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Etihad Airways has confirmed the expansion of its network of carriers by taking a 49% stake in Serbian national carrier JatAirways.

The Belgrade-based airline is being renamed Air Serbia under a five-year management contract with the United Arab Emirates carrier.

Etihad and the Serbian government are both injecting $40 million into the airline and have pledged to each provide up to $60 million in further funding.

A fleet of new aircraft and a new integrated network of international destinations are planned to enable greater access for travellers to Serbia.

The current JatAirways fleet of 10 Boeing 737-300s will be retired and be replaced in the short-term by leased narrow body aircraft.

In the longer term, an Air Serbia order will be made for 10 new narrow body aircraft.

An enhanced flight network will see the renamed carrier codesharing with Etihad and partner Air Berlin, adding 12 destinations in Africa, Europe and the Middle East to Air Serbia’s network of 33 cities.

The deal follows the launch of Etihad flights between Abu Dhabi and Belgrade in June.

Air Serbia will become Etihad’s sixth equity partner following investments in Air Berlin, Air Seychelles, Virgin Australia, Aer Lingus and most recently Jet Airways.

Etihad president and chief executive James Hogan said: “We are delighted to welcome Air Serbia to our equity alliance and look forward to working constructively with them and their stakeholders to build a sustainable, competitive, and profitable airline.

“In addition to creating scale, our renowned business model provides a unique common platform to drive synergies and cost savings which will be of considerable benefit to Air Serbia as the new airline evolves.

“We will have tough decisions to make but the financial investment by Etihad Airways and the government of Serbia, together with the positive impact of our joint management expertise and experience, will help ensure this airline, with its proud history, now has an even brighter future.”

Aleksandar Vučić, deputy prime minister of the Serbian government, said: “Etihad Airways’ reputation, financial strength and stability will be of significant benefit to Air Serbia and we are delighted to launch this strategic partnership. Air travellers to and from Serbia will soon benefit from an incredible range of new products and services.

“The partnership will provide passengers with an extensive route network and smooth flight connections. It will also consolidate and enhance both airlines' market competitiveness as the relationship deepens over the com