the two airlines, Etihad and Jat Airways, formalized their cooperation. Two months later, Etihad launched daily, direct flights from Abu Dhabi to Belgrade with the smallest aircraft in its fleet, Airbus A319. Throughout the summer season, Etihad experts evaluated the overall state of the Serbian national carrier before formally announcing a minority takeover on 1st August 2013. Even though the official takeover was scheduled to take place on 01st January 2014, the airline took immediate charge of Jat Airways. By mid-September, Etihad proposed a new CEO, Danny Kondic, a man with vast aviation experience. Regardless of his experience and professionalism, a certain Serbian aviation portal did not waste its time to attack the government’s decision for allowing the previous (politically appointed) CEO, Velibor Vukasinovic, to be deposed. According to this portal, Mr Vukasinovic had done a lot to save Jat Airways’ summer operations by leasing a total of four new aircraft; two Boeing B737-300 from Bulgaria and two Atr 72-500 from a Danish leasing company. Even though this was a good move and it did help with the summer schedule, the candidate proposed by Etihad had far more experience from internationally acclaimed airlines and aviation businesses. In other words, by bringing a new CEO such as Mr Kondic, the government ensured that the airline has a long-term development strategy. Furthermore, Vukasinovic might have saved the summer schedule from collapsing but he still did not show any intention of dealing with the fundamental problems with which the airline was faced. What the portal missed was that Vukasinovic merely prolonged the status quo for a bit longer before the whole structure would have come down crushing.

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On top of everything, Mr Vukasinovic never worked directly for an airline; his aviation experience comes from working for government institutions which have little in common with running a successful aviation business. Just because Mr Vukasinovic was successful in his previous jobs does not mean he would have run Jat Airways/Air Serbia successfully, especially not since he did oppose the takeover. Many in Serbia tend to forget that running an airline and working for a civil aviation institution is not the same thing. The qualities required for each post are completely different; one is a technocrat while the other is a businessman. By opposing the deal with Etihad, Mr Vukasinovic proved to all of us that he was not a businessman and that he probably did not understand in what state Jat Airways truly was- in other words, it was on the brink of bankruptcy. Only Etihad with its fresh capital injection could have saved it, which it did, especially since the Serbian government was in no position to provide the funds needed to restructure and revitalize Jat Airways.

One can interpret Mr Vukasinovic’s departure as a symbolic one. It marked the end of an era where Jat Airways was a political toy misused by successive governments. It had become obvious that the only way for Jat Airways to survive was for a professional and financially strong partner to step in and introduce a modern work ethic and business strategy. Etihad did exactly that and positive results were noticed from the very start. Besides introducing new corporate identity, fleet and a revised flight schedule the airline managed to become, in just two months, the main factor of growth at Belgrade airport. During November 2013, the first month of Air Serbia’s operations, the airline recorded a 12% increase in passenger numbers. Even though passenger statistics for the month of December have not yet been published, Belgrade airport has forecast its own passenger growth to be close to 20%.

Belgrade airport’s phenomenal passenger growth could not have been achieved without Air Serbia and its new business strategy. Air Serbia’s future ambitions have been recognized in both Bucharest and Sarajevo where both Tarom and B&H Airlines have stepped forward and offered to cooperate with Air Serbia.

In the next blog post, I will take a closer look at what kind of airline Etihad and its team have created in Belgrade. In addition to this, I will present its main advantages and challenges.

Summer 2011 on Final Approach (Part 4)

Fourth part of the ‘Summer on Final Approach’ will look at the presence of SkyTeam in Belgrade and the changes in the schedule for the 2011 summer season.

The national carrier of Russia, Aeroflot, has operated daily flights for several seasons now. Through a codeshare with Jat the airline offers double daily flights to Moscow’s Sheremetyevo airport.

Aeroflot’s main goal in Belgrade, besides the origin and destination market, is to offer flights to Asia via its hub in Moscow. Its main competitors in Belgrade are Turkish Airlines and Aerosvit.

There are no announcements of additional frequencies for this summer season. However as Aeroflot’s A321s are becoming more common in Belgrade, we can hope that new flights will be announced by the summer season of 2012.

Air France returned to Belgrade in 2005 using their B737-3/500, however after having retired this model the airline replaced it with the A318.

Air France currently offers double daily flights between Belgrade and Paris. The morning departure is operated through a codeshare withJat, where as the early afternoon flight, at 12:40, is operated using their own metal.

With the visa liberalization the flow of passengers on the route had increased, resulting in Air France upgrading the route on certain days to A319.

In mid-summer Jat Airways will be increasing Paris from 7 to 11 weekly flights. The additional 4 frequencies are scheduled to leave Belgrade at 13:55 without Air France’s codeshare.

