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. Last Updated: 07/27/2016

Region Takes Bigger Stake in Tyumen Air

Regional air carrier Tyumenaviatrans shook up its board at an annual shareholders meeting Wednesday, as the local Khanty-Mansiisk administration, which controls 67 percent of the company, voted four of its representatives onto the airline's new seven-seat board.

Tyumenaviatrans operates 171 helicopters — the world's largest fleet — and 96 airplanes. Most of its business comes from transporting employees for oil and gas companies, like Surgutneftegaz and Sibneft, and United Nations to work sites. The airline ranked No. 3 last year in passenger volumes.

Vladislav Nesterov, a re-elected board member and deputy mayor of Surgut, where the airline is based, said Wednesday that the Khanty-Mansiisk and Surgut authorities increased their stakes in the company last year from 8.8 percent to 25.1 percent and from 10 percent to 18.8 percent, respectively. An additional 23 percent of the company's shares belong to companies affiliated with the regional authorities, he said.

Shareholders overwhelmingly re-elected Andrei Martirosov as the carrier's general director. Neither of the three candidates put forward by Sovlink, an investment company and a minority shareholder of Tyumenaviatrans that brought Martirosov to the directorship two years ago, was elected to the board.

The new board members pledged to shareholders that the Khanty-Mansiisk and Surgut governments will take an active role in the airline's strategic development.

"We're planning a range of investment projects, including upgrading [the airline's] fleet and breaking into new markets," said Oleg Chemezov, first deputy head of the Khanty-Mansiisk government and a new board member.

Speaking to reporters after the meeting, Nesterov said the new board would work out a five-year strategic development program that will turn Tyumenaviatrans into one of the leading companies on the domestic market.

But the new board will not have to start from scratch.

"For the first time in its post-perestroika history, the airline turned a profit," Martirosov said in presenting the 2000 annual report to shareholders.

Tyumenaviatrans netted a $17 million profit on revenues of 2.4 billion rubles ($82 million) using Russian accounting standards, compared with a 1999 loss of 165 million rubles. Shareholders approved a dividend of 5 kopeks per share.

The airline's passenger business also increased. Last year, it carried 653,000 passengers, up from 403,000 in 1999, and introduced 16 new domestic routes. It also made its first 18 regular flights abroad to the United Arab Emirates, Turkey, Greece and Finland.

The airline's first-quarter results this year also showed a positive trend.

"We've overturned the practice whereby the first quarter is loss-making," Martirosov said. This year the airline reported a first-quarter profit of 117 million rubles.

In the first five months of this year, the airline carried 274,000 passengers and is planning to carry over a million passengers by year-end, Martirosov said.

Martirosov said that the airline plans to increase its revenue from helicopter operations by 50 percent, and is expecting to double its contracts with Surgutneftegaz and increase its business with the UN by 25 percent.

Martirosov also said with the full support of the local administration, the airline will push further for expanding operations in the region by means of swallowing smaller regional operators.

Tyumenaviatrans is now eyeing Tyumenskiye Airlines, Kogalymavia and Yamal for a possible merger, a move strongly supported by Tyumen region Governor Sergei Sobyanin.

Nesterov said it's highly likely that by the end of the year, the merger of debt-ridden Tyumenskiye Airlines with Tyumenaviatrans will be resolved.

"The first priority is to merge [the airlines] in Tyumen, then we will look beyond the region," he added.

Nesterov did not rule out that the regional administration would further increase its stake and said the authorities are preparing for a share emission. The final decision will be taken in two to three months, Nesterov said.

Aton analyst Yelena Sakhnova said that in the short term, minority shareholders will see the share emission as an unpleasant development. But in the long term, they will profit as the airline will be supported by the government in the process of consolidating the industry into seven major airlines, ensuring that Tyumenaviatrans stays a leading player on the market.