Aeroflot set for privatisation by 2014: chief executive

Russia should not sell a blocking stake in flagship carrier Aeroflot until 2014 or after its planned merger with other state aviation assets, its chief executive told Reuters. Finance minister Alexei Kudrin said last month Aeroflot will be added to the state's multi-billion dollar asset disposal plan, designed to cut the budget deficit and attract foreign investment and expertise.
Russia, which has already raised $3.3 billion from the sale of a stake in lender VTB, is hoping for a second windfall from lender Sberbank later this year.
Aeroflot CEO Vitaly Savelyev said in an interview the airline should join the back of the queue and allowed to concentrate on integrating new acquisitions. "The issue of privatisation of all companies including Aeroflot is on the agenda. My opinion is that we need to do it," he said.
Aeroflot plans to take over aviation assets from state conglomerate Russian Technologies by the end of the year, a move that, if successful, could see the airline's market capitalisation grow by 30-40 percent, Savelyev said.
The state should wait until the transaction has been completed before selling part of its 51 percent stake, he said. "If the project is not so successful, because of financial problems with the new assets, Aeroflot may, however, need a year or more to get them in order," he said.
Savelyev said debt to be taken on from Russian Technologies assets would be added to Aeroflot's consolidated borrowings of $1.5 billion putting pressure on lending terms. "It is not critical but new consolidated debt could lead to more expensive borrowing," he said.
Russia had originally thought the assets could have been restructured to create a rival airline to Aeroflot, but made a swift about turn as part of a new state strategy to create national champions. Savelyev said the government should cut its stake in stages and keep a small shareholding to show investors it would continue to help develop the airline.
Savelyev declined to give financial forecasts for 2011, saying Russian airlines could carry 62 million passengers this year, of which the enlarged Aeroflot would carry 20 million. The company flew 11.3 million passengers last year, when net profit tripled to $253 million.
Savelyev pledged not to raise ticket prices for the rest of 2011, believing crude oil prices have peaked and will cease to have an upward impact on fuel prices.