One of the possible reasons Air France will not be codesharing on these flights is that they are seen as seasonal and mostly introduced for the Serbian diaspora living in France. Not to mention that this flight leaves Belgrade just 1 hour 15 minutes after Air France. Regardless of these additional frequencies Air France will keep its codeshare on Jat’s morning flight.

Before its restructuring, Alitalia used to be one of the dominant carriers in Belgrade. The airline operated 4 daily flights from Italy, 1 from Rome and 3 from Milan. All in all, the airline had up to 28 weekly frequencies.

Alitalia’s loss of dominance became Lufthansa’s gain. Even though Alitalia kept its flight from Rome it could not be considered as a major player simply due to a lack of frequencies.

Throughout the winter season it operates 6 weekly flights to Rome which are increased to daily in summer. It also codeshare with Jat Airways on routes from Belgrade to Rome, Milan and Trieste.

15th December 2010 marked the end of Alitalia’s and Jat’s monopoly on the Serbian-Italian market. The lowcost airline Wizz Air launched three weekly flights from Rome to Belgrade. According to the latest statistics, passenger numbers between the two capitals rose by 63%. Wizz Air is not the only one contributing to the positive results, Jat and Alitalia recorded growth of 20%.

Belgrade-Rome sees the weakest form of cooperation between Jat and a major SkyTeam airline. Paris and Moscow both have 14 weekly frequencies where as Rome has only 11 (12 in summer). The reason for this could be that Alitalia had undergone a major restructuring process which saw its network greatly reduced.

With airlines like Wizz Air and Eagles Airlines planning new routes from Italy to Serbia, both Jat Airways and Alitalia will have to reconsider their future cooperation.

Newly arrived competition might not be considered dangerous as according to some they serve a very different market. However what both Alitalia and Jat need to understand is that even if they serve a very different market, they have taken away their monopoly and with it a certain number of passengers.

For a long time Jat Airways with its highly dysfunctional timetable offered 4 flights per week departing at 06:40. With the first regional flight arriving at 07:00 it was next to impossible to offer any connections. However, the 5th frequency, departs Belgrade at 08:00 which is perfectly timed for connections. Unfortunately Jat is no Emirates so I doubt that anyone will organize their trip around that weekly flight.

Looking at the preliminary summer schedules of the three airlines certain changes are very interesting. Jat Airways will fly to Rome 5 timer per week with an improved timetable. Flights will be departing Belgrade at 08:20, perfectly synchronized with the arrival of the regional flights. From the summer season, flights offered by Jat and Alitalia will finally make it possible to connect from Skopje, Sarajevo and Podgorica via Belgrade to Rome.

Wizz Air is also revising its schedule with frequencies being reduced from 3 to 2 per week. Departure time has been moved from 09:50 to 20:50 making this flight far more convenient for passengers coming from outside Belgrade. Wizz Air flies into Rome’s main airport, Fiumicino, with the price of one way ticket starting at 18 Euros.

Czech Airlines CSA launched flights to Belgrade a few years ago using their B737-500. Flights were operated three times per week in cooperation with Jat Airways (this cooperation has been terminated shortly after). With time CSA steadily increased its presence in Belgrade from 3 to 7 to 12 flights per week.

During the summer season CSA will resume its 12 weekly flights. Summer schedule will include a slight modification to the timetable. The flight departing Belgrade at 14:15 (arr 16:15) has been reduced from daily to six times per week. Morning flights has been changed as well.

 

Belgrade – Prague OK837

1-3-5– 05:05-07:05
-2-4-6- 07:00-09:00

 

 

CSA has changed certain departure times out of  Belgrade to 05:05, timing the arrival in Prague shortly before the morning wave of departures.

CSA is the only SkyTeam carrier flying out of Belgrade not codesharing with Jat Airways.

Last but not least, the national carrier of Romania, Tarom, had launched Bucharest-Belgrade flights shortly before the visa liberalization in 2009. With the the 2010 summer season  the airline increased flights from 4 to 5. For now the airline had not announced any change to its Belgrade flights.
Belgrade – Bucharest
RO 212   1-3—-    10:20
RO 214   -2-45—  17:25

Tarom uses its Atr-42 on the route which is in cooperation with Jat Airways.

It is worth mentioning that KLM is present in Belgrade through its codeshare with Jat on the Belgrade-Amsterdam-Belgrade route.

SkyTeam’s presence in Belgrade is not as aggressive as the one of Star Alliance. Additionally Jat Airways has a much closer relationship with SkyTeam members than with the other two alliances. This summer SkyTeam will add little changes to its schedule but nevertheless it will maintain its strong presence at the airport.