Listen in as Air Serbia CEO Jiří Marek discusses the strategy, successes and resilience that led to his airline being selected as ATW’s Airline Market Leader winner for 2027.
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Victoria Moores (00:10):
Hello everyone, and thank you for joining us for Window Seat, our Aviation Week Air Transport podcast. I'm Air Transport World, Europe and Africa bureau chief Victoria Moores, and I'm delighted to welcome you on board. This week I'm joined by Air Serbia CEO, Jiří Marek, who has over two decades of industry experience with a range of European airlines, including Malev, Lot, Alitalia, and CSA. For our listeners who are not familiar with Air Serbia, the airline used to be called Jat Airways until Etihad came in as a shareholder in 2013. Ten years on in 2023, Etihad exited and Air Serbia returned to state ownership. Today, Air Serbia is a network carrier with regional, mid, and long-haul operations and a fleet covering ATRs, e-jets, and Airbus narrow and widebodies. Now, before we begin, I'd like to congratulate Jiří and the whole of the Air Serbia team for winning the 2027 ATW Airline Market Leader Award.
(01:10):
So, to win that award, our carrier really has to stand out within its own market sector. And what we've seen from Air Serbia is impressive growth from Belgrade, creating a really strong connecting hub, including new long-haul routes. Last year, Air Serbia carried a record 4.6 million passengers, and the network spanned over a hundred schedule and charter destinations. And in May, Air Serbia launched direct flights between Belgrade and Toronto, restoring air links after more than three decades. This makes Toronto your third North American destination alongside New York and Chicago, and you also serve multiple destinations in China. So, it's been a really busy time for you and the team, Jiří. Congratulations on winning ATW's Market Leader Award. And on that note, I'm wondering, casting your mind back to the last year or so, what are the achievements that really stand out and are important to you yourself?
Jiří Marek (02:05):
Well, first of all, thank you for inviting me on the podcast and also for recognizing what we actually achieved. And when you sum it up in your introduction speech, it's actually something we normally are missing to step aside and look back what actually we did because being the fully stayed on airline from the, let's say Southeast Europe growing over 80% for pre-COVID levels and opening more than 60 destinations in the last three years, sometimes we are missing time actually to look back how is it? And when you tell it from aside, yes, I should say that we should be proud of our team and what they achieved.
Victoria Moores (02:43):
I think it is about taking that time to step back and reflect, and obviously that's why we are going to be celebrating your achievement in Milan this December. We've talked there a lot about your growth, and obviously there has been a lot of growth in all areas of markets that you serve. Also, we're in an era of very high fuel prices, geopolitical unrest. I'm wondering how that's impacting your growth plans going into 2027.
Jiří Marek (03:11):
Look, definitely it's impacting, but I think the main question is how long these prices will stay because you have different inputs from different leaders of the industry, how long it will last. On the other hand, there is very strong demand. So partly you can offset by the stronger demand and stronger yields, but at the same time you are working on several plans, for how this will go forward. One thing we made, I would say unique, we decided not to reduce or before the current year, let's say the summer season, we opened more than 12 new destinations, and it turned very well back. So that's definitely, I think it was a good decision. At the moment, we are entering the winter also with the capacity growth because we see at the moment that the demand continues to be strong in the double-digits versus the previous year.
(04:02):
And anyhow next year, despite whether the fuel prices will be high or low, it doesn't really matter, the airline which will be ending hedging, they will need to react on it as well. And because we are entering the year where we will have not only our one-hundred-year anniversary, but there will be the Expo 27 in Belgrade, there will be the GITEX. So, the demand will be multiplicated even more. So, we strongly believe that even if the fuel prices will stay high, there is no reason now it will be rather a short-term period, even midterm period. But in the long run, aviation is used to the resilience and the different cost, let's say headaches, and I'm more than sure that we will get through.
