State-owned Aeroflot is to take control of troubled private Russian rival Transaero.
A government commission backed the consolidation in a meeting led by first deputy prime minister Igor Shuvalov.
The board of Aeroflot will vote to buy 75% plus one share in heavily indebted Transaero.
Transaero blamed a “sharp” devaluation of the ruble for reduced sales of international flights and increased payouts on foreign exchange-denominated loans, according to a statement on its website last month.
The carrier borrowed in 2010 to 2013 to expand its fleet, it said.
“In an economic situation that has been fairly described as a perfect storm, Transaero Airlines no doubt is experiencing difficulties,” the airline said.
Transaero reported an operating loss of more than 19 billion rubles in 2014 despite a 5.6% rise in passenger carryings to 13.2 million.
The airline cited “extremely unfavorable macroeconomic conditions” mainly as a result of a sharp depreciation of the ruble for having an adverse impact on pricing and profitability.
Transaero’s majority owners are Olga Pleshakova and her husband Alexander Pleshakov, the company’s chief executive and board chairman, respectively. They each own about 18% of the carrier.
Aeroflot announced a first half operating profit of 5.8 billion rubles on Monday against a loss of 1.3 billion rubles for the same period last year. The net loss was 3.5 billion rubles against 1.9 billion rubles in the first six months of 2014.
Deputy chief executive, Shamil Kurmashov, said that Aeroflot had benefited from changes in the competitive landscape, taking market share from foreign carriers that decreased frequencies on a number of routes as well as less efficient Russian peers.
“We are confident our policy of expanding our presence on the growing Russian market, maintaining customer loyalty and increasing business efficiency will enable continued growth in the group’s profitability as the Russian economy recovers,” Kurmashov added.
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