Aeroflot to buy Transaero in tie-up of Russia's biggest airlines

Baku, September 2, AZERTAC

Aeroflot, Russia’s largest airline by passenger traffic, agreed to take over its closest competitor Transaero Airlines as the country’s economic woes shake the industry. A government commission backed the “consolidation” in a meeting led by First Deputy Prime Minister Igor Shuvalov, Transaero said in an e-mailed statement Tuesday. The board of state-controlled Aeroflot will vote to buy 75 percent plus 1 share of Transaero, according to a government official, who spoke on condition of anonymity.

Aeroflot will pay 1 ruble for its indebted competitor, Interfax reported, citing an unidentified person who participated in the meeting. Transaero’s majority owners are Olga Pleshakova and Alexander Pleshakov, the company’s CEO and board chairman, respectively. They each own about 18 percent of the carrier.The combined airline will probably fly more than half of all domestic passengers, according to Andrei Rozhkov, a transportation analyst at Moscow-based IFC Metropol.

“Weak airlines are leaving the market or reducing their business, on the one hand,” he said by phone. “Aeroflot is getting a boost from the Transaero deal, on the other hand.”

Transaero blamed a “sharp” devaluation of the ruble for reduced sales of international flights and increased payouts on foreign-exchange denominated loans, according to an Aug. 21 statement on its website. The company borrowed in 2010 to 2013 to expand its fleet, it said.

“In an economic situation that has been fairly described as a perfect storm, Transaero Airlines no doubt is experiencing difficulties,” the company said in the statement.

Transaero had debt of 64.8 billion rubles ($990 million) as of Dec. 31, Vedomosti reported. About 31 percent of it was foreign-exchange denominated at a time when the domestic currency plunged amid international sanctions over Ukraine and slumping oil prices, according to another Vedomosti report. Airbus Group SE last month announced it postponed the delivery of its A380 superjumbo to the Russian carrier.

Russian airline passenger traffic rebounded year on year in the January to July period, according to the Federal Agency of Air Transport. Transaero carried 2.7 percent more passengers during these seven months from a year earlier, the data showed.

Passenger numbers fell 2.3 percent to 17 million in the first quarter, the first decline since 2009, the air transport agency said.

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