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22 Aug, 2008 03:19

AirUnion resumes flights after Rostechnologia guarantees debts

One of Russia's biggest airline groups – AirUnion has resumed flights from Moscow's Domodedovo airport that were delayed for 24 hours. 22 flights failed to depart when alliance members couldn't pay for fuel supplies. The company blames surging

Travel chaos gripped more than 2000 passengers at Moscow's Domodedovo airport when their flights operated by airline group AirUnion were delayed for a day. Domodedovo's problems followed those of Krasnoyarsk airport, where flights were held up earlier.  The airports refused to refuel AirUnion's planes due to the company's 1 billion dollar debt for aviation fuel.

AirUnion's losses due to the delays are estimated at 1 million dollars. But for the passengers of 22 flights delayed for 24 hours it was more that just the money. For some of them Airunion provided accommodation but the majority spent the first day of their vacation delayed at the airport.

Yulia Bagrisheva, AurUnion spokesperson blames rocketing fuel prices for its financial problems.

“During past 12 months airfuel prices have grown by more than 70 percent. The last jump happened at the beginning of summer when tickets for the busiest season had already been sold. So the already-thin margins became almost loss making.”

But the airline group also acknowledges that it has structural problems.

The AirUnion alliance was created four years ago on the basis of five regional carriers that remained independent firms. Last year then-president Vladimir Putin launched the consolidation of the five airlines into one company called AirUnion. But that process has been slow, creating problems in optimising expenses of the air carriers. Dmitry Baranov, Analyst at Finam Management says that a lack of financial discipline is to blame for AirUnions woes.

“I doubt that rocketing fuel prices were the main reason for the situation. Fuel price grew for all airlines. The key factor is the lack of financial discipline in the companies – they had the money but didn't spend it on paying back their debts.”

The flights were renewed after state corporation Rostechnologia, which is to become the airline group's biggest shareholder this year provided guarantees to pay the debt. Russia's air transport regulator says several russian airline may soon face the same problem. And it urged the Government to allow opportunities for airlines to buy more efficient foreign planes.