Failure to deliver TU-154Ms (600 words)

Published: 8/15/2000

Tyumenaviatrans (TAT) has filed a claim in the Samara Arbitrage Courts for $48m against Aviakor for failing to deliver four Tu-154Ms to the Surgut-based carrier, with the possibility being presented by TAT's lawyers that they sequester the assets of the Samara-based producer. The Arbitrage of the Samara region rescheduled the hearings of the TAT-Aviakor case to 1st September. The conflict between the two parties has been simmering for sometime and the airline was expecting to have an aircraft delivered this year, according to statements made at the company's AGM. Under a contract signed in August 1995, Aviakor was to provide the carrier with five aircraft at a price of $7.5m each, the first of which was to be delivered in April 1996 and the last by the end of 1998. TAT paid an advance for three aircraft in the form of bills on the plant's outstanding debts to Samarenergo in the amount of $15m - it is unclear whether any cash was involved in the deal. In the interim however, Aviakor has failed to fully deliver. The first Tu-154M was delivered in September 1998, but equipped with overhauled engines and not the new engines stipulated in the contract. Since that point no further aircraft have been delivered and, according to TAT, the move to the arbitrage court has been a last resort after the failure of negoiations between the two parties. For TAT, the amount being claimed represents compensation for the low quality of the first aircraft combined with the repayment of the debt and the accompanying interest. It has suggested however, that it would take two aircraft in part payment and would even provide the cash-starved plant with $0.5m of working capital to complete them, an offer not regarded by Aviakor as particularly generous. So determined is it to succeed in the case, TAT has even created a company OOO Tyumenaviatrans-Samara to fight the plant. According to Alexander Abalmazov of TAT, the reorganisation of Aviakor under its new owners Sibirsky Alluminiy in 1999-2000 has made it difficult to seize the company's assets as many of them have been transferred to other entities. Abalmazov is reported to be optimistic about potentially seizing them despite the fact they are now owned by a new entity, ZAO Aviakor-Aviation Plant. Sibirsky Alluminiy, claims that it wants to fix the problem with TAT and acknowledges that there is a debt and a non-fulfilled contract, but argues that the contract was signed by individuals that are no longer with the plant and that it cannot be held responsible. Interestingly Abalmazov was formerly Marketing Director of Aviakor. The current management of Aviakor believes that it is trying to reach an amicable settlement but considers the terms for two aircraft to be unacceptable. For Aviakor the experience of being taken to court and using the 'no longer present' defence is not a new one. In January 2000, ELK Airlines of Estonia, demanding repayment of loans made to the plant in 1993 or to supply the airline with a new Tu-154M in compensation, took the plant to court. The plant's defence was that the loan had not been made to the plant, but to an entity jointly owned by ELK and Aviakor formed to lease two aircraft and buy a third, from which Aviakor claims to have received no revenue, despite ELK operating the aircraft, and that it had also lost associated shareholdings in ELK after Aviakor shares were cancelled. To date the dispute is believed to be still outstanding despite the effort of the court to reach a settlement between both sides.

Article ID: 1995