United Arab Emirates' airline Etihad Airways will acquire 49 percent of Serbian flag carrier JAT Airways, which will be renamed as Air Serbia, the airlines announced on Thursday.

The Abu Dhabi-based carrier has also been awarded a five year management contract for the Serbian national airline.

The partnership agreement signed by Etihad Airways and the Government of Serbia includes a fleet of new aircraft and a new integrated network of international destinations enabling greater access for business and leisure travellers to Serbia.

The strategic partnership agreement was announced by James Hogan, president and chief executive officer of Etihad Airways and Aleksandar Vučić, Deputy Prime Minister of the Serbian Government, at a media conference in Belgrade today (August 1).

Within the agreement Etihad Airways will provide a $40 million loan facility which will be converted into equity on January 1, 2014. This will be matched by an equal funding injection by the Government of Serbia.

Etihad Airways and the Government of Serbia will also each provide further funding through shareholder loans and other funding mechanisms of up to $60 million to meet working capital requirements and support network development for the newly created Air Serbia.

Hogan said: “In addition to creating scale, our renowned business model provides a unique common platform to drive synergies and cost savings which will be of considerable benefit to Air Serbia as the new airline evolves.

“We will have tough decisions to make but the financial investment by Etihad Airways and the Government of Serbia, together with the positive impact of our joint management expertise and experience, will help ensure this airline, with its proud history, now has an even brighter future.”

Vučić, said: “Etihad Airways’ reputation, financial strength and stability will be of significant benefit to Air Serbia and we are delighted to launch this strategic partnership. Air travellers to and from Serbia will soon benefit from an incredible range of new products and services.

“The partnership will provide passengers with an extensive route network and smooth flight connections.  It will also consolidate and enhance both airlines' market competitiveness as the relationship deepens over the coming months.”

The rebranding and renaming of JatAirways to Air Serbia is a significant moment in the history of the Serbian carrier which is more than 80 years old.

The new livery was designed by a team in Serbia and the UAE and provides a new look and feel for the national airline. The aim was to make a break with past practice, but not with Serbian heritage and also offer an unmistakeable national identity.

Among other planned developments will be an enhanced flight network, codesharing with Etihad Airways and airberlin, adding to Air Serbia’s current network of 33 cities another 12 destinations in Africa, Europe and the Middle East.

Among the first new destinations to be launched by Air Serbia will be a four flights a week service between Belgrade and Abu Dhabi.

Complementing Etihad Airways' current daily flights, the new Air Serbia service will start in October and will move to daily when the new fleet grows to facilitate an increased service.

The new A319 aircraft will be in Air Serbia livery, with a stylish cabin trim and product of a standard never seen before operating out of Belgrade.

The current JatAirways fleet of 10 Boeing 737-300 aircraft will be retired from scheduled operations, and in the short term will be replaced by leased narrow body aircraft. In the longer term, an Air Serbia order will be made for 10 new narrow body aircraft.

The strategic partnership agreement will also offer unprecedented career development opportunities for Air Serbia cabin and flight deck crew, who will have access to Etihad Airways’ world class Training Academy and facilities in Abu Dhabi. - Reuters & TradeArabia News Service