Story ID: 0CATransaero
Russian Government Guarantees Debt For Transaero
By: Charles Alcock
Caption: Transaero Airlines CEO denies reports of possible service cancellations due to Russian currency crisis.
Word Count: 424
Russia’s second largest carrier Transaero Airlines has acknowledged receiving a 9-billion ruble ($164 million) credit guarantee granted by the Russian government on December 25. In a December 29 statement, Transaero specifically thanked Russia’s finance and transport ministries, as well as the Federal Air Transport Agency and Vnesheconombank, for supporting new guarantees for loans it has with government-backed JSC VTB Bank.

Transaero also indicated that it has agreed to a government demand that during 2015 it should freeze domestic air fares and reduce them by between 5 and 7 percent on routes where it is the sole operator. However, it did not make it clear whether the price freeze is a condition of the government’s financial support. The company said “JSC VTB Bank will assign the necessary credit funds to the airline during this period of drastically changing macroeconomic conditions.” The funds are to be used to cover operating costs at the discretion of Russia’s transport ministry.

The Russian government’s intervention comes against a backdrop of unofficial reports that several Russian airlines may now be facing financial difficulties. One likely challenge is the rising cost of meeting aircraft lease obligations, due to the collapse of the Russian ruble against the U.S. dollar.

The Transaero statement also indicated that it has begun to implement unspecified measures “aimed at enhancing its operational efficiency.” These measures were recommended last month by management consultancy McKinsey & Company, and the operator said that all would be implemented within three to six months. The carrier said it would focus its business plan services to destinations in the South and Far East of Russia.

Earlier in December, Transaero CEO Olga Pleshakova denied media reports that the airline might have to cancel services due to cash-flow difficulties. “We have overcome the crises of 1998 and 2008. We have great experience of finding a way out,” she told Russian news agency RIA. “As then, all our actions are aimed at safe and reliable transportation, as well as increasing the availability of air travel, which is affected by the current exchange rate.”

Transaero currently has a fleet of 103 aircraft, mainly consisting of a mix of Boeing 747s, 777s, 737s and 767s, as well as some Tupolev Tu-214s and Tu-204-100Cs. It has ordered a number of Airbus A380s, A320neos and A330neos, as well as four of the Boeing 747-8i model. However, in September 2014, it cancelled orders that it held for four 787-8s.