State Will Supply Fuel To Indebted AiRUnion

As AiRUnion suffered new flight delays, Prime Minister Vladimir Putin offered substantial state support Tuesday by ordering the government to tap into its contingency reserves to provide jet fuel for the beleaguered alliance of five airlines.

Deputy Prime Minister Sergei Ivanov said later in the day that the government would make every effort to keep AiRUnion from bankruptcy. AiRUnion is the third-largest operator of domestic flights, with 12 percent of the market last year.

AiRUnion, in which the state controls two major carriers and owns just under 50 percent of a third, has delayed at least 15 flights from Moscow's Domodedovo Airport since Monday, Interfax reported. The delays stranded some 900 people.

AiRUnion ran up a huge jet fuel bill as prices soared this year. It first began delaying flights last week after suppliers severed contracts over unpaid bills. State corporation Russian Technologies, which is set to take over the government's stakes in the three carriers, came to the rescue late last week by pledging to pay for new fuel supplies. That fuel ran out Monday.

Under Putin's order, the Federal Reserves Agency will mete out 24,000 tons of fuel from Tuesday to Sept. 14 for AiRUnion to operate current flights. Russian Technologies will guarantee payment, the order said.

In an additional measure, Russia's other airlines, including Aeroflot, have agreed to give spare seats to AiRUnion passengers, Transportation Minister Igor Levitin said Tuesday.

Authorities last week banned AiRUnion from selling tickets for the period starting Oct. 28, but Ivanov expressed confidence that the planes would eventually continue to fly.

"The situation in AiRUnion is difficult but not irreparable," he said, Interfax reported. "I think we will overcome this crisis."

Calls to AiRUnion's press center went unanswered Tuesday afternoon.

Levitin said AiRUnion's largest airlines -- state-controlled KrasAir and Domodedovo Airlines, would hold board meetings next week to map out possible solutions to the crisis.

A spokeswoman for Russian Technologies said it would come up with a plan for the airlines after it formally takes over the stakes and carries out an audit.

Exactly when the stakes will change hands remains unclear, said Alexander Komarov, a spokesman for the Federal Property Management Agency, which is holding the shares. The agency is looking at ways to appraise the stakes before handing them over, he said.

Compared with other Russian airlines, AiRUnion was dealt hard blow from increasing jet fuel prices because it operates a fleet of mostly old Soviet-made aircraft, said Kirill Kazanly, an analyst at Troika Dialog.

Boeings and Airbuses consume half of the fuel that AiRUnion needs to run its jets, he said.

Should AiRUnion go bankrupt, the country's leading airlines would have the capacity to handle its traffic, Kazanly said.