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. Last Updated: 07/27/2016

Aeroflot Board OKs Historic Airbus Order

Aeroflot's board of directors late Tuesday approved the largest fleet upgrade ever undertaken by a Russian carrier.

The state-controlled company's board, dominated by government representatives, agreed to acquire a total of 18 mid-range Airbus A320s -- 10 under seven- to 10-year operational leases and eight under 12-year financial leases.

The list price of the A320 and its A319 derivative is $50 million, but neither side will reveal the true cost of the package. What is known, however, is that Aeroflot's board called an extraordinary shareholders meeting for the end of December to formally approve the deal, which means, under company law, that it is worth more than 50 percent of the carrier's assets, currently valued at $554 million.

Aeroflot currently flies 111 airplanes, 27 of which are foreign, including 11 Airbus A310s and 16 Boeings -- 10 737s, four 767s and two 777s. The airline intends to shed the 737s and 777s and fly just two foreign models from 2005: 18 A320s and nine 767s.

By the end of 2004, when all 18 jets are to come into service and the overhaul of the foreign fleet completed, the company expects to save $100 million a year in operational costs and boast the youngest foreign squadron in Europe.

Sergei Koltovich, head of Aeroflot's fleet planning department, said U.S. giant General Electric's aviation finance arm, GECAS, is handling the operational leases, while the financial leases would likely be arranged by one or more European agencies, such as Britain's ECDG, Germany's Hermes and France's Coface.

Aeroflot's capital investment will not be significant, he said.

Aeroflot expects to receive the first A-320 by September and take delivery of another seven plus a Boeing 767 by the end of next year.

The rest will be delivered in 2004.