Six state-run airlines in Russia to merge with Aeroflot

Russia has put on hold earlier plans to set up a second large state-owned airline and will, instead, merge 6 small government-run aviation companies with Aeroflot, Russia’s flag-carrier airline.

The move is seen as a part of the efforts to consolidate Russia’s troubled commercial aviation sector.

The merger of the 6 state-run airlines with Aeroflot, which was approved by Russia’s Prime Minister Vladimir Putin, will increase Aeroflot’s share of the domestic passenger market from 15% to about 35%.

The 6 government-owned airlines that are going to be merged with Aeroflot are Rossia, Saratov Airlines, Sakhalin Airways, Orenburg Airlines, Vladivostok Avia, and Kavminvodyavia.

The government of Russia has been seeking ways to rescue the country’s aviation industry ever since it was hit by the ill-effects of the global economic recession and also planning to fold these 6 carriers into a single airline to be called Rosavia. Had this plan materialised, the state-run conglomerate Russian Technologies would have owned Rosavia.

It may be noted that Russian Technologies has been struggling to run hundreds of loss-making companies, including AvtoVAZ, the largest car manufacturer in Russia.

Aviation analysts have warned that the merger of the 6 troubled airlines with Aeroflot will weigh down Aeroflot with heavy burden of debts since these carriers have been on the verge of bankruptcy following a sharp decline in passenger traffic.

After the Soviet Union collapsed, the monopoly of Aeroflot was broken up, and hundreds of smaller airlines were formed to operate regional flights.

According to aviation analysts, the Russian aviation sector flew about 45 million passengers in 2009. This is figure is still smaller than the average number of passengers carried by major carriers based in Europe, such as Lufthansa, the flag-carrier airline of Germany.

Aeroflot, the largest airline in Russia, carried an estimated 8.7 million passengers in 2009.

And, in 2009, the overall airline passenger traffic in Russia dropped by 10%.

According to aviation analysts, the merger of the 6 troubled airlines with Aeroflot may take over one year since those airlines have to be first valued and transformed into joint-stock companies. It is not possible to ascertain the total debt of the 6 carriers as they are government-owned and hence do not divulge figures regarding gains or losses, the analysts added.