Russia’s Utair navigates around bankruptcy – for now

Utair The debt-ridden Russian major has won support from country’s largest bank as it posts US$15.5 million of net income (Utair)

In a boost of confidence for the airline’s partners and its passenger customers, Russia’s biggest state-controlled bank has agreed to support the financially-stricken large Russian carrier Utair which, at the same time, posted more than one billion roubles (US$15.5 million) of net income in the first nine months of 2019.

Sberbank, Russia’s largest financial institution, has confirmed that it has no intention to pull the plug on its Utair Airlines customer and has instead approved a new debt-restructuring plan. After the confirmatory statement from Herman Gref, Sbarbank’s chief executive, Utair’s stock went up by 14 per cent on the Moscow Stock Exchange.

Sberbank is Utair’s largest creditor. “Regarding Utair, we have no intention of calling it bankrupt. Utair submitted a plan for its financial turnaround and we have approved it. Now we’re waiting for approvals from all [other] creditors,” Gref stated.

In September, Utair approached its other creditors, a syndicate of different banks, with yet another proposed solution for its debt trap, which proffered the acquisition of more than 50 per cent of its entire debt for 39.1 billion roubles. The plan was for creditors to purchase the seven-year-term credit for 20 per cent of its nominal value, and the 12-year-term credit for six per cent – and it agreed to buy both of its credits for 4.5 billion roubles, or 11.5 per cent of their aggregated value. Apart from these debts, Utair owes an additional 17.4 billion roubles to Sberbank alone.

Meanwhile, encouragingly, Utair posted a net income of more than one billion roubles in the first nine months of 2019, compared to the 1.9 billion roubles loss it suffered in the same period of last year, according to the airline’s latest report. Its revenues (by Russian accounting standards) improved by 3.2 per cent year-on-year in the period, reaching 46.8 billion roubles, an almost 1.5 billion improvement on the same months of 2018. This achievement comes as the result of a “continuous effort to improve operational efficiency.”

However the airline nevertheless “shares a pessimistic outlook on the Russian air travel industry’s perspectives, due to low GDP growth rates and the effects of currency and fuel cost risks,” Utair’s general director Andrey Martirosov insisted.

In the first nine months of 2019, the airline reduced its fuel spending by three per cent and, compared to last year, cut its aircraft turnaround times by an average of 10 minutes. In line with recommendations from Russia’s transport ministry, the financially troubled airline has taken a cautious approach to boosting traffic numbers. In January through September its traffic climbed by only 1.2 per cent to 6.1 million passengers.

The airline is currently undergoing a restructuring process. Its total debt at the end of 2018 stood at 59.9 billion roubles (US$950 million).

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