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Russia's two biggest airlines to combine; Aeroflot to buy Transaero for patriotism rather than profits

Nov 14, 2015 10:34 PM EST

Aeroflot agreed to take over its closest competitor Transaero Airlines as the country's economic woes shake the industry. And to help support homegrown companies in the middle of a downturn, the government is urging Aeroflot to purchase the new Russian Superjets by Sukhoi. 

Aeroflot is set to purchase the rival Transaero in a move that will consolidate Russia's two largest carriers into one, the airline company announced on Tuesday. "Transaero will be completely overhauled and integrated into the Aeroflot group," an Aeroflot spokesman claimed to Russia's RIA news agency via Reuters.

It would likely acquire a 75 percent venture in struggling competitor Transaero, which will instantly create one of the world's largest air transport companies. The deal, which focuses on Kremlin's determination to support ailing industries, takes in a lifeline to the challenged private airline, given that their net debt totalled 106 billion roubles or $1.63 billion at the end of last year.

According to Bloomberg, Aeroflot is ready to shell out 1 ruble for its indebted completion.  Transaero's main owners are Olga Pleshakova and Alexander Pleshakov, the company's CEO and board chairman. Both of them have about 18 percent of the carrier's shares.

The joint airline companies will probably fly more than half of all domestic passengers, as stated by Andrei Rozhkov, a transportation analyst at the Moscow-based IFC Metropol. "Weak airlines are leaving the market or reducing their business, on the one hand," Rozhkov said via phone call. He went on by stating, "Aeroflot is getting a boost from the Transaero deal, on the other hand."

Moreover, the move to buy the company emphasizes the thought that Aeroflot is ready to support its homegrown companies in the midst of a downturn and Western sanctions. The government also claims that the new Russian Superjets' manufacturer is well-known for building the fighters and bombers now striking on Syria.

However, Aeroflot must allegedly shift without alarming its customers at a time when the country's airline industry is having troubles not only from a sharp recession, but also from safety jitters over the crash in Egypt of a Russian passenger jet created by Airbus, as reported by The New York Times.

For now, the news of the combination of both airlines sent Transaero's shares up by almost 40 percent, while Aeroflot stocks slipped by 5 percent on the Moscow Exchange. But in the middle of Aerflot's lost, the passenger numbers were up to 8.7 percent year by year  in the same period. 

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