The Wings Of Europe
A Conversation With Dane Kondić, Chief Executive Officer, Air Serbia
For Air Serbia, the national airline of the Republic of Serbia, 2015 proved to be a stellar year. During the first quarter, for example, revenues for the airline increased 44 percent over the same quarter the previous year, from EUR 27 million to EUR 39 million. Passenger numbers grew from 359,000 to 453,000, a 26 percent increase. Available seat kilometers were up 15 percent at 795 million, cargo rose by 61 percent, and the airline’s on-time performance was at 86 percent.
Much of its growth can be attributed to the airline’s strategic partnerships. In 2013, for example, Etihad Airways entered into an agreement with the Government of the Republic of Serbia and acquired 49 percent of Air Serbia (then government-owned JAT).
“We owe a debt of thanks to both our shareholders — the Government of the Republic of Serbia and Etihad Airways — for their ongoing support,” said Air Serbia CEO Dane Kondić. “The agreement between the Government of Serbia and Etihad is an example of how a public-private partnership can resuscitate a troubled airline and turn it into a successful, commercially viable venture.”
Air Serbia At A Glance
Take a glimpse into Air Serbia, with its new aircraft livery and modern interior designs, stylish uniforms for its workforce and its new Premium Lounge. The airline, which was renamed three years ago, has made numerous enhancements that are tailored to its customers and employees.
Air Serbia is a member of Etihad Airways Partners, an alliance comprising Etihad Airways, air Seychelles, airberlin, Alitalia, Etihad Regional, Jet Airways and Virgin Australia. In addition, early last year, Air Serbia further expanded its network exponentially through additional codeshare agreements with some of the world’s leading airlines, including:
- Adria Airways,
- Air France,
- Bulgaria Air,
"We have continued to reap the benefits of our growth, which is fueled by the development of our network and the expansion of codeshare partnerships,” Kondić said. “Our results continue to demonstrate the effectiveness of our business strategy. This is a great sign for our long-term success.”
In addition to its airline partnerships, Air Serbia forged an agreement with Sabre-owned Abacus International, the leading global distribution system in the Asia/Pacific region. This strategic move provides travel agents at more than 20,000 locations access to the airline’s network of routes, partner connections and fares.
Air Serbia, above all, has a keen focus on its customers and employees. In a recent interview with Ascend, Mr. Kondić discusses why and how the airline places great emphasis on its customers and employees, as well as some of the main factors that have contributed to the airline’s success; the impact the carrier has on its region and the industry as a whole; and the significance of the airline’s theme song, The Wings Of Europe.
Question: Air Serbia’s strategic goal is to become the leading airline in the region and resume its place among the leading carriers in the world. What types of initiatives have you and the leadership team put in place to help achieve this objective?
A: The deal with Etihad Airways truly marked the beginning of a new phase in the life of Serbia’s national airline, one of the oldest airlines in continuous service, founded in 1927 as Aeroput and renamed as JAT after World War II. Today, we can truly see the fruits of our labor, which is a testament to the hard work of the dedicated team at Air Serbia.
Air Serbia’s Premium Lounge
Last September, Air Serbia opened its new Premium Lounge at Belgrade Nikola Tesla International Airport. The lounge is the first dedicated, airline-owned and operated lounge in Serbia. The opening of the lounge began with a ribbon-cutting ceremony with Air Serbia CEO Dane Kondić and Belgrade Mayor Siniša Mali, who is also chairman of Air Serbia’s supervisory board, followed by a tour of the new facility and a cocktail reception.
When we started the airline’s new journey nearly three years ago and renamed it Air Serbia, we had to re-fleet, rebrand, retrain and reinvest. We renewed the inherited and aged fleet by introducing 20 modern aircraft. As a result, the average age of our fleet has decreased from 25 years to 10 years, delivering greater reliability and significantly lowering operating costs. We designed a brand, including a new name, livery, interior and uniforms. Since the start, some 600 new people have been hired in key areas such as cabin crew, pilots, sales and commercial, while administration has been reduced to between 15 percent and 18 percent of the workforce.
