One company miraculously saved a failed government airline in just 6 weeks

Chances are, you haven’t heard of Air Serbia.

And unless you frequent the Balkan Peninsula you have little reason to be familiar with this small three-year-old airline.

But you will soon.

Starting this week, Air Serbia will fly to New York five times a week from its home in Belgrade.

The flight represents the first time a direct flight has been available between the cities in a quarter century and a major milestone for the company.

On Tuesday, Air Serbia CEO Dane Kondic spoke with Business Insider about how his airline came to be and its new flight to New York.

“No one in this part of the world is flying trans-Atlantic right now so we have a head start there,”Kondic said.

But first, a little bit of background.

Even though Air Serbia is just three years old, it’s actually the latest iteration of one of the oldest airlines in the world with 90 years of history.

Until 2013, Air Serbia was a failed airline owned by the Serbian government called Jat Airways. (Jat, itself, is a remnant of the old Yugoslav Airlines that was decimated by a decade of civil war in the 90s.)

Quick Turnaround

In August of that year, Jat got a new lease on life when Abu Dhabi’s Etihad Airways entered into a partnership with the Serbian government and took a 49% stake in the airline. Each party also agreed to kick in about $100 million to help fund the new operation that would be renamed Air Serbia.

Kondic, a veteran aviation executive from Australia whose resume includes stints at Qantas and Malaysia Airlines, was appointed by the new ownership to turn around the Serbian national airline.

Boeing 737 300 Jat AirwaysFlickr/Aero IcarusJat Airways Boeing 737-300.

With the new investment in place, Kondic had very little time to get the reborn airline off the ground.

“I was installed as the CEO on the 11th of September in 2013 and our first flight under the guise of Air Serbia was on the 26th of October,” Kondic said. “We had to re-size, re-fleet, retrain, and rebrand the airline in six short weeks.”

“Which, if you are familiar with the airline industry, is unheard of.”

Things have changed

These days, Air Serbia is a fairly well-oiled machine who’s operational and service excellence is a stark contrast to the final days of Jat Airways.

Gone are Jat’s fleet of ageing Boeing 737 Classics.

In its place, Air Serbia operates a fleet of 21 aircraft made up of ATR-72s, Airbus A319s, A320s, and a wide-body A330-200 that will make the trip to New York.

Financially, the airline reported $4.4 million in profits last year. It may not sound like much, but it’s a drastic improvement over the $82.5 million Jat Airways lost in its final year of operation.

“So we’ve gone on a pretty amazing journey in a short period of time,” Kond added.

Airbus A319 Air SerbiaFlickr/John TaggartAir Serbia Airbus A319.

Apart from a new name, uniforms, and planes, there’s been a shift in culture at the airline.

“The biggest cultural changes to the airline are accountability, which there wasn’t any, and a commercial mandate in that we had to become a profitable business,” Kondic said.

Although Jat was able to get people to their destinations safely, the operation, especially in its final throws was devoid of the accountability necessary to run a successful modern airline, Kondic said.

In addition, as a government-run enterprise, the former Jat Airways wasn’t all that concerned with profitability.

“Making money was never high up on Jat’s agenda,” he added. “And the business of aviation is a very expensive folly where you can lose your shirt very quickly.”

As a result, Kondic had to refocus the airline to perform at a level of excellence required to earn business in a competitive environment.

“People are not so unreasonable if you give them a good reason to do something and provide them a clear vision of where we are going,” Kondic said of the employees his airline inherited from Jat.

Air Serbia Crew

Air Serbia
Air Serbia crew.
Etihad’s presence
Air Serbia along with a handful of other airlines around the world including Alitalia, Air Berlin, Virgin Australia, and Jet Airways form Etihad’s equity partner network.

Although Etihad holds a 49% stake in Air Serbia, it’s not involved in the airline’s day-to-day operations, Kondic said.

“But what they do do is play the role of an enabler,” the CEO said.

According to the Air Serbia boss, his airline’s landmark flight to New York is a great example of how the partnership has been a benefit to his company.

The Airbus A330 used for the route was leased from Jet Airways, while the Air Serbia pilots were trained in Italy by Alitalia. At the same time, Etihad provided Air Serbia with ground staff in the US as well as training for its cabin crew.

Without these synergies, Kondic doesn’t believe Air Serbia would have been able to progress in the way it has over the past few years.

“A small impoverished airline such as ours would never in a million years be able to fly across the Atlantic if it wasn’t for us being a part of this group of like-minded airlines coming together as Etihad Airways partners,” Kondic said.

Etihad Airbus A380

Etihad Airways Airbus A380.
What does the future hold for Air Serbia?
According to Kondic, Air Serbia’s future is framed by the competitive environment of the broader market. That includes significant changes to the airline business in Serbia as well.

“Serbia is not part of the European Union and so we don’t have the degree of openness and competitive environment that other counties who are part of the EU would have,” the CEO said. “As a result, we don’t have as much low-cost carrier penetration in market.”

However, Kondic warned that the flood of low cost carriers that have waged war on traditional airlines across Europe is on its way to Serbia.

“It definitely weighs heavily on our thoughts in terms of our future plans,” he added.

However, Kondic believes his Air Serbia future growth should be on par with the trajectory it has set for itself over the past three years. But any growth the airline experiences will be dictated by what makes commercial sense.

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