The airline insists, however, that there is no chance of a fresh share issue to raise new cash either in Moscow or the USA.
Aeroflot says the contract with Chase Manhattan is only to look for a long- term solution to its mounting lease payments and is not a response to an immediate cash crunch. This is despite debt in 1998 leaping to Rb7 billion ($272 million) from just Rb2 billion in 1997. The carrier's profits are being hit hard by a weakened rouble which lowers the value of domestic revenue in relation to the soaring costs of the dollar denominated fuel and leasing costs.
Financial specialists in Moscow confirm the carrier is not stuck for cash in the short term but say that a long term restructuring of the debt is probably necessary.
Chase Manhattan will almost certainly rule out a fresh share-issue as the current share price gives Aeroflot a market capitalisation of only around $100 million.
With this, says Aeroflot analyst Kim Iskyan of MFK Renaissance in Moscow, "even if it were to sell a 51% stake, the company would not be able to raise more than about $50 million".
He adds that the only chance of raising significant capital through this route is by finding a strategic partner and this is equally remote for the moment.
"Before an investor looks at a company, he will look at the country first and at this point Russia is not an attractive place to be," he says.
Passenger traffic in the first half of this year fell by almost 6% at Aeroflot and revenues could possibly have been hit by the loss of some of its foreign earnings through a holding company set up to consolidate the carrier's foreign revenues but which allegedly hid much of the cash. Aeroflot operates 11 Airbus and 14 Boeing aircraft and is said to be looking at plans to order two additional Boeing 767s.
Source: Airline Business
