BELGRADE, Serbia (AP) -- Etihad Airways signed a wide-ranging strategic partnership deal Thursday with the Serbian government that will lead to the launch of the Balkan country's new national carrier and spell the end for the old loss-making JAT Airways.
The deal envisages that the United Arab Emirates company will acquire a 49 percent stake in the new carrier that will be called Air Serbia, while the Serbian government will own 51 percent.
Air Serbia will start flying on Oct. 1, and JAT operations will cease.
"We made something that will become a new face and a new start for our country, something we will be proud of," said Serbian Deputy Prime Minister Aleksandar Vucic.
JAT Airways, once a major European airline, will cease to exist after 66 years in service. JAT has been crippled by international sanctions imposed on Serbia during the wars of the 1990s when most of its fleet was grounded and is survived only on big government subsidies.
"The bottom line is that we wouldn't be here if we didn't believe Air Serbia has an exciting future," president and chief executive of Etihad Airways James Hogan said during the signing ceremony. He said long-term goal is to turn Air Serbia into a "leading carrier in the region."
The pact is the latest partnership for fast-growing Etihad, which is locked in competition with other Gulf carriers, the Dubai-based Emirates and Qatar Airways. Abu Dhabi-based Etihad already has investments in European carriers Airberlin and Ireland's Aer Lingus.
Hogan said "JAT required a fresh start as a legacy carrier."
"This isn't new for Etihad Airways," he said, noting that his company has a similar deal with Air Seychelles.
Officials said Etihad and Serbia will immediately invest $40 million each into the new company. A further $60 million each will be provided in the future. The new company will be managed by Etihad in the next five years.
Air Serbia's new fleet will include 10 Airbus A319 aircraft. JAT's current aging Boeing 737-300s will be phased out.
Air Serbia's new chief manager Dane Kondic, an Australian of Serbian origin, said the aim for the new airline is "driving toward profitability in the next 24 months."
"A new brand signals a new start," he said.
Air Serbia is expected to take over JAT's current 30 routes within Europe and to the Middle East, and add several new ones.
Associated Press writer Dusan Stojanovic contributed.