We also advanced aircraft utilization from about five hours a day of point-to-point flying to a mini-network-carrier status, so our fleet is now up around 12 or 13 hours a day. Etihad Airways connected Air Serbia to its own global network, but at the same time it provided passengers flows into Belgrade with its own service.
Air Serbia’s network of direct routes grew to 40 destinations in 29 countries in Europe, the Middle East and the Mediterranean, while an additional 63 global destinations are covered through our codeshare agreements with 14 airlines.
In a single year, the airline went from a 73-million-euro (US$80 million) loss in 2013 to a 2.7-million-euro (US$2.9 million) profit in 2014. The airline’s revenues rose by 87 percent to 262 million euros (US$289 million), marking the strongest results in the existence of the national carrier. In addition, export revenues valued at close to 180 million euros (US$199 million). Our latest 2015 results continue strong. Our revenues grew by 29 percent and passenger numbers by 19 percent compared to the same period in 2014. Although traditionally the winter season presents significant challenges in traffic levels, Air Serbia broke the one-million-passenger mark during the first half of 2015, carrying 1.12 million passengers. These results are a great achievement, validating the effectiveness of our strategy.
New Name, New Brand, New Look
Three years ago, an airline once known as Aeroput and then JAT was reborn into a new airline, Air Serbia. As part of the airline’s new journey, it created a new brand, including new livery, aircraft interiors and uniforms.
We are proud to have been able to deliver on our mandate, which was to achieve growth, to become the region’s leading carrier and, most importantly, to do so as a commercially viable and profitable enterprise, while becoming a key driver of economic growth in Serbia. The results we have delivered so far are, above all, a great sign for the future, as they lay a solid foundation going forward and are proof positive of what can be achieved when the right strategies and governance structures are in place.
Q: What role does Air Serbia play in the development of Serbia’s travel and tourism industries?
A: Air Serbia is the most natural contributor to Serbia’s travel and tourism industries. We represent our country and are often the first point of contact for both foreign tourists and business travelers. As a landlocked country, a significant part of our inbound travel and tourism is concentrated through our capital, Belgrade. Belgrade has always been at the crossroads between the East and West and is now re-emerging as a leading commercial and cultural center.
Therefore, a major aspect of our efforts is to further develop Belgrade into a hub, so it really starts to compete against the likes of Vienna, which was for many years the hub in this region, as well as the gateway to Central and Eastern Europe. And we are beginning to see the results.
In 2014, what a recent CAPA report named a ‘quiet revolution’ took place at Belgrade Nikola Tesla Airport, challenging the hub order in the region. Air Serbia is a major contributor, with our own passenger numbers growing tremendously.
Travelers are increasingly taking advantage of our strong regional network, which now incorporates all regional capitals, without exception. Coupled with favorable geography, Air Serbia inevitably places Belgrade, the region’s largest metropolis, and Serbia, at the very center of our region. We simply offer the convenience, comfort and speed of traveling to one end of the region in the morning and returning to another in the evening, easily overcoming the barriers and stress imposed by alternative modes of transport at an affordable cost.
Looking inward, the citizens of Serbia are avid travelers, always eager to visit attractive destinations worldwide. In 2014, we launched our dedicated charter brand Aviolet to support the Serbian tourism sector. Aviolet has already demonstrated its potential to fulfill the needs of this particularly important market segment, offering quality of travel, added value and experiences rarely seen on charter flights. During the summer season, Aviolet covered 19 popular destinations in five countries, operating flights with four of our rebranded and refurbished Boeing B737-300 aircraft, configured in a comfortable all-economy cabin setting of 144 seats.
The tourism industry is growing and showing great potential to be one of the key drivers of Serbia’s economic growth. As Air Serbia consolidates its position as the region’s leading carrier, it is proud to play a role in supporting the further growth of inbound tourism.
Q: In what way does your airline contribute to the country’s economic growth?
