Russia’s second-largest carrier, Transaero, sees no option left to avoid bankruptcy. Authorities have called on the airline to stop selling tickets after rival Aeroflot backed out of purchasing it for a symbolic price.
Russian Economy Minister Alexei Ulyukayev said Friday bankruptcy was the only solution for Russia’s Transaero after state-controlled flagship carrier Aeroflot rejected a deal to absorb the embattled airline’s debts.
“The search for other options has not led to positive results,” the minister said. “We are proceeding on the basis that bankruptcy is the only option left.”
Transport Minister Maxim Sokolov said Transaero could no longer meet its financial obligations in their entirety. The civil aviation authority ordered the carrier to stop selling tickets.
No way out
“The company has absolutely no prospects; it has huge debts and its operations have been loss-making for three years in a row,” Sberbank chief German Gref said in a statement.
Aeroflot’s General Director, Vitaly Savalyev, was quoted as saying that Transaero could stop all flights as soon as October 15. Transaero’s shares fell by almost 20 percent in Moscow trading on Friday.
Aeroflot had originally planned to acquire a controlling majority of 75 percent in a government-approved deal. But in the end, it did not manage to agree with Transaero creditors on restructuring debt totaling an estimated $3.78 billion (3.35 billion euros).
Shares of Transaero hit rock bottom plunging more than 50 percent during trading on the Moscow Exchange on Friday. Just hours before, Russian Premier Dmitry Medvedev reportedly accepted the start of bankruptcy proceedings for the country’s biggest private airline.
As of 4:12pm MSK, Transaero was trading at 12 rubles (less than 20 cents) a share after the company failed to service its $4 billion debt and is on the brink of bankruptcy.
The bankruptcy of the carrier is considered inevitable by most of the mediators after the airline’s shareholders failed to consolidate 75 percent plus one share that was hoped could be transferred to state-controlled Aeroflot.
About 5,000 Transaero employees out of 11,500 will be transferred to Aeroflot, said Russian Labor Minister Maksim Topilin.
The Russian Ministry of Finance has been reluctant to give 85 billion rubles ($1.3 billion) in state guarantees for the debt restructuring, and Transaero’s creditors have rejected a restructuring deal proposed by Sberbank.
Russian lenders Sberbank, Alfabank and VTB have announced they intend to file bankruptcy proceedings against Transaero in the courts.
“Neither creditors, nor Aeroflot wanted to save Transaero after the former owners deserted the company. Aeroflot was adamant against taking on any additional burden. There were no chances for rescue,” said VTB CEO Andrey Kostin.