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Aeroflot seeks Kremlin’s blessing for takeovers


Carrier fields plan seeking effective monopoly status in nation’s domestic air travel

Russia’s largest airline, Aeroflot, has approached the Russian government with an offer to increase the state’s holding in the airline in exchange for allowing it to purchase five of Russia’s other carriers, all of which have substantial state share ownership, in a move that would give Aeroflot a virtual monopoly on domestic air travel.

The move comes as the Russian government is undertaking a wave of de facto nationalisation in a variety of industries that it sees as being of strategic importance, including oil and gas, metals, defence and aerospace.

The proposal was revealed in documents prepared by company managers for a forthcoming annual shareholders meeting on 17 June, which will include an additional share issue, according to Russian business daily Vedomosti.

Aeroflot’s deputy director Gen Lev Koshlyakov says that the issue would go ahead “with the aim of broadening the activity” of the airline, but refuses to elaborate. However, another member of the Aeroflot board told Vedomosti that Aeroflot had proposed to the government that the share issue be used to pay for a buy-out of the government’s stake in five airlines – Dalavia, Pulkovo, Rossiya (all totally state-owned), and KrasAir and Vladivostokavia (both with a 51% state share). Other sources cited by Vedomosti say that the proposal is part of a presentation by Aeroflot for the airline’s board of directors.

The airline also has aspirations to a controlling stake in number two carrier Sibir, according to a member of the Aeroflot board of directors quoted by the newspaper.

The plan has already been discussed by government bureaucrats and the Aeroflot management, according to a member of the board.

Aeroflot has lobbied for the idea of the state combining its holdings in a unified national carrier for over a year, but only now has the government agreed, although exact parameters of the new share issue have not been defined.

A government official quoted by Vedomosti says that the Aeroflot board has instructed managers to work out share issue details within a month, and the deal will go ahead following government approval.

KrasAir and Sibir decline to comment on the report. The government is keen to bolster Aeroflot’s strength so that it can better compete internationally.

HOWARD GETHIN / MOSCOW

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