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Russian government to issue 9-bln-rouble guarantee to Transaero airlines

The guarantee-secured VTB loan is to go solely to finance the company’s operating activities

MOSCOW, December 25. /TASS/. Russian Prime Minister Dmitry Medvedev has signed a government resolution on a nine-billion-rouble ($164.8 million) guaranteed support to Transaero, Russia’s second largest air carrier in terms of traffic, which has begun to experience problems against the backdrop of the current problems in the economy.

The Russian government’s website on Thursday posted the rules of granting this support in 2014. The state guarantee will cover up to 100% of Transaero’s liabilities on a three-year loan from Bank VTB to a sum of nine billion roubles. The guarantee will cover the company’s liabilities to be mature after January1m 2017.

The guarantee-secured VTB loan is to go solely to finance the company’s operating activities. Control over the use of this loan was vested with the Russian ministry of transport.

According to the government, this guarantee will entail no extra burden on the federal budget till 2017, since Transaero’s guarantee-secured liabilities become mature after January 1, 2017.

Transaero last August came up with a proposal for devising mechanisms of compensating for air carriers’ risks only to revoke its request for government guarantees in the autumn, saying that it had coped with problems on its own. Last weekend the news arrived the air carrier asked the government for assistance again due to its inability to compensate for operating costs.

Embattled airlines faced with financial constraints amid the current economic situation may count on state guarantees on loans, Deputy Prime Minister Arkady Dvorkovich told the daily Vedomosti in an interview. He added that the air carriers would have to cut costs and find opportunities for achieving breakeven operation at least in several months’ time.”

Alongside Transaero Russia’s third largest airliners, Utair, has asked the government for a helping hand. Its overall debt to banks has soared to 13 billion roubles (214 million dollars). Last week the company published its streamlining program expected to achieve breakeven operation in 2015. Its fleet of aircraft will be cut by 40%