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. Last Updated: 07/27/2016

Aeroflot Re-elects Chief In Snub to Berezovsky




Aeroflot investors took steps to distance the airline from businessman Boris Berezovsky by re-electing his foe Valery Okulov as chief executive at the annual shareholders meeting over the weekend, which also voted to bring in an international auditor for the first time.


Shareholders on Saturday also snubbed two candidates for the board of directors who are said to be closely associated with Berezovsky, the well-connected financier believed to control Aeroflot.


The vote was a show of confidence for Okulov, President Boris Yeltsin's son-in-law, who earlier this year mounted a much publicized campaign to distance the airline from Berezovsky. When he was first appointed at Aeroflot in 1997, Okulov himself was reputed to have ties with Berezovsky, but he turned against the controversial tycoon in February of this year when prosecutors raided the airline's offices during a probe into Berezovsky's business dealings.


Okulov's anti-Berezovsky drive led to the sacking of one of Saturday's board hopefuls, former Aeroflot commercial director Alexander Krasnenker. The other candidate, former Aeroflot vice president Nikolai Glushkov, is currently under investigation on suspicion of money-laundering.


Berezovsky has been accused of instituting shady management practices that have bedeviled Aeroflot in the past, including a scheme to use a Swiss company to skim profits from the airline's international operations.


The airline's recent history has done little to reassure outside shareholders, a problem that puts the heavily leveraged company in an uncomfortable position. Aeroflot has incurred hundreds of millions of dollars of debt to buy and lease Western airliners, and needs to avoid alienating potential investors, analysts said.


"Aeroflot is dependent on foreign money," said Kim Iskyan, an analyst at MFK Renaissance. "They need to be able to tap capital markets."


The government, which holds a 51.17 percent stake in the company, is believed to be interested in selling shares as a means of filling its empty budget coffers, Iskyan added.


However, in order to do this it must patch up its relations with shareholders.


In what appeared to be a move toward that end, Aeroflot announced that it has hired the international accounting firm Arthur Andersen, along with a Russian firm, as the official auditors for the airline.


"I think it will increase the transparency of Aeroflot," said Anna Doumnova of United Financial Group. "International accounting standards will give investors a better picture of how the company is really doing."


Also at the meeting Saturday, investors voted to pay 1998 dividends of 0.8 kopeks on ordinary shares and gave the board of directors the authority to issue up to 3,164,149,000 ordinary shares. The airline currently has 800 million outstanding ordinary shares.


Meanwhile, Aeroflot said in a statement Monday that it had posted an operating profit of 756 million rubles ($77.14 million) in 1998. It did not offer any comparison figures, but Troika Dialog estimated the profit to be a 40 percent increase over the previous year.


Analysts said, however, that the profit mainly was due to the effects of the ruble devaluation and low oil prices.