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No Place for Charter Airline in Aeroflot
The deal announced in November of last year for the purchase by Aeroflot of a controlling package in the charter Kontinentalnye Airlines has been put on hold due to the debts of tax bodies to the charter airline for VAT refunds that have not been received and deteriorating relations between the current owners of the company. Aeroflot is not rejecting the deal, however. It expects both issues to be settled by the end of the year.
Kontinentalnye Airlines is one of the largest charter lines in Russia. It carried 547,800 passengers in 2004 and received an income of 900 million rubles, of which 2.6 million were gross profit. Its fleet consists of three Tu-154Ms and one Il-85. The company was founded by former commander of the Moscow air defense district Oleg Lengarov, his sons Andrey and Yury and businessman Agan Uzunyzn.
The deal to buy the airline was announced in November 2004. The deal was to be completed by the end of the year and the influx of capital into the company was to go to developing its international charter business. Aeroflot carries 70 percent of all air passengers in Russia, but it has lost its leading position in international carriage in recent years, carrying only a third of international passengers in Russia, largely due to competition from charter flights. The size of the deal was not made public, but experts say that it was not likely to be more than $10 million.
The deal has not been cancelled. A top Aeroflot manager told Kommersant that it was put on hold because of a heavy load on its accounts receivable for VAT refunds. “In our view, it had reached a critical level,” the source said. The charter company confirmed the problem. Kontinentalnye commercial director Nadezhda Savina said that the company had not received any of the VAT refunds it is entitled to as a provider of export services since August 2004. The company sued for those payments and won and the money is expected “any day now.”
Relations between the owners of the company are a more serious hindrance. Yury Lengarov sold his share in the company to Agan Yzynyan without telling his father and brother and Uzunyan now holds more than 50 percent of the company's stock. That sale is now being disputed in court. Aeroflot was expecting to receive about 75 percent of the stock in the company. Aeroflot expects those problems to be settled and the deal to be completed before the end of this year.
All the Article in Russian as of Aug. 11, 2005
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