Transaero Owes Billions To Russian Fuel Suppliers

LondonCity · Sun Dec 21, 2014 2:05 pm

Russian airline Transaero has asked both creditors and the Kremlin for financial support.

According to reports in the Russian media today, the carrier has threatened to suspend flights in the near future.

It owes two Russian fuel suppliers around 4.5 billion roubles. Rossneft is owed 2.5 billion while Gazzprom Aero is owed almost 2 billion.

Article in Russian language:

http://tvrain.ru/articles/transaero_...rozila_priostanovit_polety-379706/

ZKCIF · Sun Dec 21, 2014 2:47 pm

The quoted article states that the profit decreased 5.6 times which would mean that the airline is still profitable. Think what you like, but I somehow doubt the credibility of the source

LondonCity · Sun Dec 21, 2014 3:26 pm

You may be right. In another Russian media report which has subsequently appeared, Transaero is denying that it might have to suspend flight operations.

http://lenta.ru/news/2014/12/21/transaero1/

migair54 · Sun Dec 21, 2014 3:55 pm

Quoting LondonCity (Reply 2):
You may be right. In another Russian media report which has subsequently appeared, Transaero is denying that it might have to suspend flight operations.

Even if they´d be about to stop they´d denied, otherwise the panic could affect them a lot.

Maybe they told the government that as a pressure measure to get some help, and someone leak out that.

Quoting LondonCity (Thread starter):
4.5 billion roubles.

Is that around 76 million USD?? If that´t the case I don´t think it is such a huge debt for an airline the size of Transaero. Actually I think the biggest problem for them is the decrease in the russian currency and he economic crisis in Russia, for them that Russian pax are the main income it´s a huge problem, they don´t rely so much in other pax like for example SU.

I guess we will not see big orders from Transaero in the near future, some people were dreaming about them getting some A380, but i´m not sure if that´s a real possibility.

LondonCity · Sun Dec 21, 2014 4:18 pm

Thanks for your comments. I agree with what you say. Transaero depends so much on Russian travellers. But in the present economic circumstances there will be fewer of them.

But also foreign carriers serving Russia will be carrying fewer passengers too. EK, for example, has transferred its A380 service from Dubai-Moscow to Dubai-Milan.

One wonders if Transaero ever will take delivery of its A380s ...

aircatalonia · Sun Dec 21, 2014 5:10 pm

Quoting migair54 (Reply 3):
I guess we will not see big orders from Transaero in the near future, some people were dreaming about them getting some A380, but i´m not sure if that´s a real possibility.

And those 747s visiting southern Europe every summer are probably a thing of the past too.

LOWS · Sun Dec 21, 2014 5:57 pm

Quoting aircatalonia (Reply 5):
And those 747s visiting southern Europe every summer are probably a thing of the past too.

Or visiting us in SZG in the winter. I think we're down to weekly A320s this winter.

PanAm1971 · Sun Dec 21, 2014 6:10 pm

I really like Transaero. I've always thought of them as an airline with real potential to become one of the greats. I'm so sorry they've gotten all caught up in this crisis. I really hope things work out and they stay operating. Pulling for them.

Flyglobal · Sun Dec 21, 2014 6:19 pm

Quoting aircatalonia (Reply 5):
And those 747s visiting southern Europe every summer are probably a thing of the past too.

This is so.
Plus last Feb. I made a holiday trip to Dominicanean Republic. One Tranearo 747 was in boarding and another one was incoming.
Then one of my colleagues just came back from Thailand. 2 Transearo 747 and one 777 at Bangkock Airport at the same time.

Luckywise they can save fuel soon, as next year they will get their first A380.
(I am sure some people will immediately open another A380 thread for that ) - but not me- propably members with a Boeing model name in their NIck. We lack on A380 threads recently.

On a more serious note: Yes I expect lower russian travel for the enxt 2 years to come which will have its effect not only on Airlines like transaero, but also at Tourist destinations.

Regards

Flyglobal

Wayfarer515 · Sun Dec 21, 2014 7:10 pm

Two notes on this,Transaero has just announced they will elliminate fuel surcharges for their international flights, I guess that's not something they'd do if they were low on cash.

The other thing is that just a few months ago, the Russian government offered all the major airlines financial assistance, and Transaero was one of the few not to take it, IIRC the other one being S7.

Transaero is headed by one of the most competent individuals in the entire airline industry. So I guess Mrs. Pleshakova should have all this under control.

