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Russian Airline Industry

Russian government plans on creating national airline champion

Maria Antonova  Apr 06, 2010

MOSCOW — The government has come up with a plan to create a national airline champion by merging Aeroflot with six other state airlines, according to a letter from the Transportation Ministry published Thursday.

Under the plan, state corporation Russian Technologies would transfer control of its six airlines to the federal government, which would in turn transfer them to Aeroflot in exchange for an increased stake in Aeroflot via an additional share issue, the Transportation Ministry said.

The ministry wrote to First Deputy Prime Minister Igor Shuvalov, saying Russian Technologies would give the assets to the state “free of charge,” according to a letter published on

The government has been mulling the merger since it became clear that Russian Technologies’ earlier plans, to jointly create a new national carrier with the Moscow city government fell through. Plans were also considered that would have seen Russian Technologies get a stake in Aeroflot in exchange for the six airlines.

Instead, Aeroflot has been chosen as the base with which to join the airline assets, which include Vladivostok Avia, Saravia, Sakhalin Airlines, Rossiya, Orenair and Kavminvodyavia.

The plan is fraught with legal complications, however. Three of Russian Technologies’ airlines technically are not yet owned by the conglomerate, as they are still registered as “federal state unitary enterprises” and have yet to be converted into joint-stock companies so as to be put under the control of Russian Technologies.

In July 2008, President Dmitry Medvedev ordered that the companies be reconstituted as joint-stock companies within nine months, but the order was never carried out.

The Transportation Ministry advised the government to reorganize the airlines and then transfer them to Aeroflot, bypassing Russian Technologies. Such a move would require making changes to several presidential and governmental decrees, the letter said.

Alternatively, the government could try to expedite the process of transferring the companies to Russian Technologies before giving them back to the state, a source in the government told In any case, Prime Minister Vladimir Putin will be the one to make a decision on how exactly the companies will be transferred to Aeroflot, the source said.

Aeroflot has also begun buying back its shares from Alexander Lebedev, who owns a 25.8 percent stake in the company through his National Reserve Bank. To finance the purchase, the airline has said it will issue 6 billion rubles ($204 million) in bonds on April 15.

National Reserve Corporation said Thursday, however, that it would not support the deal, because “the company’s financial situation has changed.”

The Aeroflot sale has already been approved on a very high level and has been partially completed, putting it off would not benefit anybody, aviation analyst Oleg Panteleyev said. “This announcement is very emotional. It almost looks like an April Fools’ joke,” he said.

Russian government plans on creating national airline champion
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