Indian guest

Aeroflot has an unexpected competitor in Serbia

Indian state-owned airline Air India is considering acquiring Serbian national carrier JAT, which the Serbian government intends to privatize by the end of this year. Yesterday, London's Financial Times reported, citing representatives of JAT and Air India, that the two companies were in talks about a "possible merger or other kind of partnership." Until now, the only contender for the purchase of JAT was the Russian Aeroflot .

JAT spokeswoman Mirjana Dragovic told the Financial Times that an Air India delegation in Belgrade reviewed the state of the Serbian airline last Friday. According to Ms. Dragovich, Air India intends to acquire JAT in order to create an aviation hub in Europe. An anonymous representative of the Indian company confirmed the interest in JAT to the Financial Times, but declined to comment in more detail.

It is noteworthy that Indian businessmen in Belgrade were testing the waters for the purchase of JAT on the same day that the CEO of this Serbian airline, Nebojsa Starcevic, signed a memorandum in Sochi to begin negotiations on the same topic with Aeroflot. The presence of two competing bidders for JAT undoubtedly strengthens the negotiating position of the company's current owner, the Serbian state, which does not have the means to keep the loss-making JAT afloat, but certainly wants to sell it for as much as possible.

The current situation and strategic aspirations of Aeroflot and Air India coincide in many ways. Both companies are controlled by their respective states (Aeroflot 51%, Air India 100%). Both were state-owned monopolies in the relatively recent past and are now competing for market space with younger commercial airlines. The historical specialization of both companies was international transportation, but right now both Aeroflot and Air India are seeking to qualitatively strengthen their positions in the domestic markets of their countries by merging with other state-owned airlines existing there. Air India is in the process of taking over Indian domestic carrier Indian Airlines, and Aeroflot is building a subsidiary based on state-owned air transport assets in the Siberian-Far Eastern region.

Both companies are engaged in a large-scale renewal of the air fleet. Air India last year bought 68 passenger planes from Boeing, more than any other single airline in the world. Aeroflot is close to concluding a deal with the European concern Airbus for 22 long-haul airliners of the new generation A350.

Finally, for both Aeroflot and Air India, the purchase of JAT (if it takes place, of course) will be their first experience of foreign expansion. "Until recently," the Financial Times wrote yesterday, "hardly anyone would have expected Air India... to become the country's first airline to engage in an overseas merger or acquisition." The same could rightfully be said about Aeroflot.

Mikhail KUKUSHKIN