State plans Air Serbia aid package
The Serbian President, Aleksandar Vučić, who will today present a five billion euro stimulus package for the local economy to help combat the effects of the coronavirus Covid-19 health crisis, has said the state will invest significant funds into Air Serbia, which he noted has been hit hard by the pandemic. The airline has been restricted from operating commercial flights since March 20. Under the plan, Serbia will resort to an array of measures. “We will significantly aid the pillars of our economy amongst which is Air Serbia. There are no longer any state aid restrictions. We wanted to invest more money into Air Serbia prior to this crisis but couldn’t because of European Union regulations. None of that is relevant anymore”, Mr Vučić said.
Commenting further on plans to aid the state carrier, the President noted, “We will either recapitalise the company or use another method such as corporate bonds. There will be no issues”. Recapitalisation entails changes to the airline’s capital. This may occur, for instance, when a creditor exchanges a loan for a stake but does not require changes to the company’s management structure. A corporate bond is a type of debt instrument that is issued by a firm and sold to an investor. The company gets the cash it needs for capital and in return the investor is paid a pre-established number of interest payments at either a fixed or variable interest rate. When the bond expires, or reaches maturity, the payments cease, and the original investment is returned.
Air Serbia was already earmarked for state subsidies this year even prior to the coronavirus crisis. The national carrier is one of 63 companies “of special importance” which are to share eighty million euros in subsidies among themselves this year. Although the exact amount of funds has not been specified, the airline was the beneficiary of 20.8 million euros "from premiums, subsidies, grants and donations" both in 2017 and 2018. In addition, Air Serbia is to pocket five million euros for subsidised operations out of Niš this year and 2.7 million euros for its services from Kraljevo. Last week, the Serbian Ministry for Construction, Transport and Infrastructure said the country’s air transport sector has so far been hit by tens of millions of euros in losses as a result of the coronavirus.
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