26 Aug 2019 11:38

S7 Group merging its airlines - paper

MOSCOW. Aug 26 (Interfax) - S7 Group is merging its airlines S7 Airlines and Globus, business daily Vedomosti reported on Monday, citing two managers at Russia's largest private air carrier.

The merger will be carried out by combining fleets rather than in the form of a merger of legal entities. All Globus aircraft will be transferred to the S7 Airlines operator certificate, along with employees, the sources said. A spokesman for S7 confirmed these plans.

S7, which is owned by the family of Vladislav Filev, is Russia's second largest airline group after Aeroflot . S7 Airlines has a fleet of 61 medium-range Airbus 319/320/321 and 17 regional Embraer E-170, and Globus operates 23 medium-range Boeing 737 airliners.

"S7 Airlines filed an application with the Federal Air Transport Agency in August to expand its operator certificate to include new types of aircraft, modified Boeing 737s. The first airliner will be transferred from Globus at the end of September, then we will transfer five planes every two weeks, and by the middle of December the merger process will be fully completed," Vedomosti quoted S7 Group senior vice president Tatyana Fileva as saying.

Nothing will change in regard to counterparties, all contracts will be transferred to one airline, she said. "Absolutely nothing will change for passengers either. On the contrary, it will become a little simpler for them, [as] all flights will be carried out under one code - S7. Globus has its own code as a separate airline - GH," Fileva said.

"Globus was set up in 2008 to develop charter flights within the holding. We realized very quickly that this segment is not profitable, but preserved the already created airline," Fileva said. "We began to discuss a merger in December 2018 as a measure to further increase efficiency amid a deteriorating market," she said, adding that the overall savings from the merger will total up to 600 million rubles per year.

This year the merger will require an outlay, as about 350 million rubles will go toward one-off payments for unused holidays and there will be 200 million rubles in losses from aircraft downtime since every Globus airliner will not be able to fly for two weeks in the process of being transferred to S7 Airlines. This is why the transfer is beginning in the low season, in order to minimize losses, Fileva said.

The merged S7 Airlines will be headed by current Globus CEO Vadim Klebanov. S7 Airlines' long-time CEO Vladimir Obyedkov is retiring in September but will head S7 Group's project to build a business jet plant in Moscow Region.

Globus LLC will remain an airline without aircraft, a legal entity with an operator certificate. "We are considering the possibility of selling it - such a company could be worth up to $5 million - or using it for our own projects," Fileva said.