Air Serbia, formerly known as Jat Airways, is to acquire ten next generation A320neo aircraft from Toulouse-based manufacturer Airbus in a deal worth more than $1bn.

The order forms part of its equity partner Abu Dhabi-based Etihad Airways multi-billion dollar Airbus order announced on the opening day of the Dubai Airshow .

Etihad is set to acquire a 49 per cent stake in Air Serbia and will manage the airline under a five-year management contract.

Speaking at the Dubai Airshow, Dane Kondic, chief executive officer, at Air Serbia, said the deal was part of the “next phase of the upgrade of Air Serbia”.

Sinisa Mali, adviser for economy and finance, cabinet of the deputy prime minister of the Serbian government said: “Key to the success of Serbia’s new economic programme is the success of Air Serbia”.

On 17 November, Etihad announced a $26.9bn order with Airbus, with a firm order for 50 Airbus A350 XWB and 36 Airbus A320neos. The deal also included the purchase rights for a further 30 aircraft.

A total of ten A320neos from Etihad’s firm order will go to Air Serbia, with the aircraft due to be delivered to the European airline between 2018 and 2020.

Air Serbia is currently in negotiate with Etihad Airways about how the aircraft acquisition will be financed.

Kondic confirmed that a deposit placed with Airbus as part of an unfulfilled order made in 1998 will be put towards the purchase of the new planes.

Serbia had been on the brink of losing this deposit, and Kondic said it was important that the money paid was “not swallowed into a black hole”.

Air Serbia currently operates a fleet of 10 narrow-bodied airlines and four turboprop aircraft.

Air Serbia also has leasing agreements in place for newer Airbus models, including the A320s, and will be gradually replacing its existing fleet.