Aviastar picks up customer as negotiations over NC equity stake continue (615 words)

Published: 8/28/2001

According to Oleg Gruzdev of Aviastar-SP, a delegation from Kavminvodyavia (KMV) has recently visited the company's plant at Ulyanovsk to continue negotiations on the acquisition of a third Tu-204-100. He said that the aircraft is currently the only Tu-204 available at the plant. Gruzdev added that the negotiations focused on changes in the aircraft to meet KMV's requirements, with no problems envisaged, although the next stage would involve discussions on price, after consultations by the two sides at MAKS-2001. The New Community (NC)-supported management at the plant is confident that it will land the order and that both sides are interested in developing a “long term relationship”. Svetlana Belova, Head of the Moscow office of KMV, said that the airline's management had decided to acquire a third Tu-204 in January 2001, after successfully operating its two Tu-204s on European routes out of Sheremetyevo-2. KMV has also established a training centre for the aircraft and has been training crews for Krasair as well as providing KMV crews to operate the Tu-204s operated by Air Cairo. Belova did not disclose the value of the possible contract other than to say that there are "several scenarios” under discussion. The sale of the aircraft needs to be seen against a background of a halt in NC's investment in the plant, from 2nd August, with a further announcement, on 23rd August, that NC and OAO Tupolev had cancelled the previous agreement, which had implied that NC would receive 26% of Aviastar-SP's in return for its investments. An NC press release stated, contrary to the terms of the previous agreement, Aviastar-SP had failed to provide NC with its stake and the company would withdraw all the investments made to date (Rb236m) if an acceptable new agreement is not concluded within a month. Gruzdev commented that NC's negotiations with RAKA, OAO Tupolev, AO Aviastar and the regional governor, Vladimir Shamanov had been completed on 22nd August, resulting in a working group to develop a new agreement, to provide greater clarification and a guarantee on the transfer of the stock to NC. The date for the signing of the new deal remains unclear. According to Moscow daily, Vedomosti, a deal is likely to result in NC taking control of both manufacturing and distribution, and a controlling stake in the plant within three to four years, provided it meets targets of “profitable” operations and production of ten aircraft a year. This suggests that some of the political brinkmanship by NC may be yielding results, as the speculated terms do not appear to be significantly different from those previously reported and the fact that NC has emphasized that no transfer of further funds will take place without the resolution of the ownership of the first tranche of shares. The various ministries involved in any potential equity deal have so far blocked it, with the Anti-Monopoly Ministry and other ministries, including the Ministry of State Property refusing to sign off on the terms. The Ministry of State Property is reported still to oppose the transaction and has announced that a thorough investigation must be conducted before any approval of the deal can be given. As the ministries' approval will be required, it seems that there is some way to go in order to win them over. Even so, the government's options are limited, as there is no immediate alternative source of financing the plant's production, other than NC, and it would be unreasonable for the state to keep the plant in a state of limbo over what seems to be an internal governmental wrangling, rather than an external problem.

Article ID: 2723