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. Last Updated: 07/27/2016

Aeroflot Expanded Operations in '98

Russia's largest airline, Aeroflot, stepped up operations in 1998, transporting half a million more passengers than the previous year, but revenue in dollars was down because of the ruble devaluation.

The nation's flag carrier flew 4.4 million passengers last year, with the number of passengers on domestic flights rising to 712,700 from 210,700, Aeroflot chief executive Valery Okulov said Wednesday.

The number of passengers transported over the first and second quarters of 1999 is down 6 percent and 4 percent, respectively, from last year, he added.

Aeroflot's 1998 revenues swelled to almost 13 billion rubles ($1.3 billion) from 8 billion rubles in 1997, but revenue in dollars fell due to the weak ruble.

Even though the number of passengers jumped, Aeroflot flights were only slightly more than half-filled last year, less than the Russian average. By comparison, European airliners were filled to about 70 percent of capacity.

Analysts said Aeroflot's passenger numbers grew mainly because the company opened more routes and offered more flights.

With its revenues down, Aeroflot, which flew 22 foreign-made planes as of the end of 1998, faces the increasingly daunting task of repaying hundreds of millions of dollars in debt under the lease agreements, analysts said.

The company's debt grew to 7 billion rubles last year compared with 2 billion in 1997, a considerable increase even allowing for the devaluation.

Analysts attributed the growing debt to problems the company had retrieving proceeds from ticket sales abroad.

Meanwhile, Okulov announced Wednesday that Transport Minister Sergei Frank has been elected chairman of Aeroflot's board of directors, replacing Gennady Zaitsev, former chief of the Federal Aviation Service.

At the same time, the government has appointed four new state representatives to the board, including First Deputy State Property Minister German Gref and presidential aide and former Aeroflot President Yevgeny Shaposhnikov. Okulov lost his seat as a state representative.

A shareholders meeting Saturday re-elected Okulov as chief executive and voted down board candidates Alexander Krasnenker and Nikolai Glushkov, believed to be associated with financier Boris Berezovsky. Those rejections are seen as a blow to the tycoon.

Also, Okulov said that the state, which holds 51.17 percent of Aeroflot shares, may consider increasing its stake.

The meeting authorized the board to issue enough additional shares to triple the company's charter capital, but Okulov said no additional issue was planned.

Instead, the state may decide to receive more shares in Aeroflot in exchange for property it would hand over to the company, Okulov said. He did not explain where the additional shares would come from.

"One way or the other, this will mean a redistribution of property, minority shareholders' stakes will decrease," said Nadezhda Golubeva, an analyst with Aton.