Sergey Kartashov reveals his own perspective on events at the plant, including the controversial EGM and the Kato Aromatic contract (1,437 words)

Published: 12/10/2001

Within Aviastar Holdings and SP, it is becoming increasingly difficult to get a clear view of what is reality, spin or fact. An exclusive interview between Concise and Sergey Kartashov, one of the two individuals currently aiming to be General Director of Aviastar Holdings, after the previous board failed to accept the result of an EGM in early November, perfectly illustrates this position. Kartashov contends that he is the legitimate General Director and continues to operate as such, claiming that the EGM was illegal as it was riddled with procedural violations that effectively cancelled the election of the new board and General Manager. According to Kartashov, the violations that he says have been agreed by the Federal Securities Commission, include the following: - A board director presided and led the meeting, instead of the Chairman - The EGM's agenda did not contain the election of the Statistics Commission (which counts the votes) - Documents with the EGM's agenda and other materials were not sent out in time - Several agenda's issues were changed. He also claims that the newly elected alternative General Director, Sergey Ponamarenko, is intimidating his new charges with threats of firing if they fail to respond to his instructions to ignore a countermanding order from Kartashov granting the Aviastar Holding's staff two days holiday. According to Kartashov, Ponamarenko's "people" called the employees and even visited their homes in order to deliver letters notifying individuals of the repercussions of not obeying the instruction to return to work. Kartashov adds that he has documentation confirming the recent reports of an investigation of Ponamarenko by a Duma deputy and the decision by the Prosecutor's office to open a criminal investigation, apparently related to loans to the coal industry. He also alleges that the new General Director has not visited Aviastar-SP since his appointment, but the new board was reported to have met on 30th November. In terms of the ongoing activities at the plant, prior to the recent impasse, Kartashov said that Aviastar had filed a complaint with the Moscow Arbitrage Court against export agency, Aviaexport. The basis of the complaint is that Aviaexport had failed to pay the company for the fulfillment of the previous orders from Kato Aromatic, under the contract signed in 1996 between the agency and the Egyptian company. According to Kartashov, the contract provided for the delivery of four aircraft at a price of $6m for each aircraft. To date, four aircraft have been delivered: three in 1998 and a further aircraft in 2000. However, Kartashov says that Aviaexport only paid for three of the aircraft, paying the factory $5.73m for the first aircraft, $5.74m for the second and $5m for the third, but nothing to date for the fourth. Kartashov acknowledges that the reason behind this was probably non-payment by Aviaexport or Inkombank, but says that the agency has done little to resolve the situation and find the funds to pay for the fourth aircraft. The court case was therefore filed to force the agency into the process of finding the funds given that Aviaexport is the plant's counterpart. Kartashov adds, however, that the monies for the fourth aircraft, if undelivered to Aviaexport, could have "disappeared" after the financial crisis of August 1998, as the monies would have been transferred to Inkombank at a time in late October 1998 when the bank lost its licence. Kartashov says that the payment situation was not properly addressed until summer 2001, when Vladimir Kostrov, Chairman of the "old" Aviastar's board filed a complaint with the Ulyanovsk Regional Prosecutor's office and the case was opened. This followed reports in July that the Ulyanovsk Region Property Fund was already looking for an EGM to replace the existing management team and board and Kartashov thinks that this move may have been prompted by individuals close to the fund wanting to prevent closer examination of the loss of the $6m. According to former Aviastar Holdings board member, Vladimir Kostrov, of Aviastar Service, quoted in the Simbirsky Kurier, the non-payment for the fourth aircraft resulted in Aviastar losing equipment seized for non-payment of debts. The seizures contributed to the plant's losses on the Tu-204, that Kostrov now believes amount to $30m as a result of under-pricing the aircraft and lost equipment. The Moscow Arbitrage Court has set a date of 10th December to hear the claim. Kartashov says that he believes the contracted $6m only covers about 50% of the Tu-204's real cost, resulting in considerable losses being made on aircraft supplied to Kato Aromatic. He adds that the original agreement had set the price at the equivalent of $7.5m, but that this had not been adjusted to take account of the currency fluctuations over the period of the contract and that Kato Aromatic had failed to invest in Aviastar directly; subsequently acquiring an equity holding from a third party. Later requests to Dr Kamal of Kato Aromatic to raise the agreed price "did not receive a positive response". Tensions arose over the New Community (NC) management's efforts during late spring and summer 2001 to "persuade" the Egyptians and others to pay a higher price. Kartashov still says that Aviastar-SP may formally refuse to build aircraft for Sirocco, given that the contract is actually between Aviastar and Aviaexport and not Aviastar-SP: a vehicle that emerged after the agreement and that did not assume the obligations of Aviastar. Whether in reality this could be done is another matter, given that Dr Kamal has already demonstrated his considerable Russian political muscle in the affair with NC and when the company is on the brink of a critical contract from the Chinese, who are unlikely to welcome any rocking of the boat. Now that Kato Aromatic/Sirocco is reportedly in charge of the new board, Kartashov says that he is continuing his negotiations over the pricing of the aircraft, sending a letter as recently as 3rd December to Dr Kamal requesting the cancellation of the existing arrangement as the original signatory of the contract, Aviastar, no longer produces aircraft. Currently the Aviastar facility has two aircraft in the plant, which Kartashov says are around 80-85% complete: one destined for Aviastar-Tu to be operated by AirRep and the other, No. 20, likely to be auctioned off to settle the NC debt, with a further three 50% complete. Other sources suggest that of the latter three aircraft, two are destined for Sirocco and at least one is 80% complete. In contrast to earlier reports, Kartakshov says that No.32 will not be supplied to the leasing company in December 2001. He also says that, despite Sirocco's own interest and that of the Sirocco-brokered five Chinese orders, the plant has no other contracts signed at the moment, although he accepts that there are seven-eight potential customers, which is assumed to include the Sirocco orders. Recent reports, however, suggest that the Chinese are due to visit in the plant in the week commencing 10th December to discuss specifying aircraft. Kartashov believes that Kamal would like to increase his 18% interest in the plant, potentially in partnership with the Leader Group, whose President Igor Leiko has already reported such discussions with Kamal on the subject at MAKS-2001. Meetings to discuss the expansion of the holdings were reported to have taken place on 3rd December in Moscow between Aviastar, Tupolev and Kamal and this may well have been in conjunction with the Aviastar-SP EGM held on the same day. The results of this meeting are unknown, but on 5th December, Victor Mikhailov, a former Aviastar General Director and reportedly a Kamal associate, was appointed the new General Director of Aviastar-SP with what appears to be the support of both the various state bodies involved and Sirocco. Kartashov thinks that Leader will never actually invest in the industry but, with US backing, could provided financing in cooperation with Sirocco, although he believes that the domestic leasing could be better done by Aviastar-TU, currently wet leasing to AirRep. In contrast to many others associated with the plant, Kartashov was much more positive about the experience with NC, believing that the cooperation between the two parties had been "very useful" and that without NC or another investor the plant continues to be troubled. He does not believe that there are any investors at present, presumably including Sirocco and is scathing of any regional support, saying that he thinks that the regional Government Vladimir Shamanov is probably not fully aware of the activities of his designated board members, Mirimsky and Piorunsky.

Article ID: 2949