Aeroflot Buys Major Stake Of Rival Transaero Airlines For One Ruble

Aeroflot Airbus A330

Aeroflot has agreed to a plan to buy out its home rival Transaero Airlines for one ruble as part of the Russian airline consolidation.

Transaero Airlines issued the following statement regarding its sale. “The Government of the Russian Federation held the meeting of the Intergovernmental commission chaired by Igor Shuvalov, First Deputy Prime Minister, on the issues of air transport industry.

In the interests of the development of the commercial aviation and creating one of the largest in the world group of airlines, the commission has approved the acquisition of JSC Transaero Airlines by Aeroflot group.

The shareholders of Transaero Airlines believe this measure will serve the interests of passengers, personnel and partners of the airline.

The Chairman of the meeting has highly appreciated the role of the founders, managers and all the personnel of Transaero Airlines in the modern history of the commercial aviation of the country.”

Financial Details

As part of its purchase, Aeroflot will inherit Transaero Airlines’ debts that valued at 64.8 billion rubles (US$990 million) as of December 31, 2014.

The airline’s finances hit headwinds in 2014 over the continued devaluation of the ruble causing lower sales from international flights and increased payments on all foreign denominated debts. The debt was used to expand its fleet between 2010 to 2013.

“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 Airlines Boeing 747

Transaero Airlines Boeing 747 Credit: Juerg Vollmer from Zürich, Schweiz [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

The combined airline will continue to experience challenges in this area as Aeroflot’s 2015 six month financials showed that operating lease expenses went up 71.5% from last year and now contributes to 11.2% of total expenses (up from 8.2%).

For the six months ended June 30, 2015, Aeroflot lost 3.5 billion rubles or (US$53 million) – up 85.9%.

Combined Route Network / Fleet

The combined airline will control more than 50% of the domestic market and operates a larger footprint internationally with destinations inAsia, Europe, Africa/Middle East and North America . Current hubs will be located in Moscow (DME and SVO), St.Petersburg (LED) and Yekaterinburg (SVX).

The combined airline of approximately 265 aircrafts will be a mix of Airbus and Boeing narrow and widebodies (along with some Russian manufactured narrowbodies).