DUBAI: Abu Dhabi-based Etihad Airways' stake in Air Serbia has been cut to 18% from 49% after the Serbian government recapitalised the airline, Air Serbia said on its website.

The state has increased its stake in Air Serbia to 82% from 51%, a step the airline said was undertaken to help it through the COVID-19 pandemic.

"The recapitalisation of the Serbian national airline was undertaken at the request of Air Serbia," the statement said.

Etihad Airways, which bought a 49% stake in Serbia's loss-making JAT Airways - later renamed Air Serbia - in 2013, confirmed in an email its stake had been diluted to 18%

"We are pleased the Serbian government has reinvested in the future of the airline," an Etihad spokesperson said.

"Etihad continues to work closely with Air Serbia, while we respond to the ongoing impact of the COVID-19 crisis on our own business."

Etihad Airways' core operating loss deepened to $758 million in the first half of the year as passenger traffic fell by nearly 60% due to the pandemic.

Aviation has been one of the industries worst hit by the COVID-19 crisis, forcing airlines to lay off staff and seek government bailouts. Etihad has slashed jobs and salaries.

Etihad once sought to compete head-to-head with major Gulf hub carriers Emirates and Qatar Airways, but its strategy, including taking minority stakes in other airlines, did not bear fruit. It made losses in the last four years prior to 2020.