Aeroflot’s Motives for SarAvia Sale Questioned

 - January 11, 2012, 2:50 PM
Aeroflot recently acquired all of fellow Russian airline Rossiya in a deal with Russian Technologies that included the transfer of a 51-percent stake in SarAvia to the flag carrier.

Questions have arisen over Aeroflot’s decision to sell its 51-percent stake in regional subsidiary Saratov Airlines (SarAvia) due to what it called “discrepancies in Aeroflot group development strategy and the local status of this airline.”

“The [economic] level and business structure of SarAvia do not fit into Aeroflot’s plans to become a global player in the international air transportation market,” Aeroflot said. The carrier further noted that it would look for other ways to expand its domestic network on “profitable growth” principles.

According to Moscow-based daily Kommersant, control over SarAvia has passed to Arkady Evstafiev, one of whose enterprises has owned a 25-percent stake since 2007. Two new investors, Tricona Enterprises and Avalon Ventures, both registered in Belize, emerged and each took additional minority stakes in SarAvia.

SarAvia’s fleet consists of 12 Yakovlev Yak-42D narrowbody trijets, only eight of which remain flyable. It ranks 27th among Russian carriers by traffic volume, carrying some 400,000 passengers last year. 

The sale has generated controversy in light of Aeroflot’s frequent declarations that it is committed to expanding domestic services and boosting its market share 36 percent by 2015. The flag carrier had claimed that adding new assets to its group would bring “synergies” worth $250 to $330 million, but now it has become more sober in its outlook.

The sale follows another controversial deal: last November Aeroflot exchanged 3.55 percent of its own shares for civil aviation assets of Sergei Chemezov’s Russian Technologies state corporation. In return, Aeroflot received 52.156 percent of Vladivostok Avia, 51 percent of SarAvia and all of Sakhalin Air Routes (SAT), Rossiya and Orenburg Airlines.

Many observers in Russia consider the deal motivated by Russian Technologies’ easier access to Russia’s petrodollars and political influence, which allows it to structure attractive financing programs for new aircraft acquisitions, most notably from major RT titanium customer Boeing.