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Transaero grounded after Russia pulls plug on carrier

Moscow: Russia today said it had pulled the plug on the country’s debt-laden second-largest airline Transaero after state-controlled Aeroflot backed out of a deal to buy the carrier.

Economy Minister Alexei Ulyukayev had warned earlier this month the airline faced bankruptcy after Aeroflot failed to reach agreement with Transaero’s creditors on a restructure of its estimated 250 billion rubles ($3.78 billion) debt pile.

Aeroflot’s board of directors had in September approved the acquisition of a controlling 75-percent-plus-one-share stake in Transaero for the symbolic sum of 1 ruble in a government-backed deal

But the deal foundered on the debt issue and the carrier, hit by three straight years of heavy losses, filed for bankruptcy on October 1 after the civil aviation authority ordered it to stop selling tickets.

After 25 years in the air its 106-strong fleet, mainly composed of long-haul Boeing jets, will be grounded after the federal air transport agency Rosaviatsia ruled its precarious financial state posed a potential threat to passenger safety.

Privately-owned Transaero, which employs some 10,000 staff, started out by leasing Aeroflot aircraft and serving destinations across the former Soviet Union as well as parts of Asia and the Caribbean.

The firm’s woes add to a growing exodus of foreign carriers with the likes of EasyJet and Air Berlin as well as Lufthansa announcing pullouts in recent months, citing weak demand as Russia labours under international sanctions imposed over its actions in Ukraine.

The Russian market has been further hit by the slump in oil prices which has helped provoke the worst drop in purchasing power in 15 years, while the ruble has also seen its value eroded, forcing up costs of fuel and aircraft leasing.

Last evening saw a flicker of hope with a reported bid for a majority stake in Transaero by Vladislav Filev, CEO of S7, Russia’s number-three carrier.

However, the Russian authorities said the distressed airline had been grounded definitively, with Rosaviatsia director Alexander Neradko telling reporters its operating license had been revoked.

Deputy prime minister Igor Shuvalov said the airline “will leave the market” but assured that “passengers will not suffer” as other carriers, led by Aeroflot, would take on its 156 routes.