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RosAvia was a newly formed national airline that was 51% owned by Rostekhnologia and 49% owned by the City of Moscow. Designed to serve as an alternative to Aeroflot, the airline, which earlier functioned under the working name Russian Airlines, will incorporate other regional carriers, including regional airlines such as AiRUnion, Krasair and Samara. It was interesting to note that the City of Moscow-owned Atlant-Soyuz was not initially mentioned as one of the airlines. The inclusion of Atlant-Soyuz in the RosAvia consortium has been a point of debate given the airline,s heavy debt load.

By late 2009 RosAvia was working to finalize the structure of the new airline before proceeding with any aircraft purchase and that would likely cause the delay. However, the restructuring of RosAvia as an independent "juridical person" had been completed, and the company's core consisted of eight regional airline companies.

The fleet was to due to include the aircraft of KrasAir, Domodedovo Airlines, Samara Airlines and Atlant-Soyuz Airlines. Rosavia would also merge the following state-controlled carriers: Rossiya, Orenair, Kavminvodyavoa, Vladivostok Air, Dalavia and Saravia.

In October 2009 Boeing submitted a bid in to supply 50 narrow bodied aircraft (with an option of 15 more) to RosAvia, a project valued at approximately $4 billion. On October 16, 2009, Boeing Russia submitted a bid, at the invitation of Rostekhnologia, to supply up to 65 passenger aircraft (737-800s)to RosAvia. This project is valued at approximately $4 billion and may include Ex-Im financing (reftel). Boeing is competing against Airbus and Russia's United Aircraft Corporation (which was not viewed as a viable competitor).

In the future, Rosavia would most likely procure locally produced aircraft, but the Russian manufacturer United Aircraft was not geared up for production. In the meantime, Rosavia would be exempt from customs duties on imported aircraft. Eventually, air passenger traffic would be divided between Rosavia (taking over all of the domestic routes) and Aeroflot (holding on to the international flights). The government was prepared to subsidize air travel between western Russia and the Russian far east.

In December 2009 Minister of Transport Igor Levitin suggested that control over new Russian airline RosAvia be transferred to Aeroflot. Under the proposal, Russian state corporation Rostekhnologia, 51% owner of RosAvia, would exchange all of its shares for a 28% stake in Aeroflot which is currently owned by National Reserve Corporation (NRC). Levitin expects the swap would help Aeroflot become a leading airline not only in Russia, but potentially in Europe as well.

Levitin's proposal regarding RosAvia was not received well by Rostekhnologia. Most analysts voiced the opinion that taking over RosAvia with its large debt burden and near-bankrupt small airlines is not in Aeroflot's best interest. The question remained over Aeroflot's ability to run a much larger number of airlines, since its management of two existing subsidiaries (Aeroflot Don and Aeroflot Nord) have not led to significant improvements.

Other analysts highlight that the deal would allow Aeroflot to strengthen its leadership in the domestic market, including the Russian Far East. Transferring control over RosAvia to Aeroflot was a complex process that could not be accomplished quickly. Different forms of ownership of RosAvia,s member airlines (some private and some state owned), and the debt burden of most of them, made the process challenging for the Russian decision makers.

Although a private company by 2016, Rosavia followed the tradition of Russia's aircraft design bureaus. Some of its senior technical personnel were involved in the roll-out of airliners such as the medium-range Tupolev Tu-204 and the Tu-214. By 2016 Rossavia's Frigate Ecojet aims to bridge this market gap by combining the capacity of a wide-body aircraft with the economics and range of a narrow-bodied one. It was designed to fly between 276 and 358 passengers over distances of 3,000 to 4,000 nautical miles, depending on the model. Rosavia planned to serially produce the Frigate Ecojet, and hoped to be operational by 2018.

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Page last modified: 26-03-2016 21:10:00 ZULU