On Thursday, an Air Serbia Airbus A330-200 landed at New York’s JFK International Airport. It was the first time the Serbian capital of Belgrade has had direct air service to New York City in 24 years.
The arrival of this Serbian Airbus embodies US-based airlines’ worst fears over the continued growth of the Middle East’s three mega carriers.
For years, the US-based airlines American, Delta, and United have accused the Middle Eastern carriers Emirates, Etihad, and Qatar of benefiting from more than $42 billion in illegal subsidies.
It’s an accusation that the CEOs of the ME3 have consistently rebutted. Emirates, Etihad, and Qatar all point to their audited financial statements as proof of their profitability as businesses.
But what does Serbia’s national airline have to do with the Persian Gulf’s mega carriers?
Air Serbia – along with Air Berlin, Virgin Australia, Jet Airways, Air Seychelles, Etihad Regional, and Alitalia – make up Etihad’s equity partnership network. That means that Etihad, based in the United Arab Emirates’ capital, Abu Dhabi, owns up to 49% of each airline.
Etihad doesn’t participate in the day-to-day operations of a partner airline, but it does make its presence felt, Air Serbia CEO Dane Kondic told Business Insider in an interview this week.
“What they do do is play the role of an enabler,” he said.
Kondic believes 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.
Though highly complimentary of US airlines, Etihad Aviation Group CEO James Hogan was quick to point out a key advantage his airline has over American competitors.
“Although (US Carriers) form the backbone of the three global airline alliances, what we’ve done and they haven’t done is decrease operating complexity across the partnership airlines,” Hogan told us in an interview this week.
Hogan said Air Berlin, Alitalia, and others in the partnership were looking to share everything from fleets to computer systems to training. The airlines are even looking to streamline the interior layouts of their aircraft so planes can easily be shifted between different fleets depending on demand.
This is the type of synergy that allows an airline like Air Serbia to expand into the US market.
“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.
Kondic is right. On its own, with a fleet of 21 aircraft, three-year-old Air Serbia would not be capable of operating trans-Atlantic service.
But with the assistance of its partners, Air Serbia has managed to build an unexpected air bridge between Belgrade and New York.
On a larger scale, Etihad’s partnership network represents the next evolution of the Emirati carrier’s global expansion.
Growth through these partnerships allows Etihad to increase the airline’s reach organically. And with the governments of Serbia and Italy writing off the old debt of their national airlines ahead of Etihad’s entry, the company is able to focus on building for the future instead of worrying about the past.
Instead of forcing its way into markets outside its traditional area of operation, such as Emirates’ route between Milan and New York, Etihad can use its partnership method to expand while turning potentially adversarial governments into stakeholders.
After all, it’s easy for both the Americans and the Italians to make a big fuss about Emirates’ Milan route. But Etihad’s Alitalia service would be beyond reproach.
US airlines simply aren’t in a position to protest the Italian national airline’s operation out of Rome or the Serbian national airline’s operation out of Belgrade.
Etihad doesn’t have to expand further into US or European market on its own. It has a German, a Swiss, an Italian, and a Serbian airline to do it by proxy.
With Etihad’s equity partnership hitting its stride, further encroachment into the US carriers’ prized trans-Atlantic business is bound to continue.
And there isn’t anything the airline’s US critics can do about it.