Privatization to bring changes to air transport

The governments push to privatize state owned assets is likely to see state owned assets at Moscow’s Sheremetyevo airport and a stake in Russian air flagship, Aeroflot, put on the block.

Prime Minister Putin said that the next government meeting will discuss the additional asset privatization plans, adding that Aeroflot may be included.

The state currently holds 51.17% stake in Aeroflot, and also holds 7.3% of its treasury shares through Aeroflot Finance. Privatization proceeds from the sale of an Aerfolot stake are unlikely to be significant according to Timur Khairullin Deputy Head of analytical department of IC Grandis Capital unless the decision is made to include the Aeroflot Treasury shares.

”If the decision is to keep the state control of Aeroflot and privatize only 1% of the company, then it can be sold for about $30 million, but sales of 7% of treasury securities of Aeroflot Finance, could bring $200 million.”

Uralsib analyst Anna Kupriyanova, also notes that with a government focus on developing industry champions, and retaining control, the proposal to sell more of the Russian air flagship makes little sense.

“Potential privatization will lead to loss of control by state, as of today the state owns 51%. So if they decide to sell any stake – it’s loss of control, which looks bit non-logical giving all ambitions of Vladimir Putin and Russia about building national champions in different industries. It was stated last year very clearly that Aeroflot is national champion in airline industry. It got bench of good assets. So I don’t see any reason to change the scenario and make Aeroflot a private company”

First Deputy Prime Minister Igor Shuvalov, says proceeds from state shares sales are not expected to contribute much to covering the budget deficit, with the main idea to attract investors.

"There are already a few investors interested in company’s’ shares, however, there may be more interested in shares if the government offer more. The assets are profitable and the price question goes beyond the infrastructure profitability."

Alexey Kudrin Minister of Finance has also noted that the latest privatization plan may add other interesting packages

“The privatization program is a long story and we have to monitor and push forward more attractive assets such as Aeroflot, Sheremetyevo airport and Zarubezhneft”

Kupriyanova says the repeated announcements about privatization, is intended to send a positive signal to investors, showing that the state is prepared to reduce its presence in the economy assumes. She says that Sheremetievo airport includes two facilities which are likely to attract investor interest.

“The most interesting assets of Sheremetyevo airport complex can be airport fuel filling stations and the network duty free, Aerofest”