$1Bln State Bailout Offered To Beleaguered Air Carriers

The Finance Ministry and the Central Bank will offer airlines up to 30 billion rubles ($1.12 billion) in financing through the year's end, Interfax reported Monday.

"The Finance Ministry has confirmed its readiness to provide this kind of financing," Ivanov said Saturday at a Cabinet meeting, in comments released Monday.

Ivanov also laid out plans for legislation that would grant the Transportation Ministry the authority to oversee the financial state of the airlines.

"The Transportation Ministry will receive authority to set requirements for the financial stability of airlines and to examine their finances," Ivanov said.

He said quick government action was needed to fix problems in the aviation industry brought on in part by high fuel prices.

The Cabinet decided to transfer to a system of long-term fuel contracts between airlines and fuel providers and allow jet fuel providers direct access to filling stations, Ivanov said.

He added that airlines often sell tickets half a year in advance and that, because the fuel price is so volatile, this "creates a problem."

Carriers will also receive a deferment of six months for import tariffs on foreign aircraft.

At a Cabinet meeting on Monday, Ivanov said government officials had flown to Krasnoyarsk and Khabarovsk to discuss the long-term prospects of KrasAir and Dalavia with employees of the troubled airlines.

KrasAir suspended all flights except those to Moscow and Norilsk over the weekend because of debts and unpaid wages. Dalavia, which has 18.4 million rubles in overdue payments, also saw flights suspended this month.

Ivanov applauded the government's focus. "This is the right thing to do because with all the mergers and acquisitions, the difficulties of the economic situation and the restructuring of the sector in general, people should be at the center of our attention," Ivanov said.