Company still faced with need to renovate fleet (456 words)

Published: 8/3/2001

Sergey Yashin, General Director of ZAO Encor, has announced that the company has taken control of OAO Buryatsky Airlines. The announcement marks yet another development in a series of events affecting Chelyabinsk air transport. According to Yashin, two years ago, ChelAl approached the President of Buryatia with a proposal to develop air transport in the republic through the acquisition of the bankrupt Buryatsky Airlines. The deal has, however, just been closed and thne airline was subsequently sold to Moscow based ZAO Media Group controlled by Alexei Popov, a former senior transport bureaucrat in return for investment committments.According to reports howeevr, this interest has now been passsed to Encor, for a 50% interest in the airlne by Media Group, although Yashin says that the Encor interest will be diluted in the future. Under the terms of the original Media Group agreement and the agreement of the regional authorities, Encor is obliged to open a local affiliate in Butyatia, which will employ Buryatsky Airlines' personnel, currently about 50 in number, and operate a scheduled flight from Moscow-Ulan-Ude. Yashin added that Buryatia also signed a decree giving Encor full access to Ulan-Ude Airport(spun out of Buryatsky earlier this year and operating airport services and a small fleet of regional aircraft), and the right to sell its full services, while the other major carrier at the airport is restricted to providing services only from Ulan-Ude to Krasnoyarsk. Despite its acquisition, Encor still has to find funding to renovate its fleet in the next three years. Currently, all of the airline's 17 aircraft are reported to be flying excluding, the recently acquired Buryatsky aircraft. The airline's Tu-134s, which were overhauled in 2000, will have to be written off in three and a half years. The Yak-42 and Tu-154Ms, produced in the late 1980s - early 90s, are likely to remain in service for at least another decade. Yashin claims that, in contrast to some other operators, Encor's policy is to write off aircraft before the requirement for an extension of the aircraft 's limit assigned by the type certificate. Encor is therefore looking to replace the Tu-134s, which Yashin would like to replace with Tu-204s. He said that Encor was recently offered aircraft by Aviastar for $34.2m and Aviastar is reported at present to be in Chelyabinsk, negotiating a possible deal. Although discussions are at an early stage, the price suggests that Encor may be thinking of buying the Tu-204-120 with RB-211s, given reports that recent deals involving Tu-204s with PS-90s have been struck at around $24-25m and the price of the RR powered variant has been cited as $34m. Encor is also considering the acquisition of two Boeing-737s, although sources say that the negotiations with Boeing having been going on for some time. Yashin comments that the company's only problem - in common with other Russian operators - is the $20m of import taxes for each aircraft, although Encor believes that it can reduce the impact of this through an affiliate in the enclave of Kaliningrad.

Article ID: 2684