Aeroflot Eyes S7 Takeover

Aeroflot is looking to acquire rival S7 and has asked that the state hand over its blocking stake in the airline.

The acquisition of S7, the country's second-largest airline, by Aeroflot, the flagship carrier, would be the biggest consolidation in the domestic aviation industry since the Soviet collapse when monopolist Aeroflot was broken up into hundreds of so-called "babyflots."

Aeroflot CEO Valery Okulov has asked Transportation Minister Igor Levitin to support the airline's bid for "direct control" over the state's 25.5 percent stake in S7, Interfax and Prime-Tass reported, citing a letter Okulov sent to Levitin.

"For the consolidation of domestic flights, we are working out the possibility of obtaining the S7 airline," Okulov wrote to Levitin.

Officials from both airlines could not be reached for comment late Wednesday. But S7 spokesman Kirill Alyavdin told RIA-Novosti that the airline had received no notification from Aeroflot.

"We have not received any letter with such offers, there are not and have not been any consultations with Aeroflot … about a sale," Alyavdin said.

Calls to the Transportation Ministry for comment went unanswered after office hours.

In the letter to Levitin, Okulov said the acquisition of S7 would be positive for the domestic airline industry, which has been hammered by soaring fuel costs and the global credit crunch and seen numerous delays and cancelled flights in recent months.

"I am absolutely confident that, given the current situation, it is necessary for large airlines to maximally coordinate their actions in order to ensure safe, stable and smooth air travel," Okulov wrote.

A merger would create an airline giant with roughly 15 million passengers per year.

Aeroflot carried 7.1 million passengers in the first nine months of this year, a 14.8 percent increase from the same period last year, according to a statement on its web site. In all, it flew 10.2 million passengers last year.

S7's passenger traffic grew 11.6 percent to 4.8 million people from January to September, compared to the same period last year, it said in a statement on its web site.

Aeroflot and S7 face competition from Russian Airlines, a new company currently being formed through the consolidation of 10 regional airlines. The new airline's combined passenger traffic would be slightly more than Aeroflot's.

Russian Airlines' main owner, state-owned Russian Technologies, said Tuesday that the new airline would serve as a domestic alternative to Aeroflot.

S7 is majority owned by businesswoman Natalya Fileva, who holds 63.26 percent, Vedomosti reported last month.

Aeroflot is 51 percent owned by the state.