Air Serbia: Navigating Regional Disruptions and Global Ambitions Amid Industry Shifts

2024 marked a year of growth and success for Air Serbia. Air Serbia welcomed over 4.4 million passengers in 2024, making it their best performance since being founded in 2013. What's more impressive is that the airline achieved a net profit exceeding €50 million, marking its best financial performance. This financial success was carried by €700 million in revenue and a massive long-haul route expansion into China and the United States. The airline expanded its fleet size by adding three ATR-600 aircraft, two Airbus A330-200 for long-haul operations, and one Embraer E-195, bringing its total fleet size to 32 aircraft. Air Serbia CEO Jiri Marek has stated that the airline's strategic strategy for 2025 includes further route and aircraft expansion, aiming to increase fleet size to 36 planes and carry over 4.7 million passengers, breaking a record set by former Yugoslavian Airline JAT Airways.

A Brief History:

Air Serbia is the flag carrier airline of the Republic of Serbia. Following the breakup between Montenegro and Serbia in 2006, JAT Airways became the national airline of Serbia. After 7 years of unprofitability, the Serbian government sought a strategic partner to allow the airline to develop. In August 2013, Air Serbia entered into a strategic partnership with Etihad Airlines, with the Serbian government retaining 51% ownership of the airline, and three months later launched their inaugural flight from Belgrade to Abu Dhabi on October 26th, 2013. In June 2016, Air Serbia launched its first long-haul flight with a once weekly service between Belgrade and New York, which now operates 6-7 times a week. The years 2017-2024 were marked with mass route and aircraft expansion, as currently Air Serbia operates over 85 routes to over 33 different countries. The Serbian government has since repurchased 32.6% of Air Serbia from Etihad, increasing their share interest in Air Serbia to 83.58%.

SWOT Analysis:

Strengths:

Financial Performance:

• Air Serbia reported a record net profit exceeding €50 million, demonstrating strong route performance. This was further evidenced by a high load factor in both passengers and cargo, indicating that the airline's flights were consistently full, maximizing revenue potential.

• Jiri Marek has stated that all profits from 2024 will be reinvested into aircraft leasing and new route negotiations, indicating a strong dedication to the airline's expansion.

• Despite acquiring 6 new aircraft, Air Serbia remained profitable, suggesting that it has avoided operational inefficiencies and placed an emphasis on effective cost management.

Fleet Expansion:

• The acquisition of more modern aircraft has benefited Air Serbia, which is making strides to become more efficient in its on-time performance and achieve key performance indicators (KPIs) related to load factor and operational efficiencies. 

• The addition of two A330-200 aircraft provides Air Serbia with a backup long-haul aircraft that can be slotted into routes depending on demand or mechanical issues. 

• Air Serbia’s expansionist mindset aligns with its current fleet expansion strategy. With additional aircraft acquisitions expected in the second quarter of 2025, Air Serbia will be able to successfully implement new short—and medium-haul routes.

Market Position:

• Air Serbia currently dominates the seat share in Serbia's aviation market and possesses 53%. This indicates a strong competitive positioning, with the next main competitor being Wizz Air. 

• Their strong market position allows them to feel confident in their expansion, as it also aligns with Belgrade Nikola Tesla Airport’s current terminal expansion. With an already dominant position, Air Serbia will seek to increase its seat share in 2025.

Weaknesses:

Aging Fleet:

• Air Serbia has replaced aging aircraft with modern, replenished ones over the past two years. However, currently, their medium-haul aircraft, including an Airbus A319-100 and an Airbus A320-200, have an average age of 17.4 years. 

• 17.4 years is not considered “old” in aviation. However, it poses risks for Air Serbia, as mechanical errors will become more frequent, meaning that the airline will need to purchase additional parts shortly.

Dependence on Specific Markets:

• A significant portion of seat capacity is given to specific routes, including Belgrade to Moscow and Belgrade to Podgorica. Although some may consider this a strength, any shift in the geopolitical landscape of relationships between the two countries can see a massive reduction in load factors or even route cancellations. 

Reliance on Wet-leasing Aircrafts:

• A wet lease is an arrangement whereby the lessor provides an aircraft, complete crew, maintenance, and insurance to another airline. Jiri Marek has previously stated that Air Serbia is trying to reduce its reliance on wet-leasing aircraft to mitigate the risk of sudden recalls. However, on February 27th, 2025, the airline announced that it would be wet-leasing an additional four aircraft for the summer of 2025. Although it is cheaper than purchasing a new aircraft, Air Serbia should seek alternative avenues to mitigate risk best. 

Opportunities:

New Route Development:

• The airline plans to launch flights in 2025 to Florence and Mykonos and has recently launched flights to Oslo and Shanghai. Jiri Marek continues to push for network expansion, aiming for Air Serbia to dominate the traffic coming through the Balkans. It is not often an airline remains profitable while undergoing the purchase of planes and new route agreements. As a result, Air Serbia has positioned itself in a unique way where last year's profits can contribute to growth this year without harming this year's financial performance, a clear indication of their strong financial performance and a indication of a healthy growing airline. 

Premium Feel:

• One constant complaint about Air Serbia is its poor product quality on long-haul business-class flights. As a result, Jiri Marek announced that they would be refitting all four Airbus A330-200s with a modern product, positioning themselves to compete against airlines such as LOT for business-class customers flying through the Balkans and Eastern Europe.

• Air Serbia has just revealed phase 1 of 2 at the Belgrade Airport for its upgraded business class product. This involves a premium lounge for check-in, as well as complimentary snacks and drinks before going through security. Phase two will see a completely new business class lounge with full meal and bar service, showers, and a view of the tarmac.

Threats:

Economic fluctuations:

• Economic downturns can lead to reduced passenger demand, leading to poor revenue and profitability. Serbia has not faced a recession since 2014, meaning that if they were to return to a recession, Serbians would most likely turn to conscious spending and will see savings increase and spending decrease. 

  
  

Geo-Political Instability:

• Regional tensions between neighboring countries, as well as the ongoing war between Russia and Ukraine, could potentially pose a threat to the financial results and success of the airline. Most of their short and medium-haul seat capacity is given to other Balkan countries, so any potential dispute could severely affect the airline.

Future outlook:

Air Serbia is poised for continued growth after its strong performance in the fiscal year of 2024. The momentum positions the airline firmly to increase its long-haul routes; it may be possible for the airline to launch flights to Toronto or Seoul. The airline's fleet modernization is a driving factor in turning the words of CEO Jiri Marek into action, where their investment in new ATR-600s will redefine their domestic and short-haul travel. The government of Serbia is investing heavily in the airline and capital airport, all in preparation for 2027, when Serbia will be hosting the popular Expo 2027. Air Serbia enters 2025 with a solid foundation, ambitious expansion plans, and a clear vision to evolve from a regional leader into a mid-sized European carrier with global reach and sustainable profitability.