Victoria Moores (04:47):
And thinking about what I shared at the beginning about the fact that you've been in the industry for 20 years, I'm sure you've already seen plenty of these cycles. And I'm wondering with that growth theme, how much capacity did you add this summer and how much are you looking to add going into this winter and next summer?
Jiří Marek (05:07):
We were growing this summer between five to 6% depending on the certain period. And what is positive is that the demand was basically twice as added capacity. So, we have also positive impact on the yield. And I think that's showing that the market is very healthy in terms of the demand. I'm usually internally comparing this period of uncertainty. In a way, it's a bit similar to the COVID crisis because it's a very strong and deep crisis, which is happening because fuel is fundamental element of our cost base. However, the difference between now and COVID is that during COVID everybody has the same rules of the game, which means that you can fly or you cannot fly. What is different now is that everybody is hedging at different levels by ending the hedge in a different period, but the demand is there. So, people outside of the industry, they were told just transfer the price and increase the prices for the end user.
(06:06):
But at the same time, if your competitor is hedging, you cannot outprice yourself from the market because then you will have no passengers. So that's why the crisis, I would say in terms of consequences is very similar to the COVID. And we will see in let's say periods to come that I think there will be some changes and some airlines will be in very severe difficulties. On the other hand, everybody has now the different rules of the game. So, I think it depends on flexibility, how you can adjust your strategy to these kind of things and how you can, let's say, get over it being maybe next six months, next one year, we will see.
Victoria Moores (06:48):
I can really see the parallel that you're drawing there because it's kind of confusing in terms of the fact that it's tough operating conditions, but also strong demand. And how do you navigate your way through that? Obviously, you mentioned there are fuel hedges. What's your hedging position going forward into next year?
Jiří Marek (07:07):
We are one of the few I think which were not hedged. So, we get very strong impact, I would say in the end of Q1 and Q2. Q3 was very strong in terms of demand and yield. So, despite the strong impact, we've been able to offset that by the revenue, and we will see how it will go toward the winter season. At the moment, the demand indication is very strong, but the problem is nobody knows really where the fuel will be evolving. There was a period when the fuel was going down, it's again back and it's kind of fluctuating, so difficult to forecast.
Victoria Moores (07:43):
Yeah. And like you say, if you're managing to hold those yields, what really matters is whether or not those increased costs you're able to pass them through in any way. While we're on the subject of the challenging environment, obviously one of the aircraft types that you don't operate yourself, but you bring in is Airbus A220s. They come from airBaltic, which has been going through its own challenges because the financial conditions. Has that been impacted at all with airBaltic going into chapter 11?
Jiří Marek (08:15):
Look, except some let's say external PR activities and questions from the public, we don't see any operational impact so far. We've been also reassured by the airBaltic management that the wet lease arrangement will not be impacted. We have ongoing cooperation also for the next year. From a passenger point of view, the aircraft is very appreciated. On many of those aircraft also there is internet available. So, we have very good positive MPS impact from this operation. And from our perspective, it's a good cooperation to actually decide on our future fleet strategy development because obviously we reach the size including the wet lease at close to 40 aircraft. Next year we will be over 40 aircraft and sooner or later we will need to take a decision on the next fleet development. And the best is to test the product in the real life and have the real operational data—what that aircraft can achieve and deliver.
Victoria Moores (09:19):
And it sounds as though the A220 is being very well received by your passengers. You brought me on nicely there into fleet strategy. You mentioned that you've got 40 aircraft at the moment. You really do operate a very wide spectrum of aircraft right the way from regional turboprops all the way up to A330s. Which areas of the fleet are you looking to renew and when might you take decisions on those?
Jiří Marek (09:46):
Look, because as you said at the beginning, we are basically a hub-and-spoke carrier, which means also having the long-haul destination which we are expanding. So obviously we need the feed to the network as well. We have more than 100 destinations. So that's why that's answering in a way also why we have such a fleet mix. So, for us, I would say core feeding within what we call in the wider Balkan region is obviously ATR. We currently have 10 units. We are looking also how potentially we can still grow. For some period of time, we saw that 10 will be sufficient, but now also with the fuel, let's say prices are increasing, we are looking into the option to expand that fleet. Then our core fleet for many years was basically Airbus 320 family, which consists of 319, 320. 319s is the aging fleet, so we are replacing that with the 320 and partly we are also replacing with the Embraer E1 generation.
