* JAT facing increasing competition from outside airlines
* EU visa ruling eases travel from Belgrade
* Sharp increase in passenger traffic seen next year
By Aleksandar Vasovic
BELGRADE, Dec 1 (Reuters) - Serbia's state airline JAT must
become competitive or fade away, officials said this week, after
the European Union relaxed travel between Belgrade and the bloc,
prompting rivals to step up penetration of its home market.
After years of bolstering by the government and protection
against outside competitors, the stakes have increased
dramatically for JAT following the EU's decision on Monday
allowing Serbs, Macedonians and Montenegrins to travel visa free
to the EU.
Budget and traditional airlines are quickly adding flights
to Belgrade, and industry experts see a sharp increase in
passenger traffic next year.
"My task is to see whether the company can survive,"
JAT Director Srdjan Radosavljevic was quoted as saying in the
Tuesday edition of the Vecernje Novosti newspaper. "If it
cannot, then it should be shut down."
Established half a century ago by communist Yugoslavia, JAT
has 209 million euros ($270 million) of debt and privatisation
has failed amid a lack of interest. Analysts estimate the value
of its assets, including its fleet and real estate, at about
$150 million.
"There is something wrong with JAT itself," Niki Lauda,
owner of the Austria's budget Niki Air told Reuters. "The
problem is JAT themselves which needs to be restructured and
needs to be set up with new feet in order to be able to
compete."
Lauda could be play a role in JAT's demise or salvation. His
airline starts flying to Belgrade in February, and his bargain
fares have already set off a series of low fare offers from JAT
and other rivals.
"Any airline can be fixed," the former racing car champion
said during a visit to Belgrade on Monday. "If you open the
market, you will generate more traffic and an airline that wants
to be competitive has to reorganise itself."
Velimir Radosavljevic, the director of Belgrade's airport,
said the removal of visa requirements would lead to a 25 or 30
percent increase in passenger traffic next year at the country's
main airport.
"It happened in Budapest eight or nine years ago, as well as
in Sofia and Bucharest," he said.
Hungary's Malev and Romania's Tarom will start flights next
month. Slovenian and Croatian state-run Adria and Croatian
Airlines have also applied to begin operations, the airport
director said.
In 2010 JAT could also face pressure from other carriers
including Ryanair, Easyjet and Wizz Air, all of which were
invited to enter the local market, said Katarina Andric
Milosavljevic, a Serbian Civil Aviation spokeswoman.
"We also invited Fly Dubai. This may be challenging for JAT
and it will be good for passengers as ticket prices will go
down," she said. "JAT is in difficult situation but those who
fail to adjust will disappear."
About 30 companies are already flying from Belgrade
including Austrian Airlines, Lufthansa, Air France and British
Airways.
JAT foresees 2010 revenues of about 150 million euros,
ferrying 1.5 million passengers from airports in Belgrade,
Macedonia's capital Skopje and the Bosnian city of Banja Luka.
It also wants to sell an office building and borrow 40 million
euros to renew its fleet with two Boeing 737-700 and overhaul 14
engines.
An investor could also come to JAT's rescue. Serbian media
has reported interest from Turkish Airlines, Russia's Aeroflot
and Greece's Marfin Investment Group.
(Additional reporting by Addam Tanner in Belgrade, Marja
Novak-Vogric in Ljubljana, Maja Zuvela in Sarajevo and Igor Ilic
in Zagreb; Editing by Jon Loades-Carter)
((aleksandar.vasovic@thomsonreuters.com; +381113044902))
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