Authorities give vent to frustration over Russian bankruptcy law, as dispute rumbles on (403 words)

Published: 9/13/2001

Following the announcement of at least a temporary truce between Kaliningradavia and the Lithuanian authorities for non-payment of ATC debts amounting to $400,000, Ionas Bareisha, Director of Economics and Finance at the Lithuanian Aviation Department, has made it clear that there are still unresolved tensions between the two sides. Bareisha acknowledged that Kaliningradavia is making its current payments for overflight, but is concerned that, under the protection offered under Russian bankruptcy procedure, it is restricted from making payments against the historic debt. He is particularly irritated by the process in the light of the fact that Lithuania is only seeking a schedule of payment for the outstanding monies. Bareisha also contends that Lithuania should not be dealt with on the same basis as Russian creditors and is keen to see some proposal before 20th October. Whether or not this is realistic is a moot point. The airline's restructuring has to be agreed by the creditors' committee, appointed by the creditors, over which the Russian government has little control. Kaliningradavia has little choice in principle but to resolve the dispute with Lithuania, given that the routing of flights via Poland or Latvia is not viable. The airline's General Director Mikhailov does express the view, however, that the Lithuanian authorities may not necessarily have negotiations all their own way. By implementing threats to exclude the airline, the authorities run the risk of not only losing the bankrupt carrier's current revenues, but also any chance of the payment of historic debts. Elsewhere within the Lithuanian aviation authorities, Kaliningradavia's situation has potentially been considerably worsened by the possible enforcement of the requirement that the airline install TCAS equipment in line with Eurocontrol regulations. Mikhailov says that the airline cannot justify equipping its Tu-134 used on flights to Russia at a cost of $150,000 an aircraft on economic grounds. However, he confirmed that the airline intends to install TCAS on its Tu-154 "at a later stage, when funds are available". It seems unlikely that Mikhailov can convince the Lithuanian authorities that non-installation of TCAS is an option. To date, however, a number of the region's carriers have extracted considerable concessions in terms of the timetable for the installation of equipment and, given that the Tu-134 flights are primarily concerned with Lithuania and Russia, some compromise may well be found.

Article ID: 2757