Air Serbia outlines Chicago, China and long-haul leisure development

Air Serbia is gearing for the launch of its third long-haul service to Chicago, expansion into China, as well as the arrival of its third wide-body aircraft this year. In an interview for EX-YU Aviation News, the company’s CEO, Jiri Marek, spoke about Air Serbia’s immediate long-haul development plans. Commenting on the upcoming three weekly service to Chicago, Mr Marek noted, “What we can see from the initial bookings, if we look at the current booked load factor, is that it is higher for Chicago than New York. Keeping in mind that there is more capacity on the New York service, it is natural to have a higher booked load on Chicago, however we consider it a very positive surprise because it is a newly launched route, while JFK has already matured. At the moment, we can see there is more point-to-point traffic, but it is still early to make further conclusions although it was expected, due to the significant Serbian diaspora in the Chicago area. As we move forward, we expect further bookings from the region to pick up more, as well. In general, Chicago is set to have a higher point-to-point share than New York. On top of that, I would like to mention the added value of having two gateways in the US and our extensive partnership with American Airlines, as well as with jetBlue, creates many more options and multiple combinations of itineraries for passengers. You can go from US domestic points in one direction via New York and back via Chicago or vice versa, which would further support additional incremental bookings”.

The carrier has made no secret of its plans to introduce flights to Beijing and Shanghai, however, the application process for Chinese permissions may slow down the addition of these two destinations into its network. “The application process for permits and slots for destinations in China is complex and lengthy, and many airports are facing infrastructure congestions and constraints”, Mr Marek said. Asked which of the two mega cities would be introduced first, the CEO noted, “We will be applying for both, but we will not have much influence on whether it will be Beijing or Shanghai first. Shanghai might make more sense in terms of long-term demand forecast. On the other hand, Beijing has a big catchment area as a capital. At the moment, we believe we can serve both, but which one will come first and where we will be able to secure the necessary operation permits is still to be seen. Even with Tianjin we are currently still getting a lot of delays regarding necessary permissions for the summer season. Based on experience with the application process for permission for Tianjin, we can assume the process will be similar for Beijing and Shanghai, and we don’t expect permission to be granted before Q4 2023”.

Commenting on its one weekly Tianjin service launched last December, Mr Marek said, “The future of Tianjin will definitely depend on those two cities [Beijing and Shanghai]. At the moment, Tianjin is working well. Flights are full and we will see how it will perform in the summer season. Currently, we are still waiting for permission for the summer season and flights are on sale with this notice, and since we are only one month away from the start of the summer season, we expect to receive permissions soon. However, this only goes to illustrate how complex the process is. Once we get permission for Beijing and Shanghai, we will keep Tianjin for some time to see how it will be impacted, and, if there is demand, there is no reason for us to stop Tianjin. Potentially, we may increase the service to two flights a week. We are targeting two weekly flights to Beijing, two weekly flights to Shanghai, and two weekly flights to Tianjin. Again, it will be possible to combine those gateways and create a much better portfolio because we will target each of them on different days”. Mr Marek added that Air Serbia is trying to negotiate a codeshare with Hainan Airlines, which maintains a weekly flight between Beijing and Belgrade.

The airline’s initial plan to introduce long-haul leisure services this winter was influenced by market conditions at the time these flights were being considered. However, Mr Marek explains the airline is experiencing a strong winter season and that while long-haul leisure routes are of interest to the airline, they are no longer a priority. “We proved during Covid that we are an agile company and that we can capitalise on the opportunities on the market. We are committed to staying that way. Historically, we always had a problem with the low season in winter, without any difference between long-haul and short haul. However, this winter season is very specific and we were brave to put up a massive schedule, in order to maintain high connectivity options. It has paid off very well and we are continuing our record-breaking performance during the winter season. Even now, in February, to-date we have a 70% load factor, which we have never had in the past and moreover few airlines in our peer group are achieving such results. In addition, revenue is still outperforming 2019 levels and it is further supported by several promotional campaigns on certain routes. We can disclose that our revenue is still two digits over 2019 levels. If you disregard charters, there is much less of a difference between summer and winter than it used to be in the past. In the future, that will give us more options to build stronger long-haul winter schedules, as well”, the CEO said.

Turning to long-haul network development in winter, Mr Marek, said, “In the past, our problem was a heavy summer schedule for our long-haul operations, while we had a single wide-body aircraft. Now we have two. We always had six weekly New York flights in the summer and two in the winter, which economically is not overall good business. This winter, due to improved connectivity, we increased New York to three weekly flights for the first time and it worked. This means that now, together with China, with a more even seasonality and the extra benefit of the Lunar New Year, there may be less necessity to look towards alternative leisure routes, especially with Beijing and Shanghai coming soon. In addition, you will always have maintenance activities planned during the winter season”. He added, “For us leisure destinations will be more opportunistic, and by that, I mean niche destinations, not the strategic ones. For example, there is high demand for Bangkok during winter, however due to overcapacity on that market, we might achieve full flights but not profitable ones due to low yield, as there is strong competition from Middle East carriers. However, we will be looking at winter leisure destinations. Obviously, we would work a lot with tour operators. In the past, we were looking at Mombasa or Zanzibar and some other options, but this will always be in synergy between us and the tour operators. The market is growing, and the leisure segment is maturing so, sooner or later, it may happen but it is not a priority for the time being”.

EX-YU Aviation News

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