East Line Holds On to Domodedovo
// Rosimushchestvo fails to reverse the terminal's privatization
Arbitration
The first attempt by the Federal Property Management Agency (Rosimushchestvo) to take the passenger terminal from East Line, which manages Russia's largest airport, Domodedovo, ended in failure. The Moscow Region Arbitration Court refused to allow the agency's claim to have East Line's purchase of the terminal declared invalid. However, the dispute will probably not end here, and the bureaucrats are still hoping for success. After all, Rosimushchestvo has achieved the dissolution of the lease agreement for airport property between GUP Domodedovo Airport Administration and ZAO Domodedovo International Airport, which is owned by East Line, after two years of litigation.
&Domodedovo is Russia's largest airport and Moscow's aviation hub. Its total traffic flow in 2004 was 12.067 million people. Based on the results of the first six months of this year, Domodedovo has overtaken Sheremetyevo, with a traffic flow of 5.9 million passengers versus 5.483 million for Sheremetyevo. Companies of Dmitry Kamenshchik's East Line group have managed Domodedovo since 1997; the airport's general agent is ZAO East Line Handling, which is 100-percent owned by FML Ltd., a company registered on the Isle of Man. Total revenues of all companies of the airport complex were 12.067 billion rubles in 2004.
The state first laid claim to Domodedovo in 2003, when GUP Domodedovo Airport Administration, the owner of the airport's property, which was not subject to privatization, filed a suit to have the lease agreement with ZAO Domodedovo International Airport concluded in 1998 declared invalid. The terms of the agreement didn't suit the bureaucrats – they disliked the long lease period (75 years) and the low lease payments. Two years later, on February 14, the court allowed the corresponding action connected with Rosimushchestvo's suit and now the parties are trying to agree on a new lease payment rate [see Kommersant of February 15].
But the bureaucrats were not satisfied with this victory and they came up with new claims on Domodedovo. In May, Rosimushchestvo applied to the Moscow Region Arbitration Court to demanding that East Line's purchase of the passenger terminal from GUP Domodedovo Civil Aviation Production Association be declared invalid. The details of the claims are unknown (neither Rosimushchestvo nor East Line is commenting officially).
However, Rosimushchestvo's first attempt has failed. According to Kommersant's information, the court refused to allow its claim yesterday. “We have been informed that we have lost the case, but we have not received any official documents from the court,” Rosimushchestvo told Kommersant. It is possible that the parties will settle out of court. East Line's press service officially informed Kommersant yesterday that “the group acknowledges the existence of a certain tension in relations with Rosimushchestvo, which has presented the group with a number of claims concerning the privatization of the airport's passenger terminal. Negotiations are now going on between the group and Rosimushchestvo. East Line senses that the opposing party recognizes the company's contribution to the airport's development [including investments of $500 million]. The parties are working to reach an amicable settlement of all disputed issues.”
The bond market reacted negatively yesterday to East Line's corporate news. The price of East Line Handling-2 three-year ruble bonds dropped more than 1.2 percent to below face value, although by evening, some investors were ready to purchase East Line's ruble debt at 100.25 percent of face value.
Sergey Ryzhkin, Yulia Chaikina
All the Article in Russian as of July 27, 2005
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