State holdings in Sibir,Domodedovo and Kuban to be privatised (370 words)

Published: 2/12/2001

The Ministry of State Property has announced its intention to sell the State's holdings in Sibir, Domodedovo Airlines and Kuban Airlines (based in Krasnodar), in 2001. The move is part of a package of 30 sales of State holdings, each of which is, according to the Minister of State Property, attractive to potential investors. They are not considered to be strategic holdings. The list of companies has been presented to the government, but changes in the current legislation prohibiting the sales of State holdings exceeding a certain value (currently $17m) are required. Domodedovo Airlines is 100%-owned by the State and, according to the Ministry of State Property spokesman, 74.5% could be offered for sale. Likewise, Sibir has a 25.5% and Kuban a 51% State holding (Ministry of State Property controls 20% and Russian federal property fund has 31%). At present it is unclear what proportion may be offered and to whom. Of the three airlines, Sibir (currently in the process of becoming one of Russia's largest airlines through the merger with Vnukovo) looks the most attractive to potential investors, given its impressive course of development over the last three years. Bearing in mind the quality of Sibir and its management, it would not be surprising to see a foreign entity in any potential tender process, intent upon cementing a link with the attractive network of the combined Sibir/Vnukovo Airlines. Domodedovo was reported to be in dire financial straits earlier this year, after closing down its flights in protest at non-payment of government debts to the airline and being the subject of a tax investigation. The airline also leased out its three cargo aircraft to East Line in an effort to meet its obligations. With routes primarily providing flights to the Far East and NE Russia and a financial situation unresolved, it is unclear who would find the carrier particularly attractive, although the possible feed into its Moscow hub may appeal to East Line, which has indicated its intention to expand its passenger business, Kuban Airlines, which carried 511,000 passengers in 1999 using a fleet that has shrunk considerably in recent years, is reported to be faring better than many of the regional carriers.

Article ID: 2350