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. Last Updated: 07/27/2016

Aeroflot to Cut Off Firms Accused of Embezzlement




Russia's flagship air carrier Aeroflot has followed up on last week's purge of staff associated with billionaire tycoon Boris Berezovsky, moving to close off the routes allegedly used for siphoning off the airline's earnings.


The airline will liquidate Aeroflot-Tour, a subsidiary responsible for selling package tours to the domestic market, as well as end its use of Geneva-based company Andava as a consolidation point for its overseas earnings, Valery Okulov, Aeroflot's chief executive officer, told a news conference Monday.


Leonid Itskov, who was fired last week along with fellow former LogoVAZ employee Alexander Krasnenker, Aeroflot's commercial director, had been closely connected with Aeroflot-Tour.


Aeroflot plans to fill the gap left by the tour agency by contracting out to independent travel agents, he said. Similarly, it will move to replace Andava by holding a tender for banks to manage overseas ticket receipts.


A sizeable portion of revenues from ticket sales in the United States and Canada had been disappearing, Okulov said, blaming Andava for at least part of the shortfall.


Andava, set up in the mid-1990s to handle Aeroflot's overseas revenues, has been linked in numerous media reports to Berezovsky.


But the battle for Aeroflot is far from over, with Aeroflot-Tour fighting back by offering to buy shareholders' votes, according to Okulov. Several shareholders have complained after receiving letters from Aeroflot-Tour offering them money if they would vote its way at the next shareholders' meeting, he said.


Aviation analyst Paul Duffy said the root of the problem is that Okulov is not prepared to tolerate subsidiaries that do not deliver cash to Aeroflot, and Aeroflot-Tour is one of the prime offenders.


"Okulov is beginning to show some steel," Duffy said. "He wants to close down Aeroflot-Tour so they are trying to muster enough votes to defeat this intention."


The moves against Aeroflot-Tour and Andava are just the latest blows for Berezovsky, whose business interests have taken a hammering in recent weeks. In addition to the Aeroflot firings, the offices of oil major Sibneft, the jewel in Berezovsky's crown, were raided last week.


He has also been pushed at least partially out of the picture at two of his other former spheres of influence, national television station ORT and Transaero.


Meanwhile, Aeroflot looks well poised to weather the financial turbulence the Russian aviation sector is experiencing, Okulov said.


Unlike most other airlines, Aeroflot finished the year with a profit, Okulov said. he was unable to give precise figures for now, however.


The airline carried 4.45 million passengers f a 13 percent increase over 1997 f and established several new domestic and international flight routes. It also added 10 new Western planes to its fleet.


Analysts were also optimistic about the airline's prospects.


"Of all the airlines Aeroflot has the greatest chance of surviving," Duffy said. "If Okulov can make sure Aeroflot money comes to Aeroflot, it will not only survive but may even prosper."