KIEV, July 31 – AeroSvit, Ukraine’s biggest airline, will acquire a 75% stake in Donbassaero, the country’s No. 3 air carrier, and will invest heavily in developing airport infrastructure in Donetsk, a company official said Tuesday.
Aron Maiberg, the general director of AeroSvit, said the company is currently awaiting an approval from the Anti-Monopoly Committee to go ahead with the acquisition.
The deal marks further consolidation in Ukraine’s rapidly growing airline industry and comes six months after AeroSvit and Donbassaero decided to form a strategic partnership.
AeroSvit has been facing challenges in securing supplies of jet fuel following disagreements with fuel suppliers and the intervention of the government in an attempt to help the air carrier.
The consolidation of assets is expected to strengthen AeroSvit’s overall position and may help the company to negotiate better jet fuel supply contracts, according to industry analysts.
This is also expected to help AeroSvit negotiate better deals with suppliers of jet aircraft, as the expanding company will need more planes to handle the increasing traffic.
AeroSvit is already in talks with three major producers of regional jets, such as Bombardier of Canada, Embraier of Brazil and Antonov of Ukraine, to secure at least 10 jets by 2009. Maiberg said the company plans to select the supplier by the end of the year.
The consolidation of assets comes as Ukraine’s airline industry has been showing robust growth over the past several years, reflecting strong economic growth and an increase in travel to and from Ukraine.
AeroSvit reported revenues growing 33% on the year to $165 million in the first six months of the year, helping the company to narrow losses to $3.5 million in the period.
AeroSvit and Donbassaero handled an overall of 2.1 million passengers in 2006 and planned to boost air traffic to a combined 2.5 million in 2007, according to company forecast. AeroSvit and Donbassaero reported combined revenues of $370 million in 2006, according to industry analysts.
AeroSvit and Donbassaero will run a combined fleet of 28 aircraft, including 14 Boeings (three 767s and 11 737s) two Airbus A-320s, nine Yak-42s and three An-24s. The joint network would cover flights to 89 terminals in 31 countries, including 58 regular international flights, 20 regular charter flights, and 11 domestic flights.
The acquisition of the stake in Donbassaero, which is now owned by the City of Donetsk, comes a week after the company won a tender from local authorities seeking to boost the regional carrier. Under the terms of the deal, the City of Donetsk will own a 25.01% stake in Donbassaero, while AeroSvit will acquire a 74.99% stake.
The value of the deal was not disclosed, but AeroSvit pledged to invest “tens of millions of US dollars” in modernization of the regional infrastructure.
AeroSvit plans to use Donetsk airport in eastern Ukraine as a transitional hub for transportation of travelers between Europe and Asia, analysts said. The investment project calls for doubling passenger traffic through Donestk airport in the next three years. (jp/ez)