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Belgrade is considering letting the heavily indebted company go bankrupt and forming a new debt-free airline, possibly in tandem with the UAE.
Mladjan Dinkic, Serbia’s Minister of Finance and Economy, announced that the government has refused JAT Airways’ request to grant the company a €35 million guarantee to maintain its liquidity and is thinking of forming a new debt-free national carrier.
He said that JAT as a business appeared unsustainable and that the company should go bankrupt.
“Instead of giving guarantees of new loans for old JAT, we’ll make new JAT,” Dinkic said adding that the government believes it would be better not to subsidise a company that is losing so much money, but set up a new company.
In that case, Serbia will activate a 15-year-old contract with Airbus for the delivery of new aircraft that have never been delivered. The contract will be used as a down payment for the leasing of new aircraft for the new company’s fleet.
The state will also give a €140-million guarantee to the new company, which would enable it to lease 12 new aircraft.
Dinkic said that government’s partner might be Etihad Airways from the United Arab Emirates, which might give the €140 million guarantee instead of the Serbian government and, in return, become a co-owner of JAT.
Dinkic said that one reason why Etihad could be interested in a Serbian deal is the Emirates' readiness to invest in Serbian agriculture, to ensure a steady supply of food for the country.
He explained that this would require adequate logistics centres - a port on the Danube and a cargo terminal at Belgrade airport for the transport of fresh produce.
The Serbian government has already tried to find a partner for JAT. In 2008 the government offered 51 per cent of JAT at the price of €51 million. However, no one offered a bid.
In 2011, the government made a call for a strategic partner to set up a new company. Again, no one applied.
To keep its reform policy credible for investors, the government must find common ground with the IMF and look for a new arrangement, experts say.