(10:41):
And obviously then we are going toward long haul, which is 330-200, we have four of them. So, at the moment ATR, I would say the fleet is more or less stable. If we find some interesting options on the market, we will add one or two or three units. Our main activity around the fleet is now happening about phasing those 319s, bringing in 320s and growing the fleet of Embraer E195s.
Victoria Moores (11:10):
I'm wondering whether from what you said just before about Air Baltic and the A220, how would you see that fitting with the e-jets that you've already got and the A319s? Could that potentially consolidate that part of the fleet for you?
Jiří Marek (11:25):
There is no secret that 320 with 180 seats and ATR on the other hand with a 72. We need something in between, which, at the moment, is a 319. And in the future, either being A220 or Embraer E1s, 95s or E295s, more or less that will be this kind of, let's say, I would say the regional segment where we need something in a capacity between. And at the moment on wet lease we have the A220s testing them. We have also Embraer 90s on the wet lease. So that's definitely will be the segment. And on the market, there are only two—either Embraer or Airbus A220.
Victoria Moores (12:06):
And how many do you see yourself needing under the strategy for that particular segment?
Jiří Marek (12:12):
Look, we strongly believe that if we talk only about the replacement, we talk between 10 to 15, but we are in the market which is growing much faster than the rest of Europe. The GDP in this region is also very strong. Demand is usually double the GDP. So, we are definitely forecasting conservative levels that this market will continue to grow 5% minimum for the next, let's say five to 10 years. It will be rather closer to 8%, which means that it's a very easy calculation from the fleet of 40, how many aircraft we need to add every year just to keep growing with the demand.
Victoria Moores (12:49):
And talking about that demand, that really pulls us through onto the idea of network development where you're going to put this additional capacity. Under your strategy, which I believe that you've been working on your long-term strategy recently, where do you see your growth and development lying geographically? Would that be more on the long-haul side, more on the regional, or more on the short-haul routes that you do?
Jiří Marek (13:13):
Look, with having the destination over 100, which I feel it's hard to even count and I remember them for the airline of our size. So obviously we cover pretty much portfolio of the destination. So, the main pillar of the strategy is continuing to densify the network. So, adding frequencies, improving the connectivity of the hub and growing the transfer traffic. And we will be still adding some destinations, but the percentage of those new and added destinations will be obviously lower than densifying the network. We said that already in the last two years when we had, let's say I would say jump in the growth behind us, but at the same time this year we opened one destination. So sometimes whenever there is opportunity in the market, even we will deviate a bit from our strategy. But at the moment for the next year, we are assuming that we will be mostly adding the frequencies.
(14:08):
We will have around six new destinations and definitely I think this will be more or less a pattern for the years to come.
Victoria Moores (14:19):
So really strengthening the existing core network you've got for that hub and spoke network. Will we see any new long-haul cities? Are you able to give us a sneak preview on any?
Jiří Marek (14:30):
Of those? Look, definitely. I think I don't want to be specific because we will be adding the long-haul destinations depending on when this podcast will be broadcasted. It might be already known. And yes, there will be one new long-haul destination next year.
Victoria Moores (14:44):
Okay. Thank you for sharing that quick sneak preview with us. And sticking with that theme of the long-haul destinations, are you working at the moment on partnerships? I saw some suggestion that you might be looking at Chinese partnerships.
