The US is choosing how to bring down the business of Aeroflot

The US State Department has not yet formulated what sanctions will eventually be imposed against Aeroflot: banning flights to the US and through the US, an embargo on the supply of equipment, components and software, or something else. In the Russian airline, this caused an attack of nervousness.
10.08.2018
Kommersant
Origin source
The US State Department the day after the announcement of new sanctions against the Russian Federation, apparently, still decided not to allow Aeroflot flights to America. Now we are talking only about the refusal of the airline's supply of goods falling under export control, which will be a general limitation for the Russian Federation. However, it is still possible that the ban - on the part of the US or as a response from Moscow - may affect the supply of Boeing aircraft. The industry estimates this negatively, as it will have to break existing contracts and become dependent on Airbus supplies.

The US does not intend to impose direct sanctions against Aeroflot, TASS reported citing a spokesman for the US State Department. According to the interlocutor of the agency, "if anyone from this state company applies for a license to supply goods that are under control, then" it will fall under the presumption of refusal ". But the decision will depend on whether the application for an export license is received for goods that Aeroflot can use.

On Wednesday evening, the State Department announced new sanctions against Russia - in connection with the poisoning in Britain of the failed spy MI6 ex-colonel GRU Sergey Skripal and his daughter Julia. The first package is expected to be introduced on August 22. The US plans to ban exports to Russia of goods that may be associated with national security. If Moscow does not give convincing guarantees of non-use of chemical and biological weapons, then new sanctions will follow, among them the suspension of flights to the US Aeroflot. But the new explanations of the State Department can also be understood as the reduction of sanctions to ban the purchase of a number of technologies. Aeroflot and the Transport Ministry declined to comment.

After the announcement of the sanctions, shares of Aeroflot on the Moscow Stock Exchange fell by 12.25%, to 98.1 rubles. for paper, but after clarifications the State Department reduced the decline to 1%.

Senior analyst Aton Mikhail Ganelin believes that the growth in oil prices and the ruble exchange rate has a greater impact on Aeroflot's capitalization and operations, a combination of these factors has already lowered quotations since the beginning of the year, when they exceeded 200 rubles. for the share, and the greater decrease against the background of sanctions "looks like an excessive reaction."

Against the backdrop of tense relations between the Russian Federation and the West, Aeroflot has faced difficulties since 2017 in obtaining US visas for crews. But in the spring-summer schedule Aeroflot increased the number of flights to Miami and New York and put more spacious aircraft in Los Angeles.

The presentation of Aeroflot to IFRS for the first quarter indicated that the number of flights to North and Central America increased by 15.7%, and passengers - by 10.6%. Revenue on these flights grew by 3.4%, to 5.1 billion rubles. (5.7% of the group's revenue). Veta expert group director Dmitri Zharsky considered the "critical" loss of American destinations for Aeroflot: in 2017, revenue on flights to the region amounted to 25.8 billion rubles, and in the CIS - 22.3 billion rubles.

It will not be easy to replace Aeroflot, taking into account the intergovernmental agreements and the fact that wide-body long-haul aircraft are needed, and the cost of fuel is high.

The interlocutor of Kommersant in the industry says that a possible ban is a direct violation of the intergovernmental agreement with the United States (Aeroflot is the designated carrier for it). Another source of Kommersant considers unlikely the answer in the form of a closure of the Russian sky for American cargo companies: Washington may prohibit Aeroflot from flying over the US flights to Cuba, the Dominican Republic or Mexico in response. One solution, he said, could be the increase in US air navigation fees, but this is not yet being discussed. The interlocutors of Kommersant agree that contracts for the supply of aircraft equipment can be revised, as is the case with Iran. In June, Boeing refused a multi-billion deal to supply 80 aircraft to Iran, after Donald Trump stepped out of a nuclear deal with Tehran.

Managing Partner of the Criminal Code "Law and Business" Alexander Pakhomov agrees that restrictions on the supply of aircraft to the Russian Federation can only be introduced by law. "As a general rule, such amendments do not have retroactive effect," says the lawyer, that is, the existing agreements with Boeing will not suffer. But "agreements from time to time require adjustments, and how counterparties will behave depends on the sanctions and their volume," he said, noting that Aeroflot takes planes through lessors, so that if you want, restrictions can be circumvented.

In March, the fleet of the Aeroflot group consisted of 336 aircraft, including 31 Boeing 777/747 and 72 Boeing 737. The Pobeda Lowcaster recently agreed with Boeing on deliveries of 15,737MAX. According to Alexander Pakhomov, the ban on purchasing from Boeing can also be introduced by the main shareholder of the group - the state. But "with a rather meager supply from the domestic manufacturer and the actual absence of other medium- and long-haul aircraft manufacturers, except for Airbus, Aeroflot will have to purchase planes from a single supplier, which will negatively affect costs."

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