Utair Airlines implores creditors to write off 40 per cent of its debts

Utair Airlines has asked its creditors to write off its 12-year syndicated credit line and half of another seven-year loan arrangement, according to a report in Vedomosti business daily.

One of Russia’s largest airlines, Utair has outstanding debts on two lines of credit, which amount to 23.7 and 15.4 billion roubles respectively. Overall, the airline is requesting a write down of a total of 31.4 billion roubles, which translates to 40 per cent of the pending debts, or 80 per cent of its syndicated credits.

More information here: http://www.rusaviainsider.com/utair-imp ... ent-debts/

Court accepts claim for UTair bankruptcy, hearings due April 17

MOSCOW, March 26. /TASS/. The arbitration court of the Khanty-Mansi Autonomous District accepted a claim filed by Flash Light Capital company for bankruptcy of UTair airline on March 26, as follows from the court ruling.

"The case is set for court consideration on April 17, 2019," the ruling says.

It was reported earlier that four contractors of the company sued UTair for bankruptcy. The four claims were filed on March 19 and 20. The total amount of claims is about 1.5 mln rubles ($23,300).

Source: http://tass.com/economy/1050642, http://www.rapsinews.com/judicial_news/ ... 95690.html, https://www.aviation24.be/airlines/utai ... s-of-debt/

When in the past 10 years were they not in trouble?

This court case is about 23.000 USD? That's nothing isn't it?

Noshow wrote:

This court case is about 23.000 USD? That's nothing isn't it?

It could be a strategic filing. Russian bankruptcy law seems to have some quirks, and one of them is that the first creditor to sue -- gets disproportionate advantage in the further bankruptcy proceedings.
I saw this tool used in years before; some companies abused it by undergoing series of "internal" bankruptcies, where most liquid assets were collateralized to a friendly creditor, another friendly creditor would file for bankruptcy, getting chairmanship of the creditor committee, and steering the process to (their) desired outcome.

And another firm order for the MAX goes poof.
UTAir had ordered 30 frames.

I doubt Russian government will let Utair just fold like that. There are dozens of places in Russia where a Utair flight is literally the only way to get in and out. I mean _literally_ because there is no roads or navigable rivers or anything other than a helipad.

workhorse wrote:

I doubt Russian government will let Utair just fold like that. There are dozens of places in Russia where a Utair flight is literally the only way to get in and out. I mean _literally_ because there is no roads or navigable rivers or anything other than a helipad.

They may let it crumble on its own and tear it apart like what they did with Transaero and VIM Airlines. Rossiya is created for such purpose....

juliuswong wrote:

workhorse wrote:

I doubt Russian government will let Utair just fold like that. There are dozens of places in Russia where a Utair flight is literally the only way to get in and out. I mean _literally_ because there is no roads or navigable rivers or anything other than a helipad.

They may let it crumble on its own and tear it apart like what they did with Transaero and VIM Airlines. Rossiya is created for such purpose....

Isn't Rossiya, just like Aeroflot, majority government owned? The only large independent airline in Russia would then be S7.

I guess those small places could be served by one of the numerous regional / charter operators, e. g. Polar Airlines.

workhorse wrote:

I doubt Russian government will let Utair just fold like that. There are dozens of places in Russia where a Utair flight is literally the only way to get in and out. I mean _literally_ because there is no roads or navigable rivers or anything other than a helipad.

They seem to be working on this possible eventuality. Utair has more than one operating company, and from what I remember, helicopter operation is ZAO "Utair", a separate legal entity and AOC from "Momma Utair". So, there is a chance that if bankruptcy comes about, the helicopter company could be simply sold off as a single unit, still operating.

mxaxai wrote:

Isn't Rossiya, just like Aeroflot, majority government owned? The only large independent airline in Russia would then be S7.

Rossiya is a member of Aeroflot group. All in all, Aeroflot Group and its subsidiaries flew almost 50% of pax in Russia in 2018. And yes, Aeroflot is majority government owned.

I’ll say it. Wasn’t a major S7 executive recently killed in a plane crash in Germany? Just saying..........

Silverstreak wrote:

I’ll say it. Wasn’t a major S7 executive recently killed in a plane crash in Germany? Just saying..........

One of the owners - Natalia Fileva

Utair's troubles seem to deepen:
https://www.interfax.ru/business/659798
Ernst&Young are not convinced of feasibility of Utair as a going concern, unless restructuring of debts is successful.

It was mentioned that Utair asked its banks to accept a haircut (some quoted figure as high as 80% haircut) on a large part of its ~1 bn USD debt portfolio.

It appears that while some banks are talking to Utair on possible terms, Sberbank, Russia's major savings bank and a major Utair creditor, is fairly public in its stance on "no haircuts" on its loans.

