Cathy Buyck Brussels
Uphill Battle
Russia’s Transaero seeks restructuring
plan as demand falters
T
ransaero Airlines executives are
presenting a brave front by stat-
ing that operations are continu-
ing as normal, but the reality is far
less rosy
Russia’s second-largest airline has
relied on the government for fi nancial
help and has hired management con-
sultancy McKinsey & Co. to draw up
a restructuring plan while its Ireland-
based maintenance, repair and over-
haul (MRO) subsidiary is actively try-
ing to secure new investors.
Transaero Engineering Ireland
(TEI), based at Shannon Airport,
this month sought court protec-
tion against creditors due to a lack
of funds, in part brought about by
its parent’s delinquent payments.
“Trans aero Airlines is, for the mo-
ment, not in a position to pay TEI
monies due for services rendered
and has indicated that it is not in a
position to support TEI on an ongo-
ing basis,” the MRO provider explains.
The High Court of Ireland has ap-
pointed an interim examiner to help
stabilize TEI’s fi nancial position and
devise a rescue plan. The company,
which has nearly 230 employees, is in
talks with a potential investor to help
put TEI on a solid footing. Transaero
acquired the former Air Atlanta Aero
Engineering in 2012, which at that
time was profitable, and rebranded
it as TEI. In addition to maintaining
its parent carrier’s aircraft, TEI per-
forms third-party maintenance work,
mainly on Boeing 737s, 757s and 767s.
Two years ago, Moscow-based Trans-
aero Airlines was still in expansion mode
and pursuing the exponential growth
rates it had recorded since its founding
in 1991 as the fi rst 100% privately owned
passenger airline in Russia. Passenger
numbers rose 150% in 2009-13 to 12.5
million and revenue almost tripled to
105.9 billion rubles ($1.7 billion), as the
airline benefi ted from Russia’s economic
boom and liberalization of the airline in-
dustry, including the opening of traf c
rights to international destinations. Net
profi t in 2013 was 788 million rubles.
But the environment changed
drastically last year. The deteriorat-
ing economic situation in Russia,
the collapse of the value of the ruble
against the euro and U.S. dollar (by
almost 40% in late 2014)—combined
with the political tensions around the
eastern Ukraine conflict and trade
sanctions imposed by Western gov-
ernments—took a severe toll on the
airline. Demand for travel, especially
on international routes, dropped of
and payments in euros and dollars
for services such as aircraft leases
became increasingly dif cult, driving
the airline to its current position.
As part of its turnaround plan,
Transaero is considering postponing
some deliveries of new aircraft slated
for this year. In September 2014, the
carrier canceled its orders for four
Boeing 787-8s and deferred deliver-
ies of six Sukhoi Superjet 100s.The airline is not disclosing which
other deliveries it might postpone.
Transaero has eight Airbus A320neos,
four A380s and four Boeing 747-8Is
on fi rm order. The Boeing order was
placed in 2012, and the fi rst aircraft
is expected to be delivered this year.
Transaero said earlier it plans to op-
erate its 747-8Is in a 460-seat, four-
class layout.
The fi rst of the carrier’s A380s also
is expected to join the fl eet this year
and a second in 2016. The y will be con-
fi gured for 650 seats, including 12 in
fi rst and 24 in business class. Delivery
of the A320neos, which were ordered
in 2011, are due to start in late 2017 or
early 2018.
In early 2013, the airline signed
a lease for 12 Boeing 737-800s from
Sberbank Leasing Co., with deliveries
scheduled in 2015-17. It additionally
has a memorandum of understand-
ing for 12 Irkut MS-21s with Ilyushin
Finance Co.
On top of this, Transaero signed
a letter of intent with Airbus at last
year’s Farnborough International
Airshow for eight A330ceos and 12
A330neos. These aircraft were not
included in Airbus’s orderbook at the
end of November.
Transaero’s fleet now consists of
103 aircraft—20 Boeing 747s, 14 777s,
18 767s, 46 737s, three Tupolev Tu-214s
and two Tu-204-100Cs.
The restructuring plan also includes
optimization of its passenger capacity
in the fi rst three months of 2015 (which
the airline says “is excessive for a low
season”), changes to its route network,
initiatives to enhance passenger trans-
fer of erings and measures to increase
cargo and mail traf c.
The new network strategy calls
for a hike in passenger capacity on
fl ights to southern resorts within theAIR TRANSPORT26 AVIATION WEEK & SPACE TECHNOLOGY/JANUARY 15-FEBRUARY 1, 2015 AviationWeek.com/awst
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