What I expect though is for them to cancel many of its widebody orders, and bring forward some of their narrowbody orders which they had deferred for the medium term. Case in point, it seems their SSJ100 order which was deferred to 2016 might be brought back next year due to the reduced capacities required and better economics of the SSJ100.

Byrdluvs747 · Sun Dec 21, 2014 7:15 pm

So it looks like that fact that 93 out of 100 planes are leased and I assume payments are made in USD. Payments on their fleet have nearly doubled since January of this year. 2015 doesn't look any better for them if the continues to trade in the 50-60 range and their russian originating traffic declines with a recession.

By comparison, the crisis doesn't seem to be hurting S7 at the moment. They're inking new deals with EK, JL.

ZKCIF · Sun Dec 21, 2014 9:29 pm

The article also lacks credibility as it presumes that Utair is also nearing bankruptcy and HAS RECENTLY DECREASED ITS FLEET BY 40 PER CENT which is not true.
in short, BS paid by some competitors or just utter incompetence...

r2rho · Sun Dec 21, 2014 9:36 pm

Quoting migair54 (Reply 3):
uoting LondonCity (Thread starter):
4.5 billion roubles.

Is that around 76 million USD??

Thank you for putting that in perspective, rather than the panic creating thread/article header.

Quoting flyglobal (Reply 8):
Yes I expect lower russian travel for the enxt 2 years to come which will have its effect not only on Airlines like transaero, but also at Tourist destinations.

They will simply fly to Southeast Asia instead of Southern Europe. Though there will of course be some reduction in the overall travel amount.

KaiTak747 · Sun Dec 21, 2014 11:08 pm

The exchange rate is going to massively affect their financial performance. Leases and fuel abroad are going to be in USD which are going to drive their costs up, and the exchange rate is going to make foreign trips much more expensive for Russian tourists. Overall not a pleasant future for Transaero in the near term.

dynamo12 · Sun Dec 21, 2014 11:30 pm

Quoting ZKCIF (Reply 11):
in short, BS paid by some competitors or just utter incompetence...

I'm not so sure...

Are these planes on USD or EURO leases? If so, these russian carriers are going to be paying USD leases with rubles that are now worth much less.

Additionally, demand for flights is going to decrease as tourists are not going to want to spend 40% extra.

The squeeze has already started on UTair. That said, I do expect the Kremlin to step in on these items to avoid embarassement. But this is going to hit financials hard in short run. In long run it may make russia more competitive pricing was on homegrown technology.

"Russian lender Alfa-Bank, has filed four new lawsuits against the country’s leading regional carrier UTair and UTair-Leasing. This comes a day after a leasing company filed a bankruptcy petition saying UTair failed to pay $67,000 for leased airplanes. ... On Tuesday, court bailiffs seized UTair’s seven Mi-8 helicopters, TASS reports." - http://rt.com/business/212667-alfa-bank-utair-bankruptcy/

Aesma · Mon Dec 22, 2014 12:20 am

Quoting r2rho (Reply 12):
They will simply fly to Southeast Asia instead of Southern Europe. Though there will of course be some reduction in the overall travel amount.

I thought I read somewhere that Russian public employees (of which there are many), including employees of state-controlled companies, are "encouraged" to take their vacations inside Russia's borders ?

prebennorholm · Mon Dec 22, 2014 1:19 am

Quoting dynamo12 (Reply 14):
"Russian lender Alfa-Bank, has filed four new lawsuits against the country’s leading regional carrier UTair and UTair-Leasing. This comes a day after a leasing company filed a bankruptcy petition saying UTair failed to pay $67,000 for leased airplanes. ... On Tuesday, court bailiffs seized UTair’s seven Mi-8 helicopters, TASS reports." - http://rt.com/business/212667-alfa-b...ptcy/

Now that is some quite funny article. First:

leasing company filed a bankruptcy petition saying UTair failed to pay $67,000 for leased airplanes.

Well, $67k almost fills the tank on one of their B767 once, or pays leasing fee for a few days for one of their 100+ planes.

On Monday, UTair settled part of its $67,000 million debt to Avialeasing...

Now that's something, 67,000 million = 67bn! Wonder if both are three zeroes off, to both sides.

The total debt of the company is about $1.1 billion (60 billion rubles). UTair revenue for the first half of 2014 amounted to $600 million (32.8 billion rubles) with net profit of $100,000 (5.5 million rubles).

Sounds more sober. But quite disturbing. With that sort of profit it will take them 5,500 years to pay off the debts.