And then you have Aeroflot making a loss of 16,85 billion roubles in Q1 2019 alone.

http://www.rusaviainsider.com/aeroflot- ... rter-2019/

As long as you have a dominant governmental owned player in the market (Aeroflot) with basically unlimited financial resources it will always remain difficult for the remaining players. The Aeroflot Group has expanded significantly in the last 24 months into areas where UTAir used to be the major or only airline serving the route, for example Moscow to GRV, IGT, OGZ, MCX, ULV, SCW, HMA. Which is fine since it increases competition and gives people options, however is it a fair playing field, I don’t know.

All of this is entirely consistent with the strongman's apparent desire to recreate the conditions of the Soviet Union.

Why does it always have to be the strongman of the state? Is it not possible that Utair is badly managed and does not have the revenue to cover asset and operational costs! For the record Aeroflot is a well run airline. Transaero was an intetesting airline but was also badly managed - it had at least one of nearly every Boeing model and in the good old days used to run DC 10s to Kiev with 40 pax! Russia is a vast and difficult market!

Aeroflot isn't a well run business. It hasn't gone bancrupt simply because it isn't run as a business but as a symbol of national pride with unlimited subsidies most of which come in a form of Transiberian overflight charges.

Russia is a huge country, sizeable population and large mineral wealth. It's not as rich as the USA but it's not 3rd world either. If the management of a company stick to business and avoid politics, there should be ample opportunity for a well run airline to make money

davidjohnson6 wrote:

Russia is a huge country, sizeable population and large mineral wealth. It's not as rich as the USA but it's not 3rd world either. If the management of a company stick to business and avoid politics, there should be ample opportunity for a well run airline to make money

I'll go out on a limb here and say that Russia is not the sort of market where it is entirely possible to stick to business, avoid politics and avoid corruption.........unfortunately.

Without having any inside knowledge, I might want to agree that UTAir has probably not been one of the most well run airlines. While other (Russian) airlines changed to more modern equipment already back in the 90’s, they were the last ones in 2008/9 and instead of going for 737NG’s they ended up with 735’s and later 762’s, being always a generation behind the competition and by the time they got their first NG’s and 321’s they were already in trouble. They for much too long relied on their once impressive domestic network, but while Aeroflot and others expanded domestically UTAir did not add any lucrative foreign routes.

They have the impressive largest helicopter fleet in Russia, not a monopoly, but definitely dominant. From the outside someone would have to guess that they make healthy profits there unless of course many of the routes are governmental contracts (for serving remote regions) where ticket prices and or transport fees are regulated.

lhrsfosyd91 wrote:

Aeroflot isn't a well run business. It hasn't gone bancrupt simply because it isn't run as a business but as a symbol of national pride with unlimited subsidies most of which come in a form of Transiberian overflight charges.

100% agree. Whit all the subsidies Aeroflot is losing money.

seabosdca wrote:

All of this is entirely consistent with the strongman's apparent desire to recreate the conditions of the Soviet Union.

I think that is a bit too simplistic for quite a challenge the politicians in Russia have.

Given Russia’s vast size, many populated areas are only reasonably accessible by air due to distance, weather and absence of any other transport infrastructure. Air transport is also essential to stimulate private investments. I worked for a company who set up a production facility in a city (in Russia) with a population of more than 800K. It was either 36 hours by train or a 2+ hour flight on a Saab340 from Moscow. Getting there from Western Europe included changing planes and airports in Moscow, making this a 1,5 day trip one way, which put the region into a significant disadvantage to Moscow, St. Petersburg and others, although being closer to the customers, suppliers and having significantly lower labour costs. Many of these routes are not profitable and will never be. So either the government has to subsidise private airlines to fly the routes or have a state controlled carrier do this.

Not sure what the better strategy is, but just wanted to highlight that it is also about controlling that essential transport links are maintained and not suddenly dropped because a private airline goes bust or looses interest. The city we set up production in and where many other foreign investors as well did, has now 10 daily flights on 4 different airlines to Moscow and surely is not subsidised anymore, but the challenge was to startup the link to the rest of Russia (and the world)

I have rarely, if ever, been delayed on an Aeroflot flight. Connections run smoothly even with difficult immigration procedures

Its quite debatable to suggest that America is richer than Russia, or any where else. Russia does not run $B deficits and Russia does not owe $T. In fact Russia has almost no Soverign debt as it has been repaid over the last 25 years, something very few countries could achieve
Its necessary to review the history over the last 40 years to understand the achievements fully
Yet for all the corruption, the mismanagement and the distances, large numbers of passengers are transported every day
Consolidation occurs everywhere so why not Russia?

and lest not forget the good old USA is far far from an example of being non-corrupt. Aeroflot has shown up as viable connecting and also affordable options quite a few times. As a loyal Medallion I would consider them without a blink. In these cases it added flight time though as Moscow is not really well situated for connections. Point being, this is not the Aeroflot of the USSR. I did not know Rossiya was owned by Aeroflot, but man they have a beautiful livery. I do miss seeing Transaero, and Russian Holiday makers flocked to the corners of the globe with them. I wouldn't have wanted to fly longer than 3 hours in that condensed configuration though. With better management, they would've survived, they had the following and the passengers.