Protracted process provides more evidence of VAL's perilous state (406 words)

Published: 5/16/2001

According to Igor Volkov, spokesperson for Siberia Airlines (Sibir), the merger of Sibir with Vnukovo Airlines (VAL) could take up to 12 months under Russian law governing the merger of joint stock companies. Curiously, given that the deal has obviously been executed, the terms of conversion of VAL's shares into Sibir's have yet to be agreed and, according to Volkov, this will not happen in the near future. This endorses the view that the VAL's condition was terminal when the merger was announced and that Sibir provided the ailing carrier with a lifeline. Volkov insists that the process is “very complicated” and dependent on the outcome of a detailed financial review of VAL, currently being conducted by an independent auditor. He added that, after the conversion rate is agreed, the companies would have a joint EGM, in order to approve the terms of merger. Volkov also commented that, as a result of this lengthy process, the two airlines cannot unify routes, even though they have unified fleets. This must wait until after the official merger of the airlines. At present, six to seven Sibir flights, used heavily at the end and beginning of the day to bring passengers to and from Siberia to Moscow, are carrying passengers on VAL's shorter routes during the day. New routes, however, require the permission of the GSGA. Volkov is confident that such permission will shortly be forthcoming. He also responded to reports from Finansovaya Rossiya (Financial Russia), which suggested that Alexander Klimov, acting General Director of Vnukovo Airlines, had claimed that the merged airline was capable of overtaking Aeroflot. Volkov said that the publication had misunderstood Klimov and that he simply made the point that the new airline was capable of carrying more passengers domestically than the flag carrier. Any possibility of competing against Aeroflot was ruled out by Aeroflot's established presence on the routes and the fact that it held the licenses for the routes. Volkov added that speculation of competition between the two entities was also misleading and that the new airline was keen to cooperate with Aeroflot, on the grounds that there is a good fit between the new airline's domestic network and Aeroflot's international network. While he said that no agreement had been reached, Volkov confirmed earlier reports that discussions on issues, such as combined ticketing, were taking place.

Article ID: 2533