Etihad Airways of the United Arab Emirates has entered into an preliminary agreement with the government of Serbia as to a possible equity investment by the Gulf region airway in the country's JAT Airways.

Serbia is seeking to divest itself of ownership of state interests that have been losing money. These government owned or controlled corporations include JAT Airways, Galenika, a pharmaceuticals firm and the steel mill Zelezara Smederevo. The policy is being done to keep the budget deficit in check at about 4.7% of the country's gross domestic product and meet growth targets of about 2% on 2013.

There have been previous attempts to sell off the airline but failed because of lackluster interest from the market.

Etihad is in an expansion spree but did not disclose the value or the volume of the transaction. What it did say was that the transaction would be subject to regulatory approval as well as due diligence from Etihad.

According to Etihad CEO James Hogan, "The two airlines will now intensify discussions about collaborative efforts to further integrate their networks and help JAT Airways achieve efficiency, build revenue and reduce costs."