Serbian national carrier Air Serbia will overhaul its fleet with 10 Airbus A320neos in a transaction valued at $1 billion at list price. The new narrowbodies are among the firm orders Etihad Airways placed with Airbus for 87 aircraft during the Dubai Airshow. Etihad, the Abu Dhabi government-owned airline, will acquire 49 percent of Air Serbia as of January.

Air Serbia, formerly Jat Airways, currently operates 10 Boeing 737-300s and five ATR turboprops. It serves 25 destinations from its hub at Belgrade’s Nikola Tesla International Airport. The carrier plans to replace the 737s with eight leased Airbus A319s and two A320s by next June.

On August 1, Etihad and the government of Serbia announced an agreement that gives Etihad an equity stake in Air Serbia and a five-year management contract; in return it is providing Air Serbia with a $40 million loan facility that matches a capital injection by the government. The parties also each agreed to provide shareholder loans of up to $60 million to meet working capital requirements and support network development of Air Serbia.

In a November 19 press conference at the Dubai Airshow, Air Serbia CEO Dane Kondic, an Australian-born Serb who was appointed chief executive with the agreement in August, said Etihad “made a commitment immediately to upgrade the fleet and introduce a new, integrated network of international destinations.” On October 26, the first Air Serbia-liveried Airbus A319 flew an inaugural service from Belgrade to Abu Dhabi. By the end of the year, the carrier will add four new destinations: Banja Luka, Bosnia; Bucharest, Romania; Ljubljana, Slovenia; and Prague. It plans to serve 39 destinations in 30 countries by next June.

“Air Serbia will be a key part of the nation’s aviation infrastructure, and will play a fundamental role in the development of Serbia’s travel and tourism industry, as well as the country’s economic growth,” Kondic said. “It is important that we enable this air carrier to have long-term growth. Our goal is to become the region’s leading airline.”

The new A320neos will be delivered between 2018 and 2020, replacing the leased Airbuses. Sinisa Mali, an economic advisor who serves in the cabinet of Serbia’s deputy prime minister, said that a previous deposit Jat Airways placed with Airbus in 1998 for new airplanes has been credited toward the pre-delivery payment for the A320neos.

Air Serbia benefits from the economies of scale resulting from Etihad’s overall 117-aircraft order with Airbus (including options), and will ultimately own the new airplanes.

Announcing the Airbus order earlier in Dubai, Etihad said, “In a unique approach, Etihad Airways will have the capability to redirect orders to members of its equity alliance, the airlines in key markets around the world in which it holds minority shareholdings.”

Etihad already holds stakes in Airberlin (29.21 percent), Air Seychelles (40 percent), Virgin Australia (19.9 percent) and Aer Lingus (2.99 percent). It plans to acquire 24 percent of India’s Jet Airways. At the Dubai Airshow, Etihad also announced that it will acquire 33.3 percent of Swiss regional carrier Darwin Airline, which operates 50-seat Saab 2000 turboprops, and rebrand it as “Etihad Regional.”