Jiří Marek (15:00):
Look, we recently, I mean it takes some time, but we recently learned the culture with China Southern and basically, we have cooperation with everybody. We are not part of any alliance. So, we have very strong partnerships, for example, on one hand with the Turkish Airlines, on the other hand with Air France KLM, also from the Middle East. But the Middle East is now a bit, let's say, slowed down with their development because of politics. We are expanding our partnership with the Chinese carriers, but definitely we have something unique in the Balkan region. We have more than let's say 18 points within the former Yugoslavia. So, I would say it's called our leverage. So, we can distribute to the wider region, and we are looking for any kind of win-win partnership. At the moment, I'm known and I'm a bit skeptic of being the smaller airline toward alliances.
(15:53):
As long as we have equal treatment like win-win, we are definitely open to any partnership. We are not open to a partnership where the partner is dictating and taking more than what we contribute.
Victoria Moores (16:07):
And obviously from your airline experience, you've worked within several airlines that have been part of all three alliances, so therefore you've got that alliance history. I'm wondering whether with consolidation within Europe and beyond, whether you see yourselves as a state-owned carrier potentially being a consolidation target from a larger airline, particularly given what you said that you don't want to be controlled or dictated to.
Jiří Marek (16:32):
Think let's say repair your vocabulary, if the consolidation, it's not equal to the equity stakes because unfortunately consolidation in Europe is not really the same as in the US where you merge the airlines, you change the brand, you change everything and you continue as one airline. While in Europe, if you look at some of the big airline groups, how many AOC and consequently complexities they have within the groups, how you will deliver the same customer experience and all these kind of things. So, I think the consolidation in Europe with affinity to the brand from the local communities, it's very strong because we are definitely not doing it same way like in the US, which in my view is a pity because I believe that the true benefits from the consolidation can be only unlocked if you really integrate fully. So, we are here in the market.
(17:29):
We believe we have something too unique to offer and we are open to a partnership. It doesn't matter if it's just informal of the interlines, culture, joint ventures, equities, whatever makes sense for both parties, we are always open to check.
Victoria Moores (17:44):
And taking that forward looking perspective, obviously we hosted you here on Window Seat as our guest speaker back in 2024 as well. Back then we asked you what you thought Air Serbia would look like in five years’ time. You said a fleet of 40 aircraft, that would've put that around 2029. What's your forward-looking five-year perspective now?
Jiří Marek (18:05):
Look, there are two things. A couple of years ago when we had our 95-year anniversary, I said also that by our hundred years we will have a hundred destinations. Our hundred years is next year. We already have a hundred destinations. It's 24. I told you about the 40 aircraft. We already have 40 aircraft, including our wet lease. So, on one hand, I'm always saying to our team, we need to aim high if we want to achieve high. On the other hand, also when we talk about the growth that we are targeting 5%, it might be rather 8%, that it's rather conservative. So even we believe that we are quite ambitious. At the end, the reality is proving that all these assumptions are also conservative. So, at the end of the day, it's a market who dictates and the market outside is very healthy and very strong.
(18:51):
And we are definitely thankful to all our customers that are giving us their trust. They continue to fly with us because without them, we will not be able to continue to develop with the speed at which we are developing. So, I'm very positive about the future.
Victoria Moores (19:06):
Well, certainly the strength of that ambition and development and growth has caught our attention as a team on ATW, and I really do look forward to seeing you in person at the ATW Gala Awards and Trophy Presentations in Milan on Thursday the 10th of December. So, thank you so much for joining us today, Jiří.
Jiří Marek (19:29):
Thank you for the invitation and looking forward to December.
Victoria Moores (19:33):
And for our listeners, if you want to learn more information about the ATW Airline of the Year Awards, you can find that at the CAPA events site or by emailing karen.walker, that's W-A-L-K-E-R, @informa.com, I-N-F-O-R-M-A.com. Before I sign off, I'd like to also say thank you to our producers, Natalia Pelayo and Cory Hitt. And of course, a huge thank you to you, our listeners, for following Window Seat. Make sure you don't miss us each week by subscribing to the Window Seat Podcast on Apple Podcasts or wherever you listen. This is Victoria Moore's disembarking from Window Seat.
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