Baikal Airlines gets last extension to external administration, but management hopeful of success

Published: 11/16/1999

At a recent creditors" meeting, to review the state of affairs at Baikal Airlines, the decision was taken to extend the external administration by six months, following a substantial majority vote in favour of the move by those present. It had been due to expire on 18th November. Legally, no further extensions are permitted and Baikal will therefore have to prove its viability within this period. The meeting was however, not entirely unanimous with two groupings, representing 21% of the creditors vote, supporting the liquidation of the airline, these being the Omsk based Western Siberian Air Traffic Control and the Irkutsk affiliate of the insurance company Afes managed by a former employee of Baikal, Petr Oveshko. The reason for Afes objection is less clear, given that it is unlikely that closing the airline would have generated a great deal in the way of proceeds. In the case of the W Siberian ATC the suspicion, expressed in the local media, is that the Omsk based organisation was attempting to remove a competitor for the Omsk based airlines. This does however, seem a little paranoid given the condition of Baikal even at this stage and more general competitive conditions in Western Siberia. The decision was also made all the more puzzling by the support of the East Siberian Air Traffic Department for the extension, although its head Vladimir Sikolnikov remained silent at the meeting. Vladimir Sizov, Temporary Manager of Baikal, claims that, had the company not been obliged to spend nearly all its revenues on aviation fuel in response to the current oil crisis, it would have been ready to reconcile its debts by November. His plans, as with many of Russia"s regional air entities, are to restructure the company, into several affiliates united as Aviation Corporation Baikal: Baikal-AT (aviation technical complex), Baikal-MVL (local airlines), Baikal-MAL (long haul airlines), Baikal-PANKh (general aviation) and Baikal-AVIAGRUZ (cargo operations). According to Sizov, the directors of the various affiliates have been appointed and are now working on the task of resolving all the legal issues such as incorporation, registration, staffing structures and documentation. Flying personnel are planned to be reduced by 60-70, along with the technical and other staff, if Baikal is to survive. By spring 2000, it hopes to be in a position to offer acceptable terms to its creditors. Sizov may have won a stay of execution, but the jury is still out on whether Baikal can overcome its problems. Its predicament has been further undermined by the alleged illegal sale, by former GD Kovalenko, of three IL-76s to East Line, and the seizure of 2m rubles, by masked police, to repay debts. (www.concise.org 10th August 1999 and 22nd September 1999).

Article ID: 1088