Punished by sanctions, Russia’s Aeroflot plans to inject $3 billion in cash According to Reuters

LONDON (Reuters) – Under heavy pressure from Western sanctions and airspace bans, top Russian state airline Aeroflot plans to raise up to 185.2 billion rubles ($3 billion) in an emergency stock issue, the company said on Tuesday.

Aeroflot, controlled by the Russian state, said shareholders at its annual meeting approved the issuance of 5.42 billion new shares that can be purchased for 34.29 rubles per share under subscription open.

With passenger numbers still down a third to pre-coronavirus levels at the start of the year, the company has been hit hard by Western sanctions in response to Russia’s February 24 invasion of Ukraine.

Once ambitious to become the world’s leading airline, the airline is now on the front lines of what President Vladimir Putin has called an “economic war” with the West.

The European Union, the United States, Great Britain and Canada have closed their airspace to Russian aircraft, cutting Aeroflot from lucrative flights to Western markets.

Planemakers Airbus and Boeing (NYSE:) – which made up all but 10 of Aeroflot’s 187-strong fleet at the start of the year – have stopped providing aircraft parts and services to airlines. Russia.

And in a symbolic blow to the company’s footprint in the West, English football club Manchester United has terminated its sponsorship deal with the Russian flag carrier.

In response, Aeroflot has opted not to pay a dividend on its 2021 earnings and has yet to release first-quarter results for this year, to avoid having to disclose a financial charge due to being cut off from most of its routes. me.

EMERGENCY SAVE MONEY

The much-needed $3 billion pump is set to come in part from Russia’s National Wealth Fund (NWF), a government rainy day fund that is being coordinated to help support key companies affected by the pandemic. Western sanctions – with the government promising to invest 107 billion rubles ($1.74 billion) in Aeroflot.

Originally designed to finance large-scale infrastructure investments, the Kremlin said it would use the $198 billion NWF to support the economy through a deep recession as well as offset cover the government deficit.

In May, the government spent $4 billion buying preferred shares of Russian Railways, the country’s largest employer. Meanwhile, Mr Putin ordered ministers on Tuesday to come up with new rules on how the NWF could be spent, suggesting guidelines could be relaxed to allow state funding. more to revive economic activity and potentially open the door for an emergency government-backed investment.

During the pandemic, the Russian government purchased 80 billion rubles ($1.3 billion) in shares of Aeroflot through NWF.

In its statement on Tuesday, Aeroflot did not provide details on how many new share issues the state could buy. The Treasury Department declined to comment.

The airline carried 2.2 million passengers in March 2022, including low-cost carrier Pobeda – Russian for “victory”. This is down from 2.8 million in February and less than half of the 4.6 million made in March 2019.

(1 dollar = 61.66 rubles)