Creditors consider options for the airline

Published: 6/2/2000

The hearing of the Irkutsk Regional Arbitrage on the bankruptcy of Baikal Airlines has been postponed until 14th August after a successful request from Vladimir Panfilov, the airline's temporary manager, to the creditors committee to delay the hearing. This follows six-month extension of the administration granted to former temporary manager Vladimir Sisov in November of 1999. According to Nikolay Rusanovsky, Director of OOO Expert-Baikal, the majority of creditors are ready to sign an agreement with the airline, but it appears this would require the payment of 14.5m rubles of wage arrears by the airline before an agreement could be made. To achieve this, according to Vladimir Panfilov, Baikal has sold 80% of its cargo subsidiary AO Baikalaerogruz to the Moscow cargo carrier airline Tacis. Panifilov says that the deal is worth $4.6m (115m rubles), of which 62m rubles was paid in cash, and with Tacis undertaking to invest 50m rubles in keeping the fleet airworthy over the next three years using the Baikal technical facilities. As part of the deal, Tacis also took the responsibility to hire 104 employees including pilots from Baikal and meet their wage arrears. In addition, the airline recovered one of the three Il-76s illegally sold to East Line by the previous General Director Vladimir Kovalenko. As the cargo business of the airline has not been operating for five years and all its aircraft were leased to other operators, the sale of the business to another operator has not impacted the business and has allowed the airline to realise some its assets for the preservation of the main business. The last creditors' meeting considered three options for an agreement: - Pay the creditors by giving them stock in the stock of the Baikal's subsidiaries and affiliated companies - Distribute Baikal's own stock proportionally among the creditors. - Restructure the debts with a moratorium on non-government creditors for five years with Baikal paying its debts to state entities: the pension fund (26m rubles), the federal budget (19.5m rubles), and the city's budget (16.5m rubles) in the first five years. Not surprisingly, according to Nikolai Rusanovsky, the creditors prefer the first two options. It appears from current statements however, that certain creditors, mainly Omsk-based insurance company Afes and the Western Siberian Air Traffic Control, no longer support the liquidation of the company. Operationally, the path that is being taken by the airline is to reduce competitive pressures in its region by looking to merge with other carriers. Baikal has already agreed with regional carrier Sayany to cooperate on longer haul flights. On local flights, the airline is seeking to merge its subsidiary Baikal-MVL with the Angara-based airline formed out of Irkutsk Aircraft Repair plant Baikal-PANH, and is seeking further merger partners, with Bratsk Avia mentioned as a possible candidate, as it would allow the Bratsk-based airline to reduce costs through merging its maintenance facility with that of Irkutsk. Vladimir Panfilov optimistically believes that these mergers will help stand off the growing threat to regional airlines from Moscow based airlines is sure that these actions will help stand the expansion of other regions' airlines, mostly by Moscow airlines, and allow the airlines to recover some the ground they have lost in the last five years, when the airline figured among Russia's major carriers.

Article ID: 1833