A: A strong Air Serbia is vital for our national economy. It creates jobs not just within the airline, but across a range of important growth sectors. It delivers revenue, not just to our own business but to thousands of companies, large and small, around our nation.
According to the results of a recent independent study conducted by Oxford Economics, Air Serbia was expected make a core contribution of US$211 million to the Serbian economy in 2015, as well as support 8,700 jobs. By 2020, Oxford Economics forecasts that our economic tourism footprint will increase to US$572 million, supporting a total of 26,200 jobs.
Belgrade: Serbia’s Capital
A major goal for Air Serbia is to further develop Belgrade, Serbia’s capital, into a hub since a significant portion of its inbound travel and tourism is concentrated through Belgrade.
Furthermore, the report highlights that Air Serbia’s economic impact goes far beyond its operational footprint, facilitating business interactions, foreign direct investment and tourism-related activities through the air connectivity that flows from passenger and cargo opportunities, further boosting Serbian economy productivity by US$690 million. This is equivalent to the creation of nearly 32,000 jobs and equates to almost 2 percent of the national gross domestic product.
Q: Knowing that Air Serbia’s future depends on its employees, what types of staff-development initiatives have you implemented to ensure you have the most skilled employees and that they have the necessary tools to succeed?
A: We have invested significantly in the development of our workforce, introducing a range of tailored training programs for a great majority of our employees, depending on their roles in the organization and their individual needs. A key priority from the beginning was to raise the level of customer service, so we provided appropriate training for all customer-facing staff, both in the air and on the ground.
Another notable example is our comprehensive graduate management development program, in collaboration with Etihad Airways. In the first phase, nine young Serbian individuals completed an intensive theoretical and practical course involving all aspects of the airline business and are now placed across various operating divisions in the airline. We are initiating and organizing a new phase, in which another group of eight young graduates will attend a training program with Etihad Airways in Abu Dhabi. The program will run for two years, and upon successful completion, graduates will join operating divisions across Air Serbia.
In addition, Air Serbia has significantly invested in the training of its pilots. Nearly all pilots who had been able to fly only Boeing 737 and ATR aircraft have successfully completed training programs, allowing them to be licensed for flying our new fleet of Airbus A319 and A320 aircraft.
Q: Last May, Air Serbia launched a national program of strategic cooperation with a broad range of educational institutions. What is the basis of the program? How will it benefit the airline and Serbia in general?
A: From the outset, we have been dedicated to the long-term development of our workforce, knowing that our future depends on our employees, our most important resource. Their ability to resolve the challenges of our business environment will determine the success of our company. This is why we contribute to the development of those capabilities that will be most valuable both to future employees and the companies for which they will work. We also believe that as a responsible company, we must actively support the young generations in building their future, because they are a key pillar of our society and our communities.
The aim of the program is to establish a close match between students’ knowledge and skillsets and the requirements of the labor market in Serbia through a series of specific joint activities, and consequently, to offer Air Serbia and other companies in our country the opportunity to identify and select students within required educational profiles as strong candidates for immediate or future employment.
Q: As a member of Etihad Airways Partners, how does your airline gain profitability and benefit from the financial advantages of codeshare agreements, joint procurement, training and staff-development undertakings?
A: Etihad Airways Partners is a brand that brings together like-minded airlines to offer guests more choices through improved networks and schedules and enhanced frequent-flyer benefits. This partnership results in synergies and efficiencies for participating airlines on the one side, and enhanced network choice, service and frequent-flyer benefits for travelers on the other.
Individually, we are small participants in the global market. But collectively, our partnership serves 330 destinations, flies almost 700 aircraft and carries more than 100 million passengers each year, making us the world’s seventh largest grouping of airlines.
Members of Etihad Airways Partners increasingly collaborate on many joint initiatives. A fine example is the recent innovative collective financing agreement, through which US$700 million was raised on the international markets to be used by members of our partnership, and part of this amount will be used by Air Serbia.
