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. Last Updated: 07/27/2016

Transaero Pitches Linkup To TWA

Transaero, Russia's second-biggest airline, has made a pitch to U.S. carrier Trans World Airlines for a strategic partnership that could see the two airlines operating joint flights and coordinating schedules and prices, a Transaero official said Thursday.


Transaero vice president Grigory Gurtovoi said the company is operating with a consortium of other investors on "a long-term restructuring deal" for TWA that would give the two airlines access to each other's markets.


"This will be a massive operation to connect TWA to Transaero in a strategic alliance," said Gurtovoi, in a telephone interview from the airline's London offices. He denied earlier reports that his company was attempting to merge with TWA.


TWA refused to confirm the offer. Spokesman John McDonald told The Associated Press on Thursday that the deal is "speculation and I can't confirm any of it. We talk to a lot of people a lot of times and when we're ready to do business with people we make an announcement."


Although officials at TWA wouldn't confirm the proposal, Gurtovoi described their reaction as positive.


The prospective partnership would involve "large-scale flight restructuring and network rearrangement," Transaero officials identified the New Jersey-based investor group Strategic Capital Group as one of several partners in the deal, but declined to identify the others.


Although Transaero gave few details about the partnership proposal, they said plans have been in the offing for about a month. The Associated Press reported that both sides were still preparing a detailed business plan, and Gurtovoi said he expected the deal to be completed sometime next month.


Another Transaero representative said the consortium's choice for a partnership fell to Transaero because of the considerable value the airline can bring to the arrangement without putting up its own capital.


"Russia and the CIS are possibly the largest remaining markets that are not served by Western air carriers," said Chris van Riet, Transaero's director for corporate strategy. "Transaero has a comprehensive Russia-wide network and can serve as a great bridge [between Russia and the West]."


The deal would allow his company to tap the profitable American market through TWA's distribution system, he said. TWA does not currently fly to Moscow but Transaero flies to a number of U.S. destinations from its base at Sheremetyevo 1.


Van Riet would not disclose financial details or say what share Transaero would hold in the prospective partnership. However, he said Strategic Capital, which is gunning for operative control of TWA, is well-versed in the aviation industry.


The group was also reportedly involved in brokering another, unspecified, deal for Transaero.


Strategic Capital could not be reached for comment.


Recent years have not been kind to the veteran U.S. carrier. The crash of its Paris-bound Flight 800 shortly after takeoff from New York on July 17, killing 229 passengers and crew, capped a four-year span that has seen the airline go through four CEOs and two bankruptcies, according to USA Today. It is expected to post an estimated loss of $150 million for the past financial year.


Despite the airline's travails, a majority 51 percent share in TWA has an estimated value of at least $3 billion, news services reported. It is still unclear how the consortium plans to acquire the stake in the airline, which is 30 percent employee-owned.


If the deal gets off the ground it will mark the end of Transaero's search for a partner in the United States. In July 1996, it signed a preliminary agreement with American Airlines for code-sharing on the Moscow-Chicago route. But Gurtovoi said the future of the deal was uncertain.


A partnership with TWA would be a major step for the progressive, 5-year-old airline. Since its formation with start-up capital of just $5,000, Transaero has grown in strength to become Russia's second largest airline after Aeroflot, with 1996 revenues of $250 million -- a nearly $70-million increase over the previous year.


Peter Smith, an aviation expert at the Kasparov Consultancy, said similar agreements could well determine the future of the industry.


"Code sharing appears to be very much the mood of the day," said Smith. "There will probably be many such alliances in international aviation."


Gurtovoi said he is optimistic that a successful arrangement can be made.


"I think it is a reasonable deal which will benefit TWA in all aspects . We are working out an agreement that will benefit both sides equally," he said.


Gurtovoi added the agreement would not affect rival Aeroflot's chances in the American market. "They have an agreement of their own," he said, referring to the national airline's recent deal with Continental.