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. Last Updated: 07/27/2016

CFO Trumps CEO in Aeroflot Board Coup

For MTAlexander Zurabov, the new chairman of Aeroflot's board of directors.
The man widely credited with turning Aeroflot into a lean financial machine, chief financial officer Alexander Zurabov, leapfrogged his boss and rival Friday to become chairman of the flagship carrier's board of directors.

Aeroflot CEO Valery Okulov, former President Boris Yeltsin's son-in-law, stripped Zurabov of the power to sign financial documents in March, just two months after Zurabov was appointed aviation adviser to Prime Minister Mikhail Kasyanov.

Out of nine board members who voted Friday, Okulov was the only one to vote against Zurabov.

Okulov was not available for comment.

Aeroflot shareholders, of which the government is the largest with a 51 percent stake, last year voted to give the board broader powers, including sole authority for any transaction worth more than $15 million. The board can also dismiss the CEO by a simple majority vote.

Speaking to reporters after the vote, Zurabov said he would leave his current post as CFO but that there were no grounds for replacing Okulov and that he would stay the course that has brought the company more revenues and better service for three years running.

"The airline is functioning within the guidelines set forth by the board of directors and shareholders. Therefore, I expect no cardinal changes in staff are on the way," Zurabov said.

Likewise, no major changes are expected for the airline itself, he said.

"The basics for the company's development were laid down in 2000. ... We have achieved two-thirds of our goals," Zurabov said.

After flying $60 million into the red in 1999, the company reported its first net profit, $8.6 million, in 2000, followed by profits of $20 million and $100 million in 2001 and 2002, respectively.

The company is beginning to restructure its fleet of foreign Boeings and Airbuses, which will save the company up to $100 million in operating costs a year from 2005.

Zurabov said the airline was still expecting net profit to hit $115 million this year despite a worldwide industry slump and a downturn in passenger numbers as a result of the war in Iraq and the outbreak in Asia of severe acute respiratory syndrome, or SARS.

Earlier this month, SARS fears prompted Aeroflot management to suggest cutting operating costs by as much as 15 percent and capital investment by 30 percent this year.

"After Sept. 11, 2001, many people thought that the airline business would plummet in Russia as well. But last year was the best ever for Russian airlines," Zurabov said.

He added, however, that he has no intention of interfering with the day-to-day running of the airline, which he said he will leave to the management team.

Instead, Zurabov said he and the other board members will focus on more strategic tasks, including the constructing the long-anticipated third terminal at Aeroflot hub Sheremetyevo, joining one of the global airline alliances, rebranding the company's image and consolidating the airline industry.

As Kasyanov's adviser on aviation, Zurabov will also focus on maintaining dialog with domestic aircraft manufacturers.

Yelena Sakhnova, transportation analyst at United Financial Group, called Zurabov appointment well deserved.

"He must be tired of the constant stand-off with Okulov and is looking ahead to more strategic work for which he is now well-placed," Sakhnova said.

Sakhnova said it would be better for the airline if Zurabov kept his position as CFO, "but given the current situation [with Okulov] it is probably to the company's advantage that he step down in that capacity to ease the daily tension."