Member airlines also work together to reduce costs and improve efficiency and customer choice through collaborative initiatives that otherwise would not be available to them. In addition to codesharing and joint commercial activities, Etihad Airways Partners work together in resource sharing; adoption of best practices; and joint procurement of assets, services and supplies. The airlines also collaborate on the sourcing of IT platforms, aircraft and insurance, as well as share resources including pilot and cabin-crew training. A number of airlines in the group have sourced additional aircraft from each other or redeployed excess fleet to each other.
Employees have been transferred between airlines, enabling members of Etihad Airways Partners to recruit skills or provide fresh employment opportunities within the group.
Services and products of the partner airlines, in the air and on the ground, are increasingly being aligned as part of a strategy to offer customers a seamless, high-quality product across Etihad Airways Partners. Loyalty programs are also being interconnected. Therefore, the advantages of the partnership both for Air Serbia and its guests are tremendous and will continue growing and becoming more evident.
Q: How will Air Serbia’s partnership with Abacus International benefit the airline?
A: We see our partnership with Abacus as an important step in growing Air Serbia’s footprint in the Asia/Pacific region, because travel agents now have access to our network routes and fares, attracting both business and leisure travelers. By improving the booking processes through Abacus agents, Air Serbia has significantly expanded its distribution potential in the region, bolstering its global positioning.
Q: Last year, you introduced Euro Sky Pass, a new business- and economy-class fare program. What is involved in the program, and how does it benefit your customers?
A: The Euro Sky Pass program gives long-haul travelers arriving in Serbia via Air Serbia’s codeshare partners from Australia, Canada and the United States the flexibility and freedom to travel onward to 37 direct destinations in our European network. Our research shows that generally guests travelling to Europe from faraway destinations, such as Australia, Canada and the United States, are compelled to take stopovers throughout Europe. The Euro Sky Pass will make these stopovers convenient and cost effective, especially when travelers are on vacation and making last-minute decisions on where to travel.
The Euro Sky Pass will also boost Serbia’s inbound tourism as it will create an incentive for leisure travelers to use Belgrade Nikola Tesla Airport as the most convenient arrival airport. Also, the flexible terms and conditions will give them the opportunity to explore other parts of Europe.
Q: Air Serbia received the highly coveted “Best of Serbia” award in 2014 as the “best corporate brand” in the large services companies category. What are the main factors that earned your airline this prestigious award?
A: This is the first time Air Serbia has been nominated for the Best of Serbia award, and we are honored to have received it. Since its rebirth in 2013, Air Serbia has made great progress, and we received the award not only as acknowledgment of our success in transforming our business and delivering strong business results, but also for our contribution to the development of foreign trade and tourism across the broader economy.
We qualified for the award based on the strong operational and financial results we achieved in 2014, during the first full year of our operations as Air Serbia.
The judges also took into consideration that in 2014, Air Serbia had an estimated 53 percent share in flights to and from Belgrade Nikola Tesla Airport, and the fact that we invested more than two billion dinars (US$18.3 million) in the development of the company, as well as 7.5 million dinars (US$69,000) in community programs. That same year, Air Serbia created more than 400 new jobs. A significant factor in the selection also included the adherence of Air Serbia to international and industry standards in its operations, such as certification according to the International Organization for Standardization and an excellent rating in IATA’s operational safety audit (IOSA).
Q: Last April, Air Serbia opened the first Etihad Airways Partners-branded retail shop. How does this benefit the airline and its customers?
A: We are proud to be a founding member of Etihad Airways Partners and to host its first retail shop in the world right here in Belgrade. The facility is equipped to serve travelers on behalf of all member airlines of the partnership. The retail shop will effectively support growing customer interest, enhance customer choice within a combined offering, help strengthen incoming and outbound tourism and business travel, as well as further establish the recently launched Etihad Airways Partners brand in Serbia and the wider region.
Q: How does technology contribute to Air Serbia’s long-term success?
