Aeroflot sold Nordavia

RIA Novosti / Natalia Seliverstova
Russian national air carrier Aeroflot has finalized the deal on the sale of Nordavia, an Archangelsk-based airline company operating mainly in the North West of Russia.

­According to Aeroflot’s statement, the total cost of the deal was $235 million, whereby Norilsk Nickel has paid Aeroflot $7 million in cash with the rest – $228 million – being Nordavia’s debt burden which Norilsk Nickel as a new company owner is obligated to diminish. Nordavia debts include the present value of obligations under operating lease of aircraft, that is, all future payments of the leasing of aircraft that are not reflected in the RAS.

Aeroflot said the consolidation of airline assets of RosTechnology and strategic effectiveness were the main motives of the deal.

“Aeroflot attributed the decision to sell the regional company to an upcoming integration of airline assets of the State Enterprise RosTechnology into the Aeroflot Group.  The company decided to develop business in the North West region of Russia on the basis of a larger operator airline company Rossia. In this regard, in order to avoid intra-group competition, Aeroflot implements a deal selling 100% stake in Nordavia airlines”

Andrey Rozhkov, analyst at FC Metropol, said despite price exaggeration the deal is favorable for both sides.

“Aeroflot has a clear target to maintain only profitable and highly loaded with passengers airlines on the back of consolidation of six airlines from RosTechnology including the largest state-controlled North West airlines Rossia which operates on the same route as former Aeroflot subsidiary Nordavia and has greater passenger turnover. Moreover, the air jet park of airline company Rossia is bigger as well as the number of flights per day and diversity of the routes. Operating under Norilsk Nickel control, Nordavia will remain on its core route and increase its number of flights to the central and Northern part of Russia, notably to Norilsk. Amidst overestimation of Nordavia concerning its debts and real market price of its competitors, Norilsk Nickel will benefit from an increased number of flights to the region and resolve the problem of low passenger traffic which earlier forced other airline companies to withdraw a number of flights due to inefficiency and low profit margins.”