Anyway, UTair is mainly owned by the Russian state, district administrations, and oil companies, and a big part of the business is serving the oil Companies. So no way will they be allowed to fold.

[Edited 2014-12-21 17:21:08]

smbukas · Mon Dec 22, 2014 9:14 am

Quoting migair54 (Reply 3):
Is that around 76 million USD?? If that´t the case I don´t think it is such a huge debt for an airline the size of Transaero.

It is quite a big money still. Turnover of Transaero in 2013 was 105,901 million roubles, so that means that at least 4-5% of yearly bills was not paid.

Other side is that Transaero owes fuel bill for government owned Russian companies, so that means they are generally in government's hand to unplug or not. It is usual practice in Russia and CIS how government supports companies - they just let not to pay the bills.

KarelXWB · Mon Dec 22, 2014 9:48 am

Quoting migair54 (Reply 3):
some people were dreaming about them getting some A380, but i´m not sure if that´s a real possibility.

There are no dreams: their first A380 is already in assembly.

scouseflyer · Mon Dec 22, 2014 10:57 am

Quoting KarelXWB (Reply 20):

I fear that they're going to do a sky mark here and never take them

SCQ83 · Mon Dec 22, 2014 11:00 am

Quoting Wayfarer515 (Reply 9):
Two notes on this,Transaero has just announced they will elliminate fuel surcharges for their international flights, I guess that's not something they'd do if they were low on cash.

That must be the reason there are flights from Western Europe to Bangkok for less than 200 USD return for as soon as next week. I guess buying them at this point is a bit like playing the Russian roulette

migair54 · Mon Dec 22, 2014 11:01 am

Quoting KarelXWB (Reply 20):
There are no dreams: their first A380 is already in assembly.

Yes. I know, I read the other day I wanted to say "some more", they have 20 B744 and when they ordered the A380 it was to replace B744, but so far they order 4 only.

Quoting Wayfarer515 (Reply 9):
Two notes on this,Transaero has just announced they will elliminate fuel surcharges for their international flights, I guess that's not something they'd do if they were low on cash.

The other thing is that just a few months ago, the Russian government offered all the major airlines financial assistance, and Transaero was one of the few not to take it, IIRC the other one being S7.

That is good news for them.

KarelXWB · Mon Dec 22, 2014 11:03 am

Quoting migair54 (Reply 23):
but so far they order 4 only

That's true, though they also have four 747-8i aircraft on order, making a total of eight new VLA's.

kogge · Mon Dec 22, 2014 11:07 am

Quoting KarelXWB (Reply 20):
There are no dreams: their first A380 is already in assembly.

still a dream... In assembly does not mean that they will be delivered.

Quoting scouseflyer (Reply 21):
I fear that they're going to do a sky mark here and never take them

exactly.

I would be very surprised if Transaero will actually take an A380 in 2015.
They are also supposed to get 2x B.747-8I, some A321 (via ICBC leasing) and some B.737-800 (ordered for them by Sberbank) in 2015. All fresh from the factories.
Hard to believe that anything of that will get reality next year...

LAX772LR · Mon Dec 22, 2014 11:40 am

Quoting KaiTak747 (Reply 13):
Overall not a pleasant future for Transaero in the near term.

Indeed. How are those 748i and A388 orders looking now, Transaero?

peterinlisbon · Mon Dec 22, 2014 2:05 pm

At least fuel is cheap, or does that make things even worse? Incidentally, I was just looking at fares from Beijing to Istanbul and Transaero is offering flights fo 220€. Not a bad deal at all, but I would hesitate to buy tickets too far in advance as who knows what will happen.

migair54 · Mon Dec 22, 2014 2:32 pm

Quoting KarelXWB (Reply 22):
That's true, though they also have four 747-8i aircraft on order, making a total of eight new VLA's.

Yes, when they order all of this BLADE already looked very weird ordering only 4 of each and not 8 of one of them.

I think Transaero in the next year's can grab some nice second hand B77W and configure them in high density comfiguration with around 450 seats, that will be a great plane for them.
They already operate B777 so it won't be that expensive to add more to the fleet.

Quoting peterinlisbon (Reply 25):
Beijing to Istanbul and Transaero is offering flights fo 220€

Actually that's a great price, I'd not be very worry about Transaero, they won't close, they can always accept the government help.

Byrdluvs747 · Mon Dec 22, 2014 6:05 pm

I would love to see a S7-UN merger but retaining the S7 name and livery.

Quoting dynamo12 (Reply 14):
That said, I do expect the Kremlin to step in on these items to avoid embarassement.

