Investment group refutes press speculation as industry awaits confirmation of merger outcome (400 words)

Published: 10/1/2001

According to press reports, Ukraine's Minister of Transport, Valery Pustovoitenko has said that the decree for the merger of Ukraine's leading airlines has been signed, with hints that the State Property Fund might not be opposed to a sale of a 51% stake in the new entity created out of 100% state-owned Air Ukraine, Aerosvit (22% state-owned), and 61.6% state-owned Ukraine International Airlines (UIA), after the various components are merged by the year-end. The Aviation Department of the Ministry of Transport, however, was a little more circumspect, saying that the minister probably spoke "prematurely" and that a number of issues had still to be resolved by the working party led by Andrey Shtkatyk, Head of the Aviation Department, before the merger goes ahead. Reports carried in the Russian press have suggested that Russian industrial investment group, Kaskol, with holdings in Volga Dnepr (VD), may potentially buy stake in the new entity. However, Igor Ignatiev, Kaskol's Vice-President, Corporate Strategy and Public Relations, said that the group was not currently reviewing the purchase of the stake and attributed the reports to misinterpretation of the company's close involvement with the Antonov Design Bureau and Motor Sich, which are jointly developing an ICAO compliant power plant for the Il-76. Ignatiev says that Kaskol's primary interests are in production, not operations, and where it has exposure, it has focussed on what is primarily a cargo carrier: VD. Despite his protestations, there was no explicit denial of any interest in the new airline. Ignatiev added that the group reviews all possible investments, but the Ukrainian government had not yet approached it with details and its statements to date did not allude to plans for the airline entity after the merger. Kaskol's reticence is well founded, according to a number of commentators, who have suggested that merging Air Ukraine with profitable Aerosvit and UIA does not make any commercial sense and potentially will drain the new entity of resources: a view accepted by Ignatiev. There still seems to be objections to the merger from the airlines themselves, in the case of Aerosvit and UIA and, particularly, from UIA's minority shareholders, including Austrian Airlines/Swissair 22.5% and European Bank for Reconstruction and Development (EBRD) 9.9%, who could potentially block the merger, despite the State Property Fund holding of 61.6%.

Article ID: 2790