CEO Interview: Air Serbia Grows as a Long-Haul Airline

DALLAS — Air Serbia (JU) is emerging on the global aviation map with its expanding long-haul network stretching not just to the west but also to the east.

For the carrier, 2022 proved to be a year of realizing its pent-up potential and making the most of it, which it did rather aggressively. 2.76 million passengers on 87 routes to four continents by 2022, a 60% increase over the previous year.

I had the pleasure to have a detailed meeting with Jiri Marek, CEO of Air Serbia, and nothing but optimism revolves around him and his team.

SG: 2022 proved to be a great recovery year for Air Serbia what is in store for 2023?

JM: The first quarter of 2022 was still challenging for us, which people tend to forget because demand is much higher now. But we expected demand to rise, and we planned an aggressive summer of 2022, focused on leisure and VFR routes. We launched 15 new routes that summer and it paid off.

From July until the end of 2022, we saw extremely high passenger numbers, especially in December – 20% over 2019 levels. So we nearly reached the 2019 level. We closed 2022 with a total of 2.76 million passengers carried and were only 2 percentage points away from the record-breaking pre-pandemic year of 2019.

We remain optimistic for 2023, as the success in 2022 was largely due to our new routes, so for the first half of 2023, we have more than 20 new routes announced, mainly leisure and VFR. We are also expanding our long-haul network. We are positive the year will be successful.

In the context of moving into 2023, what are your expected passenger numbers? And what percent of this is purely transferring? Can you draw a comparison to 2022?

Our expectations for 2023 are high. We plan to carry over 3 million passengers, with more than 30% being transferred (25% in 2022). Since we mentioned that there will be more than 20 new destinations, with some of them already announced, we continue to work on new opportunities to be regularly added to our network.

Belgrade as a hub for not just the Balkans, but beyond—doable?

This is a tricky question; everybody sees the Balkans a bit differently, and we believe we are already the leading carrier in the ex-Yugoslavia region. However, we wish to be the leader in the wider Balkan region, and that’s our strategy. We can make good use of Belgrade as a hub with our ATR aircraft, with a radius of 700 to 800 miles - for countries like Italy, the Czech Republic, Austria, Bulgaria, Romania, Hungary, etc. besides the existing ex-Yugoslavia region.

Belgrade Airport is going through a massive infrastructure update which should be ready by the summer of 2023 and will give us more opportunities. We already see big leaps in security fast track which eases connections and times and helps us to further improve our feeding.

Curious to many is Air Serbia's newly launched second long-haul route - Tianjin, China of all places. How much do you think you would have to wait before Beijing or Shanghai free up for you in terms of permission to fly?

Our aim has always been Beijing and Shanghai but due to COVID restrictions and market access to the country, our only viable option was Tianjin, from the options available. On the other hand, Tianjin is a good secondary niche—it is just 30 minutes by high-speed rail from Beijing, it is a large cargo port, and it also has an Airbus plant.

Our Tianjin flights were sold out in no time within two months of being listed. The market is changing rapidly as China has reduced restrictions and we are working on adding Beijing and Shanghai but will most likely keep Tianjin, as well.

And What about Guangzhou or Hong Kong? They are also large cargo points. Comment?

We are not a cargo-dedicated carrier. However, we are utilizing our belly capacity and Beijing and Shanghai remain our nearest future priority. We believe that our extensive network beyond Belgrade offers seamless connectivity to Chinese passengers as the niche alternative to other European gateways.

How about India? India has year-round demand (especially VFR) - plenty destined for Europe and more to North America.

There have been a lot of questions about that, and COVID-driven demand should not be mistaken for natural tourist demand. The period in which Belgrade saw a significant number of Indian tourists using Serbia as a stopover on their trips to Europe, the US, and the Middle East has passed, and numbers have dropped significantly as a result of the latest changes in travel restrictions.

To complement your pillar route to New York JFK, you have got Chicago ready for the upcoming summer, but there's also the option of Miami as a possibility—when could that be?

Chicago starts with two weekly flights now and three in the summer. We are flexible with frequency based on demand. With our two widebody aircraft, we can operate a daily service to JFK, and the rest to Chicago and Tianjin, China. So, any additional destination will require a third aircraft – which is targeted for further China growth.

So is a third Airbus A330 aircraft finalized?

It's not finalized, but it's shortlisted, as we continue to work on securing permissions for Beijing and Shanghai, and those activities will go in parallel. The aircraft is still not finalized; however, the shortlisted unit would be available to enter into service latest in July, and we are continuing to work accordingly.

You are more adamant about Chinese expansion over North America. Comment?

In terms of market demand, yes. However, the process of securing all flight permissions takes much more time than for other destinations, and we believe that we will see Air Serbia’s further expansion into the Chinese market this year.

As for partnerships with American carriers, what are your likely options, besides your recent codeshare partnering with Qatar Airways?

Since we are not a large carrier that can significantly contribute to other airlines’ hubs, any expansion or cooperation is driven by the step-by-step evolution of existing partnerships, such as the current significant expansion of the interline cooperation with American Airlines.

Europe expansion - what does that look like?

We will continue to work in parallel on expanding further in the Balkan region with multiple frequencies on regional destinations and continuing to further broaden and spread our European network in primary, secondary, and tertiary segments.

What's the future like for the A320 family at Air Serbia – do you plan to phase out the A319s this year?

Our A319 fleet will be upgraded step-by-step to A320s at the end of lease terms. However, due to volatile and dynamic lease markets, we will not be saying no to any opportunity for favorable conditions for either A319s or A320s.

Do you look at brand-new aircraft or prefer the second-hand market of CEOs?

We are open to both, but as a developing regional player, we will preferably capitalize on deals on the secondary market rather than heavily investing in new aircraft. However, a couple of NEOs about 6 years old recently appeared on the market and are already being returned by airlines, which could potentially be attractive to us.

Bridging the gap between the ATR and the A320 family - will the economies really work out with a small fleet of another variant be it the A220 or the E jet?

We are looking into it, but not for the near future, maybe as a mid-term strategy. The A220 is an aircraft much in demand, ownership costs are high, so I do not see that happening, and there are also engine maintenance issues.

The Embraer might be something to consider, especially the latest project of the turboprop 90-seater with similar costs to an ATR’s operating costs. However, that idea exists only on paper at the moment. For any immediate bridging of the gap, we can always find some regional jet operators in the form of wet leases.

Air Serbia's busiest routes today?

Our typically busiest winter routes, such as Zurich, Paris, etc., continue to deliver great results. However, we would like to point out Istanbul, for example, where three years ago we started with three weekly flights and are already currently flying 17 while growing towards 21 flights, which makes us one of the highest-frequency European airlines flying to Istanbul.

And finally, what challenges do you think you will face this year?

We anticipate the same challenges as last year, which disrupted the supply chain and caused infrastructure constraints in the aviation industry, particularly within the network of European airports, which will be exacerbated by growing industrial action.

Featured image: Francesco Cecchetti/Airways