Yes, but how long and how often can the Kremlin step in to bail out airline and other industries. Their reserves are already falling.

SonomaFlyer · Mon Dec 22, 2014 6:40 pm

Its unfortunate how the Russian airlines are caught up in this mess but the crash of the ruble and the fact that aircraft are paid for in dollars is a killer. The ruble has lost about half its value against the dollar this year and that fact makes taking delivery of new aircraft a killer financially. Add in the fact their Russian passenger base is feeling the squeeze and not flying as much makes it a double whammy.

seabosdca · Mon Dec 22, 2014 6:43 pm

They need VLA capacity as many of their destinations are of the "pack-'em-in" variety. They can't keep themselves going without plenty of large aircraft. But given Russia's struggles at the moment I expect in hindsight they wish they had found a few more used 747-400s and 777-300As rather than ordering new VLAs that require hefty delivery payments in non-Russian currency.

peterinlisbon · Tue Dec 23, 2014 1:22 pm

I just went to the Russian embassy and they told me that to get a visa here in Asia would cost 1000$ as I am not a resident. I don't know what they were smoking when they decided on that price. Even with the 200$ tickets on Transaero from Asia to Europe, it still works out more expensive than flying business class on another airline.

I'm sure no government in the world does more to discourage visitors thank Russia. Maybe if they change their crazy visa rules they could save some of these airlines without having to bail them out. The could make up for the fall in outbound traffic with an increase in inbound traffic if they said no visas required for EU citizens for the next 6 months, for example. This would also help them get their hands on some foreign currency.

What other country tells you when you go to get a tourist visa that you need an invitation (that their friends across the road can sell you for a convenient price) or that if you want a visa because of your nationality you have to give them 1000$. Every time I think of going to Russia, their local embassy convinces me not to.

Severnaya · Mon Dec 29, 2014 9:39 am

Quoting peterinlisbon (Reply 30):
Maybe if they change their crazy visa rules they could save some of these airlines without having to bail them out. The could make up for the fall in outbound traffic with an increase in inbound traffic if they said no visas required for EU citizens for the next 6 months, for example. This would also help them get their hands on some foreign currency.

Why should Russia abolish visa requirements, while for RU citizens it's equally hard, if not harder to get an EU/Schengen/USA visa?

peterinlisbon · Mon Dec 29, 2014 10:25 am

Quoting Severnaya (Reply 31):
Why should Russia abolish visa requirements, while for RU citizens it's equally hard, if not harder to get an EU/Schengen/USA visa?

Because it would be in their interests to do so as inbound tourism and transit would benefit the Russian economy (especially airlines and hotels) and reduce the pressure on the rouble. Their policy of making it difficult for foreigners to visit Russia hasn't had any positive effect so far, has it? People just go elsewhere on holiday, and Russian still need visas for the EU.

KarelXWB · Mon Dec 29, 2014 1:22 pm

Transaero receives financial support from Russian government:

http://www.ch-aviation.com/portal/ne...al-support-from-russian-government

Quote:
Transaero Airlines (UN, Moscow Domodedovo) has asked for and received government support last week due to its short term financial issues caused by the "current macroeconomic environment". The government has provided a state guarantee for a RUB9 billion (USD164.8 million) loan to be provided to the carrier by VTB Bank. Prior to the loan being granted, Transaero's Director General Olga Pleshakova had warned that the carrier might have to suspend operations before the end of the year already because of its financial difficulties.

Aesma · Mon Dec 29, 2014 1:39 pm

Quoting peterinlisbon (Reply 25):
At least fuel is cheap, or does that make things even worse? Incidentally, I was just looking at fares from Beijing to Istanbul and Transaero is offering flights fo 220€. Not a bad deal at all, but I would hesitate to buy tickets too far in advance as who knows what will happen.

If they can't pay for fuel, can they pay for spare parts ? Maintenance ? Pilot training ?

[Edited 2014-12-29 05:40:08]

Severnaya · Mon Dec 29, 2014 2:49 pm

Quoting peterinlisbon (Reply 32):
Because it would be in their interests to do so as inbound tourism and transit would benefit the Russian economy (especially airlines and hotels) and reduce the pressure on the rouble.

Pressure on the ruble would be reduced by receiving some more tourists from the EU...not sure in what world you live, but that would perhaps gain a few max hundred millions of Euros per year (and this is a very high estimate). This certainly wouldn't alliviate the pressure on the rubble, where tens, if not hundreds of billions of Euros are at stake. And those are only the financial consequences, but what about the security issues, i.e. the Schengen area isn't exactly known for protecting it's borders very well, especially in the South and South East of the Schengen zone.

