The airline plans to raise $4m in order to help fund its growth (490 words)

Published: 11/28/2001

Transaero has started issuing its planned commercial paper with $4m to be raised in four tranches, made up of two, four, six and nine month paper. The underwriter of the issue is the Russian investment company, Russian Funds, and, according to one of its analysts, Alexander Baranov, the timing of the issue reflects a favourable market for the paper. The issue, which began on 8th November, is Transaero's first raising of tradable debt and part of a planned raising in the first half of 2002 of up to Rb 200-300m, followed in the second half by an issue of between $10-30m of corporate bonds for fleet expansion. Olga Pleshakova, the airline's General Director, has reported that the company signed the agreement for the lease of four more Boeing-737s, with delivery planned for January 2002. She said that negotiations are still underway concerning the lease of a Boeing-767 or Airbus-310 and that a final decision will be made by the end January 2002. The airline's choice of commercial paper over bonds, despite the higher cost, was driven by the speed of issuance, according to Alexander Krinichansky, the First Deputy General Director of Transaero, since the primary objective is to establish a market in the airline's paper. The acceptance of the paper is, however, by no means unanimous, with some investors observing that the lack of transparency in the airline's results between 1996-1999 and its refusal to discuss these in detail, make the risk difficult to assess. Even so, the company is estimating full year results for 2001 to end with a net profit of Rb 30m ($1m). Pleshakova says the achievement of this will be against a background of efforts to reduce the airline's costs through the introduction of new technologies, particularly in booking systems. In an effort to boost passenger traffic in December 2001 all Transaero's business class passengers will have access to DVD players. Catering is also being improved with the flight Tel Aviv - Moscow on the 23rd November offering Japanese food to business class passengers. According to Pleshakova, the passengers were so impressed they filled 60 pages of the comment book on board with positive feedback. Transaero now plans to offer sushi to its business class passengers on routes to Kazakhstan, Germany, France and the UK. Pleshakova still remains confident in the outlook for the Russian market and argues that growth in the Russian economy outweighs the impact of the terrorist attacks on the US. Domestic routes are key in this respect, where growing business activity is increasing yield per passenger. The airline plans to open more domestic routes, with new flights to Ekaterinburg and Novosibirsk in early 2002, to follow the airline's expansion of its Kazakhstan coverage where it currently operate four routes and plans to add a further three in December 2001-January 2002 to Aktyubinsk, Kustanai, and Aktau.

Article ID: 2932