Hungarian Carrier Not in State Sights

APAiRUnion boss Boris Abramovich, right, holding a drink after the purchase of Hungary's Malev in February 2007.
Russian Technologies will not be making a play for Hungarian carrier Malev despite gobbling up the state's stakes in parent company AiRUnion, the recently formed state corporation said in a statement.

After months of lobbying from Russian Technologies chief Sergei Chemezov, President Dmitry Medvedev finally signed a decree last Monday handing over government assets in the airline conglomerate to the state corporation.

Over the next month, majority stakes in AiRUnion subsidiaries Domodedovo Airlines and KrasAir and a 46.5 percent stake in Samara Airlines will be handed over to Russian Technologies.

AiRUnion, the country's third-biggest carrier, unites five airlines under the management of KrasAir bosses, twin brothers Boris and Alexander Abramovich. In early 2007, then-President Vladimir Putin signed a decree consolidating AiRUnion into one company.

The final makeup of the company has been held up by wrangling over the size of the government's stake, after an audit from Deloitte put the state's holding in the unified company at 58 percent, worth 4.36 billion rubles ($158 million).

AiRUnion scooped up Malev in April 2007 in a bid to break into international markets but never moved to merge the Hungarian carrier into the main company. Russian Technologies said in a statement that Malev would not be absorbed into AiRUnion.

In the first quarter of 2008, AiRUnion carried nearly 800,000 passengers, a 28 percent increase on the same period last year.

The incorporation of the AiRUnion assets represents the first confirmed government stakes to be included in Russian Technologies' startup assets. The corporation, based around state arms exporter Rosoboronexport, is said to be after stakes in up to 600 other companies.

Russian Technologies is also eager to acquire stakes in Rossia, Orenburg Airlines, Kavminvodyavia, Sibir and Saratov airlines, Kommersant reported.

Any further airline stakes that the corporation eventually controls could be merged into AirUnion, Chemezov told reporters Wednesday.

On Thursday, Chemezov met with AirUnion chairman Boris Abramovich to discuss the incorporation of the AirUnion stakes. A working group has been set up and plan agreed, Russian Technologies said in its statement.

The transfer of AirUnion to Russian Technologies is one of the hottest topics in the sector and looks like good news for the company but bad news for the its competitors, analysts said.

"In terms of the firm's investment potential, to be under Russian Technologies' wing is undoubtedly beneficial for AiRUnion," said Oleg Panteleyev, chief analyst at Aviaport.ru, an Internet portal that monitors the sector.

"But for the market as a whole, there are serious fears among competitors that Russian Technologies could use its influence to advance AiRUnion's position artificially," Panteleyev said.