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31 May, 2007 06:59

Russian airline to buy 15 Boeing Dreamliners

Russian airline to buy 15 Boeing Dreamliners

S7 has placed an order for 15 Boeing Dreamliners becoming the first Russian airline to buy the aircraft. The order comes only months after Aeroflot backed out of buying Dreamliners.

S7 airlinee, one of Russia's largest carriers, will buy 15 Boeing 787 Dreamliners, in a deal worth US$ 2.5 BLN, with an option for another 10 aircraft.

Although the company has already made a down payment itself, it will have to attract a syndicated loan to finance the entire order.

“The company plans to use a syndicated loan from Russian and international banks,” said Oleg Panteleev, the Editor-in-Chief of Aviaport Agency. “The head of S7 said he hopes Russia’s state-owned Sberbank, with which the airline has a long-term relationship, will participate in the pool”.

Some market watchers, however, doubt whether the company could even afford the repayments on such a loan.

“Dreamliners are very expensive planes in comparison with the current S7 fleet. The company’s revenues now are about US$ 9 MLN with net profit estimated at US$ 2 MLN. So now S7 just can’t finance the purchase even using the loan,” cautioned against the loan Evgeny Shago, analyst of Trust Bank.

S7 has made only a small part of the down payment, the rest due on delivery.

So even if it ultimately can’t afford the purchase, analysts say it could sell its place in the Dreamliner queue at a premium.

However, the company will not have to pay for the planes for 7 years. With the Russian airline market growing rapidly, to some experts this is long enough for the company to grow profitable to afford Dreamliners.

The long-haul aircraft would open the skies to new destinations and bigger revenues.

“We don’t have regular flights to South America or Australia, for example,” Oleg Panteleev noted. “These routes are up for grabs because no Russian airline has the fleet necessary to fly there. Thus with Boeing 787, S7 airline would be able to step into these new markets”.

Dreamliner is the first aircraft to have had such a queue of advance orders, and that has increased pressure on airlines to secure their place in the line.