Concern for UTair amid 2.7 billion rouble loan default

Fears are growing for the future of UTair after the Siberian airline was unable to pay for two loan bonds totalling 2.7billion roubles ($59million). Based at Khanty-Mansiysk Airport, the carrier is in the grip of a cost-cutting exercise, having laid off more than 800 employees and slashed its schedule by 20 per cent during the summer.

All new deliveries for new aircraft have already been put on hold, and there are rumours the entire 123-strong existing fleet could be moved to a subsidiary of the company. Now there are reports the airline - the third largest in Russia, with 6,000 employees including 2,647 cabin crew - has no more available funds.

UTair had been due to pay its loan bonds by November 20, but chief executive Andrey Martirosov announced the company was experiencing 'temporary' difficulties.

He said the 'failure to perform the financial obligations is not a critical moment'.

The carrier has approached Raiffeisenbank to act as a debt restructuring advisor.

In a statement on the airline's website, Mr Martirosov added: 'It is not a critical issue, and UTair is not the first company that has faced such difficulties.

'The situation is of a temporary nature and should not affect the company's operations, if a timely and reasonable solution between the lenders and the company is found. Raiffeisenbank and UTair have started working on the restructuring plan and are going to present it to investors in the coming days.'

UTair was established initially as Tyumenaviatrans Aviation (TUT) in the wake of the break-up of Aeroflot in 1991 before adopting its current name and livery in 2003.

It is owned by a mixture of Russian shareholders and companies, foreign investors, and local government administrations, with two per cent owned by the State.

Passenger numbers were up 10 per cent year-on-year during the first 10 months of this year, to a total of 9.1million, but the net profit for the same period was just 9.2million roubles ($200,000). The airline has already announced plans to allocate its charters to a separate business division of the company, with nine Boeing 757-200s moved to its Katekavia subsidiary.

A new strategic business plan will allow the airline to evaluate its charter stream, since the leisure market has been expanding across Russia despite the travel crisis.

Indeed, UTair's main partner, Anex Tour, plans to increase its flights by 30 per cent during the 2014/15 winter season, reaching 84 routes.

UTair has been working with Anex since 2010, operating Airbus A321, Boeing 757, Boeing 737, and Boeing 767 aircraft on flights for the travel company.