Quoting peterinlisbon (Reply 32):
Their policy of making it difficult for foreigners to visit Russia hasn't had any positive effect so far, has it?

Correct, but Russia in general has a visa policy based on reciprocity. For citizens from a Schengen country it's actually very easy to get a Russian visa, and certainly easier than for Russians getting a Schengen Visa.

Quoting KarelXWB (Reply 33):
Transaero receives financial support from Russian government:

Yes, see also http://itar-tass.com/ekonomika/1671017

A342 · Mon Dec 29, 2014 3:00 pm

Well, who knows, maybe a devaluating ruble will actually drive Russians to book MORE vacations?

After all, many rushed to buy cars, smartphones and other expensive things while their money still had some value...

r2rho · Tue Jan 06, 2015 2:42 pm

Quoting peterinlisbon (Reply 30):
Maybe if they change their crazy visa rules they could save some of these airlines without having to bail them out.

Visa rules are reciprocal. Russia will change its visa rules if the EU changes theirs. Russia is not going to give away anything for free, it's not like it's easy for Russians to come to the EU. And given the current political climate, an improvement of visa conditions is not foreseeable in the short term.

Quoting Aesma (Reply 15):
I thought I read somewhere that Russian public employees (of which there are many), including employees of state-controlled companies, are "encouraged" to take their vacations inside Russia's borders

I am not aware of that , I was just stating that Southeast Asia is increasingly becoming a major tourist destination for Russians, and that there could be a shift to more tourism there at the expense of now much more expensive Europe.

toxtethogrady · Tue Jan 06, 2015 7:33 pm

Quoting ZKCIF (Reply 1):
The quoted article states that the profit decreased 5.6 times which would mean that the airline is still profitable.

It could also mean a loss of 4.6 times the prior profit. They really ought to tell their fuel supplier how lucky they are to be owed so much for fuel at the old price.

BiggerJetsPlz · Tue Jan 06, 2015 7:40 pm

Quoting toxtethogrady (Reply 38):
It could also mean a loss of 4.6 times the prior profit. They really ought to tell their fuel supplier how lucky they are to be owed so much for fuel at the old price.

Transaero should pay them back with freshly purchased jet fuel instead

Wayfarer515 · Thu Jan 08, 2015 7:14 am

In some related news, it seems Transaero Engineering Ireland MRO was abandoned to it's own luck by Transaero´s HQ in Russia:

(Use google translate as the article is from ato.ru)
http://www.ato.ru/content/transaero-...atit-svoey-stancii-toir-v-irlandii

Not surprising, but rather sad to see this happening to Russian carriers.

peterinlisbon · Thu Jan 08, 2015 7:52 am

Quoting A342 (Reply 36):
Well, who knows, maybe a devaluating ruble will actually drive Russians to book MORE vacations?
After all, many rushed to buy cars, smartphones and other expensive things while their money still had some value...

I don't think so. If the price is twice as high as normal, most people would be put off going.

Quoting r2rho (Reply 37):
Visa rules are reciprocal. Russia will change its visa rules if the EU changes theirs. Russia is not going to give away anything for free, it's not like it's easy for Russians to come to the EU. And given the current political climate, an improvement of visa conditions is not foreseeable in the short term.

There are the one's that have decided to have this "reciprocal" policy, which only harms their own interests. EU and USA will never be visa-free for Russians because these countries know that a lot of people would not return home afterwards, given that the economic conditions are better there. So it would be better to be realistic. Opening Russia up to tourism would only help their airlines, especially as foreigners would pay in foreign currency.

Anyway, as long as Putin is in charge I don't expect anything much to change. Who knows, maybe he will use this situation to take ownership of Transaero at some point in the future or give it to one of his friends.

Severnaya · Thu Jan 08, 2015 8:42 am

Quoting peterinlisbon (Reply 41):
Opening Russia up to tourism would only help their airlines,

Currently you can already TWOV at a certain number of airports in Russia.

jfk787nyc · Tue Jan 13, 2015 3:46 am

Quoting peterinlisbon (Reply 32):

it is much harder for Americans to get VIsas to Russia then viceaversa.

The only type of people that have trouble obtaining Visas to the USA are Young woman traveling themselves to the USA.

I am a Russian American myself and travel back and forth 4 times a year.

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