A: The importance of technology in our business is manifold. One aspect is internal. A clear example is our fleet, because it is essential that the aircraft we use reflect a correct balance between the capacities and efficiencies we need to achieve sustainable business success. That is why one of our first steps when we launched the new airline was to modernize our fleet by leasing 10 new-generation Airbus aircraft. Within a month of the launch of Air Serbia, we announced the purchase of 10 next-generation Airbus A320neo aircraft for our fleet, as part of a major fleet order by our equity partner Etihad Airways. The A320neo will replace the eight Airbus A319 and two A320 aircraft we are currently leasing. The A320neo incorporates new, more efficient engines and large ‘Sharklet’ wingtip devices, which together will deliver up to 15 percent in fuel savings. These modern, well-equipped aircraft will be vital for our development as a reliable and profitable airline.
Air Serbia is also committed to contributing to the industry’s sustainability agenda by using the latest aircraft technology and running its own fuel-efficiency program, thus playing its part in the reduction of carbon emissions and the achievement of IATA’s target to reach carbon neutrality by 2050. Within the program, Air Serbia achieves results by carefully controlling key parameters, such as aircraft weight, cleanliness of outside surfaces to preserve perfect aerodynamics, length of flight routes and optimal speed of the aircraft. The airline’s pilots and first officers are continuously trained on how to be more efficient on the ground and in the air.
Of course, technology also has a significant external impact, as it increasingly determines our capability to continuously offer our guests product and service excellence as our airline develops in the long term. To make our mark in the European skies, we must focus on the elements of our business that are most likely to have a significant effect on customer satisfaction, and we must continuously innovate. A big part of that includes introducing new technologies in the air and on the ground. In fact, during the past several months, we have truly made giant steps in this direction, catching up with our bigger competitors and, in some cases, exceeding their current offers.
Q: Which customer-centric products and services have you recently implemented to enhance your customers’ experience?
A: 2014 was marked by the consolidation of our business, while in 2015 and beyond we will focus on delivering the best guest experience possible. After months of hard work to overcome many of the legacy obstacles we encountered with outdated technology, we introduced our Web check-in service, which has already simplified and enhanced the travel experience for many of our guests.
We recently inaugurated the new Air Serbia Premium Lounge at our hub at Belgrade Nikola Tesla Airport , our crowning innovation so far, which is the first dedicated airline-owned-and-operated lounge in Serbia. The opening of our new Premium Lounge further reinforces our commitment to the highest standards of customer service and demonstrates our ongoing efforts to provide the best travel experience to our premium travelers.
We have also introduced the comprehensive ‘Air Serbia Wi-Fly’ service onboard our Airbus A319 and A320 fleet, enabling our guests to make phone calls, send and receive text messages, surf the Internet and watch video content through the onboard streaming application. Few airlines in the world provide this — certainly here in Europe — yet our national carrier, Air Serbia, in making this service available to its guests, will leapfrog many of our bigger and better-known competitors.
Another area that has continuously had a critical impact on the overall travel experience since our rebranding is our catering segment. We introduced a radical shift in our approach to the in-flight catering service concept, which rapidly became a central and broadly acknowledged segment of our overall service, satisfying a wide variety of tastes and lifestyles with an industry-leading precision and attention to detail. The quality and variety of meals prepared with carefully selected seasonal products, proudly reflecting and interpreting Serbian tradition and flavors within the finest of dining experiences, have already clearly differentiated us in the European skies. We believe our guests are entitled to a tasty meal of great quality on all our flights, and we have made a commitment not to compromise that.
Q: Air Serbia introduced its own theme song, The Wings Of Europe, which was composed by renowned musician Sanja Ilić and performed by his band, the famous ethno group Balkanika. What is the significance of Air Serbia having its own theme song?
A:Sanja Ilić & Balkanika are no strangers to Air Serbia, as their music has already become a part of the overall guest experience onboard our aircraft. Their music has been with us since the relaunch of our airline. For the first time in the airline’s history, we now have music composed specifically for us, with our origin and values in mind, which will serve as a form of expression of the soul of our flag carrier wherever we go. Sanja Ilić & Balkanika have gone a step further and employed their talent and sensibility to develop a modern sound that is specific to Air Serbia and, at the same time, represents our country and its people.