S7 insists 737-800 order remains in place

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Russia's S7 Airlines remains committed to acquiring new Boeing 737-800 aircraft, despite mounting financial and operational constraints and the cancellation of its 787 order.

Two years ago the carrier placed an order for 10 737-800s and took options on 10 more, with delivery due to begin in 2010.

"At this point we have no intention of revisiting that agreement with Boeing," a company spokesman says, although it remains unclear whether S7's financial state will support its fleet-modernisation plans.

S7 has hired Raiffeisen Bank to help restructure debt with investors. This covers Rb2.3 billion ($63 million) in coupon payments.

The bank's corporate bond department head, Oleg Gordienko, says the company cannot honour these payments because of the lack of readily-available funds.

"S7 also needs to raise cash to finance working capital requirements," says a source close to the airline. "That's why it has annulled order for Boeing 787s but left open a leasing possibility."

He believes that the move allows S7 to withdraw its commitment deposit of up to $24 million, given the size of the cancelled order and barring penalties.